MoneyGram, a US money transfer company, has announced that it has agreed a strategic partnership with Ripple. In exchange for equity during this two-year period, Ripple will make $50 million available to MoneyGram to be drawn down.
MoneyGram will primarily use Ripple’s xRapid service. This system enables inexpensive, instant cross-border payments across the world, reducing the need to hold foreign currency.
Currently, MoneyGram uses traditional means of making cross-border payments. They must hold foreign currencies in multiple bank accounts at all times, which is costly and restricts capital flows.
The xRapid process utilizes XRP, Ripple’s cryptocurrency. When an institution initiates a payment, the original currency is first converted into XRP by a digital asset exchange in the original country, say dollars to XRP. Almost immediately, the XRP is converted into the destination currency, for example XRP to Canadian dollars, by a digital asset exchange in the destination country.
Some of Ripple’s other services do not utilize XRP, such as xCurrent. However, XRP enables the xRapid process to take just a matter of seconds. Payments settle much faster than traditional systems such as SWIFT, and considerably faster than other cryptocurrencies.
XRP is also more scalable than other cryptocurrencies.
Through this partnership with Ripple, MoneyGram intends to reduce operating costs and speed up their cross-border payments.
Indeed, Alex Holmes, MoneyGram Chairman and CEO, says that xRapid could potentially “dramatically streamline [MoneyGram’s] global liquidity management.”
A Ripple deal with MoneyGram makes sense. Indeed, Facebook’s GlobalCoin initiative shows that for the remittance market there needs to be an off-ramp for the unbanked. Facebook is also rumored to be talking to Western Union.