Crypto company Ripple this week announced a large investment in MoneyGram, a payment processor that rivals Western Union. As part of this agreement, Ripple becomes MoneyGram’s global partner for cross-border payments and foreign exchange settlement.
Reaction across the crypto space has been mixed. Some people are excited while others are skeptical.
Let's look at the facts.
Ripple has invested 30 million USD for an 8-10% stake in MoneyGram, with the option for MoneyGram to receive up to a 20 million USD cash infusion over the next two years in return for an additional stake of the company.
Interestingly, Ripple is going to pay 4.10 USD a share to receive the 8-10% stake in MoneyGram, while the public share price was just 1.44 USD prior to the announcement.
For MoneyGram, this partnership could be a saving grace. Share prices have been dropping in recent years and earnings reports have been unfavorable for investors.
In contrast, this partnership has likely been in the works for quite some time, as MoneyGram was reported to be testing XRP for international payments more than a year ago.
The global remittance market is huge. Almost 600 billion USD was processed in remittance alone in 2016. Amazingly, in 2017 the average fee for an international 200 USD payment was 7.2%, or 14.4 USD. Clearly there’s room for improvement.
Cryptocurrency is fast and borderless with low fees, which could be where XRP starts to shine.
However, keep in mind that Western Union, a rival of MoneyGram, trialed the usage of XRP and purportedly found no financial benefits from using it. It’s important to note that Western Union only sent 10 payments with xRapid at the time, so it’s possible that MoneyGram will uncover more benefits of using XRP.
As part of this partnership, Ripple’s cryptocurrency XRP will be used in MoneyGram operations. This has many XRP fans excited.
Is this the push for adoption of XRP, and consequently cryptocurrency, that we’ve been waiting for?
It’s anticipated by both parties that settlement fees could fall from about $30 to under a cent, while settlement times could drop to as little as 10 seconds, potentially transforming the realm of global remittances.
The stock price of MoneyGram (MGI) shot up much more than XRP following this announcement. Here’s a look at the MGI price:
In contrast, here’s the XRP chart:
A lot of people are understandably very happy with this news.
Others aren’t so sure.
Desperate times call for desperate measures.— antiprosynthesis (@antiprosynth) June 17, 2019
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