Ripple has announced a partnership that will bring blockchain technology to MoneyGram, a leading global money transfer firm that operates in more than 200 countries. As part of the deal, Ripple has committed $50 million to MoneyGram, which it can draw on in exchange for equity over the life of the two-year deal.
The partnership will see Ripple bring MoneyGram’s cross-border payment and foreign exchange settlement business onto blockchain technology via its xRapid on-demand liquidity solution. That uses the XRP cryptocurrency as a bridge between senders and recipients, allowing a remittance in one currency to be settled nearly instantly in the currency of the receiving country.
Ripple’s xRapid can complete these transactions in two to three seconds for a fraction of a penny. Running transactions through the traditional SWIFT bank settlement channel takes several days, and even other blockchain based digital asset solutions can take 15 minutes to an hour.
Traditional money transfers can eat up a huge portion of money workers in wealthy countries send home to families in developing nations, running as high as 10% on small amounts like $200 or $300. The World Bank has made cutting that to no more than 3% by 2030 a Sustainable Development Goal. Remittances are a $600 billion business globally.
“This strategic partnership will enable MoneyGram to greatly improve its operations and enable millions of people around the world to benefit from its improved efficiency,” said Brad Garlinghouse, Ripple’s CEO, in the announcement. “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.”
Another big benefit is reducing the need for prefunding—the requirement that money transfer services pre-buy foreign currency reserves that are held by banks and other payers in recipient countries—in order to allow immediate payouts.
“As the payments industry evolves and matures, it’s imperative that we continue to improve our platform and provide the most effective solution to get funds from point A to point B,” said Alex Holmes, chairman and CEO of MoneyGram. “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.”
According to Nasdaq, MoneyGram lost $24 million on revenues of $1.45 billion in 2018. That was down from a $29.8 million loss on revenue of $1.6 billion in 2017.