Legacy remittance provider MoneyGram will form a strategic partnership with distributed ledger fintech Ripple to pilot XRP, the cryptocurrency used on Ripple’s network, in MoneyGram’s “payment flows,” as well as some other Ripple offerings.
The firms didn’t specify how many of MoneyGram’s transactions will be included in the test, or whether the partnership will become a permanent part of MoneyGram’s business, according to Bloomberg, but both parties are optimistic it’ll improve services. It’s worth noting that this news comes just after rumors that Western Union, MoneyGram’s biggest competitor, would forge a similar relationship.
The move comes as legacy remittance players seek out ways to better compete with digital upstarts. Digital-first remittance players are still much smaller than dominant legacy providers, but they’re growing more quickly, and could represent a substantial threat down the line.
That’s likely because these firms can take the costs they save from not operating brick-and-mortar locations and pass them onto consumers — something popular at a time when remittance volume is growing and costs are high. If legacy firms want to remain atop the industry, they need to find ways to compete.
This pilot could show if enlisting blockchain and technology is a viable way of doing so.
- Blockchain technology, and Ripple in particular, could increase speed and efficiency. Right now, MoneyGram’s process relies on “pre-funded accounts” in the markets it operates in across the globe. These accounts, and the transfers between them, can be time-consuming to operate and often tie up capital for these firms, according to Fortune. Ripple, and platforms like it, change that by giving players a more efficient, and often less expensive, way to transact.
- That could help the firm find level ground. The retail costs that legacy players must maintain make it hard for them to compete with upstarts on pricing. So if they want to do so, they’re going to have to find other places to trim costs. Looking toward methods like Ripple could free up funds for legacy players, which they could then use to pass on cost savings to consumers directly, or save and re-invest in other types of digital innovation.
If the firm ultimately sticks with Ripple, it could be a big win. The announcement comes just after MoneyGram terminated Ant Financial’s billion dollar acquisition following regulatory hurdles; Ant Financial’s purchase of MoneyGram would have drastically boosted MoneyGram’s digital capabilities at a time when it, in particular, is struggling to keep up. MoneyGram’s ongoing innovation, and interest in finding ways to compete, could point toward a bright future, with stronger digital growth and improved industry positioning on the horizon.
- Quantifies how large the remittance market currently is.
- Discusses what some of the barriers to growth have been for the remittance industry in recent years.
- Identifies what factors are going to lead to continued growth going forward.
- Considers ways digital-first startups have begun to disrupt traditional remittance companies and bring down fees.
- Breaks down what legacy firms are doing to hold off these challengers, while also evolving with the changing technological trends occurring globally.
- Explores what firms in the industry will have to do going forward in order to avoid being outperformed in an industry that is becoming increasingly saturated.
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