Ripple (XRP) and MoneyGram (MGI) have agreed to try out a partnership to use blockchain technology, xRapid to speed up money transfers, and to do so at a much lower cost than the soon-to-be-extinct “technology” used by companies like Moneygram and Western Union today. Based on international banks testing Ripple, we expect this to be a success, but MoneyGram has already achieved success on the news alone. Its share price rose by 15 percent.
News of the deal caused XRP to soar on a day when other alt-coins were in a dip as fearful investors were reacting to fake news about South Korea’s pending “ban” on cryptocurrency trading.
Ripple has teamed up with international banks and financial institutions to provide frictionless money transfers using the blockchain technology. From November 2017 Santander Bank and American Express have been piloting cross-border transfers between the United States and the United Kingdom. Financial institutions using Ripple’s growing network can process instant, reliable and affordable payments. Ripple has offices in New York, San Francisco, Mumbai, Singapore, Luxemburg and Sydney through which over 100 institutional clients are using XRP to reduce costs and access new markets.
MoneyGram, which sent at least $600 billion in 2016, is a recognized “provider of innovative money transfer and payment services” providing a much-needed connection between family and friends around the world. By using a web portal, mobile devices, local stores or kiosks they have been helping customers transfer money from one location to another. They also issue money orders, offer bill payment services and check processing, and it will be interesting to see how xRapid is utilized in all of these areas.
On their partnership, Ripple CEO Brad Garlinghouse said in a statement on Thursday that any “inefficiencies of global payments don’t just affect banks, they also affect institutions like MoneyGram.”
Ripple created xRapid so that banks could transfer client money on their network across borders in a matter of seconds rather than days. Ripple says their transaction fees are by far lower than what is charged by competing cryptocurrencies or conventional money transfer companies.
By using xRapid, MoneyGram will have caught up with the current technology. Ripple claims on their website that an average transaction on their network takes between two and three seconds compared to about 51 minutes for Bitcoin transactions. If you’ve ever used Moneygram or Western Union to transfer funds from one location to another, you’ve most likely experienced one of the many time-consuming challenges with the process, ranging from long hold times to rejected transfers. Shaving off even a fraction of the time it takes to do a transfer is world-changing.
For MoneyGram, this partnership comes only one week after its rival Western Union raised dust following an unspecified rumor that it also plans to use Ripple. Ripple had tweeted that it was roping in three out of the five leading money transfer companies without elaborating. The tie-up creates a new way to maintain MoneyGram’s share in the money transfer market at a time they are facing stiff competition from competitors offering cost-effective online services like TransferWire, PayPal, and Xoom.
In an official statement, MoneyGram CEO Alex Holmes said they are embracing the blockchain technology by piloting xRapid as they plan to “increase efficiency and improve services” to their customers. It will be interesting to see how stock prices hold up for Western Union if MoneyGram is first to market with this new technology, and if it will have an impact on market-share for each company.