U.S.-based major money transfer company MoneyGram said it has already started to use Ripple's xRapid product that is aimed at minimizing liquidity costs and is powered by Ripple's XRP cryptocurrency. However, what are they using it for?
“We are using XRapid to buy a portion of our currency needs in major receive markets”, MoneyGram spokesperson told Cryptonews.com. “We expect to expand into several major currencies over the two-year life of the commercial agreement [with Ripple]. While we are in the process of developing markets, we cannot disclose which currencies we are buying and our volume of trading activity.”
According to the company, its money transfer revenue was USD 282.2 million in the second quarter of this year, or 14% less than in the same period of 2018.
Ripple declined to comment.
As a reminder, it was announced back in June that Ripple made USD 30 million initial investment in MoneyGram equity and has a right to invest another USD 20 million over two years. But even before this news came out, which caused XRP to jump, MoneyGram was already 'ripe' for blockchain.
As MoneyGram explains in their report, “The commercial agreement allows MoneyGram to utilize Ripple's xRapid blockchain product, as well as XRP, Ripple's cryptocurrency, to facilitate cross-border settlement. The Company expects that this will reduce working capital needs and have the potential to generate additional earnings and cash flow.”
During the earnings call with analysts on August 2, MoneyGram CEO W. Alexander Holmes said that, excluding the U.S. to U.S. market, the company returned to positive transaction growth in July, which was “driven by our digital transformation initiatives”, seeing a success with its app, and rolling out a web-based portal and a web-based point-of-sale system. MoneyGram’s online transactions saw 109% year-over-year growth, and revenue has increased nearly 50%.
“Ripple has become our key partner for cross-border settlement using digital assets,” said Holmes, adding that he is excited to announce that “MoneyGram is now live and transacting on the Ripple xRapid platform. We started executing trades earlier this week and all signs point to this being a tremendously beneficial relationship for all parties involved. We are literally settling currencies in seconds.”Watch the latest reports by Block TV.
Holmes added that Ripple will help further improve MoneyGram’s “core strength”, which is the “global liquidity and settlement engine that enables millions of customers to move billions of dollars across 200 countries and territories using over 120 currencies”, adding, “our internal innovation lab continues to explore new and exciting use cases for crypto, DLT [distributed ledger technology] and blockchain as we look to build the business model of the future.”
On a research analyst’s question how much of the cost base they think they can save through this partnership, Holmes replied that “this product has the capability to […] completely streamline and transform our back-end capabilities and for the first time, I think ever really actually enable money to move instantly or is close to instant as humanly possible. […] So if you think about hundreds of millions of dollars circling the world every day waiting to be settled and sort of what we call money trapped in transit, the ability to streamline that can drive a ton of efficiency.”
CFO Lawrence Angelilli explained that they can’t discuss the profit and loss impact at the moment due to “the kind of confidentiality and the unique nature of what we're doing”, but said that they are “not going to be maxing out or stressing their [Ripple’s] system”, and that it will build gradually.
MoneyGram, which was founded in 1940, was on sale recently as it's trying to deal with falling revenues and restructure its debt pile, which reportedly totaled USD 902.8 million as of the end of September 2018 and comes due next year.
According to their website, MoneyGram operates in more than 200 countries and territories around the world, whether online, with services available through a mobile device, at a kiosk, or in local shops.
At pixel time (14:17 UTC), XRP trades at c. USD 0.306 and is down by almost 2% in the past 24 hours and by more than 2% in the past week. It's also down by 15% this year.