Ripple has entered into a partnership with MoneyGram, who will now use XRP for cross-border payments and foreign exchange settlements.
As part of the terms of the partnership, Ripple is investing up to US$50 million in MoneyGram (NASDAQ: MGI).
The San Francisco-based blockchain startup has committed to buying $30 million in MoneyGram shares, with the option of MoneyGram giving the okay for another $20 million in shares at $4.10 a share to be bought over the next two years.
— Brad Garlinghouse (@bgarlinghouse) June 17, 2019
A lifeline for MoneyGram
The partnership – and accompanying injection of capital – is a fortuitous one for MoneyGram, which has undergone some recent financial losses and seen the value of its shares drop more than 56% since May.
MoneyGram is one of the largest money transfer service providers in the world – second only to Western Union – and operates in over 200 countries.
The implementation of Ripple’s xRapid system of cross-border payments through the use of XRP should provide a firmer financial footing for the company.
“This will eliminate the need to deploy foreign bank accounts. That’s why MoneyGram has negative working capital,” says Brad Garlinghouse, CEO of Ripple.
The use of the cryptocurrency negates the need for MoneyGram to convert payments from one fiat to another through financial institutions in the host countries.
Garlinghouse notes that XRP transfers are completed in two to three seconds with a transaction cost far less than current, traditional models.
“Through Ripple’s xRapid product, we will have the ability to instantly settle funds from US dollars to destination currencies on a 24/7 basis, which has the potential to revolutionize our operations and dramatically streamline our global liquidity management,” adds MoneyGram CEO Alex Holmes.
Gains for Ripple
Ripple benefits from its investment in MoneyGram by gaining a greater foothold in the global payments ecosystem, which is worth an estimated $600 billion per year.
While companies like Facebook and VISA are working on their own cryptocurrency or blockchain project for cross-border money transfers, Ripple has been actively building up its own network over the last several years.
To date, Ripple has onboarded more than 200 banks and other financial institutions onto RippleNet, its comprehensive global payments network.
Pundits may argue over the scale of mainstream use of cryptocurrency, but Ripple has been steadily forging working partnerships that are embedding crypto and blockchain technology into the financial sphere.
As for the investment in MoneyGram, Garlinghouse notes that it “will enable MoneyGram to greatly improve its operations and enable millions of people around the world to benefit from its improved efficiency.”
“This is a huge milestone in helping to transform cross-border payments and I look forward to a long-term, very strategic partnership between our companies,” he adds.