22 April 2019

MoneyGram Signs Deal to Work With Currency Startup Ripple

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MoneyGram International Inc. signed on to run a pilot program testing XRP, a digital currency created by San Francisco startup Ripple, in its payments network, the companies said Thursday.

The Dallas-based company agreed to test XRP as a tool for reducing money-transfer costs and settlement times. A MoneyGram spokeswoman said the open-ended pilot wouldn’t involve customers’ money since it is limited to internal processes. It is the first time the two companies have worked together, she added.

Shares of MoneyGram and the value of XRP rallied after the announcement. MoneyGram closed 0.5% higher on the day, at $12.18 a share. XRP jumped 24% in morning trading but was down about 1.6% on the day at 5 p.m. EST.

Ripple develops software, based on the concepts underlying the digital currency bitcoin, that is aimed at creating networks for banks and financial institutions that would allow for faster and cheaper interbank trading and settlement.

Ripple has about 100 banks, including UBS Group AG , Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, signed on as customers but has been working to sign up remittance companies like MoneyGram as well. Ripple Chief Executive Brad Garlinghouse said in a tweet earlier this month that three of the five largest money-transfer companies would begin using XRP this year.

MoneyGram, with 350,000 agents around the world, is the second-largest money-transfer company by total face value of remittances, behind only Western Union . In 2017, the company agreed to sell itself to Chinese financial-technology giant Ant Financial Services Group, but that deal fell apart last week after failing to win the approval of U.S. officials.

Startups in the cryptocurrency space have been trying for years to develop products for the remittance market, with only limited success. As a digital asset, cryptocurrencies generally can be transferred virtually anywhere in the world with a smartphone or computer.

Remittance costs vary by service and countries, but they can be high. The cost to send $200 from a bank in the U.S. to a bank in Brazil via MoneyGram, for instance, can bring a fee of almost 9%, or about $18, according to data from the World Bank.

Bitcoin-related startups have found, though, that the logistics of building new markets around the world and introducing a new technology at the same time are considerable.

Having MoneyGram experimenting with XRP is a significant development for Ripple, too. The firm created XRP in 2012—the currency was originally called ripple as well—and created 99 billion units. But over the years, it has experimented with different blockchain-based programs, and some of those don’t require XRP at all.

Only one institution, Mexico-based money-transfer service Cuallix has signed up to specifically use XRP for settling cross-border trades. That has led some people to question the valuation that the market has been putting on XRP, which has risen sharply amid a broad rally for bitcoin and other digital currencies.

XRP has been volatile, rising from about 25 cents in early December to as high as $3.81 last week. It was at $1.98 in late New York trading Thursday, according to coinmarketcap.com.

Ripple has sold 38 billion XRP into the secondary market and holds the remaining 61 billion as an asset on its balance sheet.

Click here for the original article from The Wall Street Journal.



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