It’s been exciting times in the XRP world over the month of June, with an upcoming partnership between Ripple and MoneyGram being announced.
As part of this deal, Ripple has purchased USD $30 million worth of MoneyGram shares at almost three times their market value. Over the next two years, MoneyGram has the option to sell an additional $20 million worth of shares to Ripple at the same price.
The big news for traders is that the deal will see MoneyGram incorporating XRP as part of its day-to-day operations by means of Ripple’s xRapid transaction product. This will greatly impact the speed and accessibility of efficient cross-border transactions for merchants and individuals in all 200 countries where MoneyGram currently operates.
Compared to the traditional fiat based cross-border payment solutions, the advantages of crypto are clear. Once implementation has been completed, Ripple and MoneyGram predict that settlement fees will drop from $30 per transaction to “fractions of a penny,” while transaction times are expected to drop from 15-60 minutes to just a few seconds.
In terms of the flow of funds, if one party wishes send money across borders, say from the U.S. into Australia, money must be “pre-deployed” in an Australian bank account. MoneyGram has to pre-fund those accounts, and then it must pay its agents, who in turn pay out AUD in cash on site.
Tying up capital in this way is expensive for MoneyGram, as the process requires having bank accounts all over the world. It also represents a risk for the company while the funds move between accounts, which can take several days to land.
In contrast, the new partnership with Ripple, via the use of XRP as a form of bridge currency, means that senders can take their U.S. dollars, convert them into XRP, and then convert them to AUD at the recipient’s end. The transaction can be settled within a minute rather than several days. This presents a huge advantage in terms of speed, efficiency, and risk management.
We look forward to seeing further developments in this partnership over the coming months. Stay tuned!