In an effort to leverage blockchain to facilitate cross-border payments, Dallas-based MoneyGram International Inc. has entered into a strategic agreement with Ripple, a provider of enterprise blockchain solutions for global payments.
MoneyGram is one of the world’s largest money transfer companies, with more than 200 countries and territories. In entering the new partnership, MoneyGram will be able to use San Francisco-headquartered Ripple’s xRapid product (XRP) in foreign exchange settlements as part of its cross-border payment process.
The alliance is in-line with recent statements by MoneyGram’s global head of product and innovation, Youri Bebic. In a recent interview with The Institute for Robotic Process Automation and AI, Bebic said cryptocurrencies may well be the future of international money transfers. And, companies don’t actually move money across borders when a client makes an international money transfer.
“The money’s already there. We pre-fund bank accounts all over the world, and then we do value transfer,” Bebic said.
He explained that it’s comparatively faster, but if cryptocurrencies were used, pre-funded bank accounts would no longer be needed. Instead, cryptocurrency exchanges could be used “to sell cryptocurrency against local currency and deposit that into the bank account or give it in cash for our user.”
Ripple to make up to $50 million investment in MoneyGram
The partnership between MoneyGram and Ripple supports a shared goal of improving the settlement of cross-border payments by increasing efficiency and lowering cost. The initial term of the partnership is two years, and with it, Ripple will become MoneyGram’s key partner for cross-border settlement using digital assets.
Ripple has made an initial investment of $30 million in MoneyGram equity as part of the partnership. The investment is composed of common stock and a warrant to purchase common stock, according to a release. Also, at MoneyGram’s election, Ripple may fund more purchases of common stock or warrants up to an additional $20 million.
“As the payments industry evolves, we are focused on continuing to improve our platform and utilizing the best technology as part of our overall settlement process,” MoneyGram Chairman and CEO Alex Holmes said in a statement. “Through our partnership with Ripple, we will also have the opportunity to further enhance our operations and streamline our global liquidity management.”
MoneyGram now uses foreign exchange markets
Currently, MoneyGram said it relies on traditional foreign exchange markets to meet its settlement obligations, and that necessitates buying most currencies in advance. With its new alliance, MoneyGram listed the following that it will now be able to do:
- Settle key currencies and match the timing of funding with its settlement requirements;
- Reduce operating costs, working capital needs and improving earnings; and
- Free cash flow.
In May, MoneyGram announced that it was expanding its digital capabilities by entering the Canada and Chile markets. In Chile, remittances have grown more than 200 percent since 2010, and MoneyGram has launched its mobile staging capabilities that allow customers and agents to process transaction more quickly at the point of sale.
And, this month, MoneyGram began a new digital money transfer service with Canada Post, the primary postal operator in Canada, that will allow customers to start a transfer online and then complete it at select Canada Post locations.
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