Yesterday, Dallas-based money transfer company MoneyGram announced a new partnership with San Francisco-based cryptocurrency company Ripple (formerly Ripple Labs). The partnership will allow MoneyGram to test a new, cryptocurrency-based approach to processing international transfers, and is aimed at reducing the high costs for moving money across borders. Given the steady rise of the global remittance market — projected to reach $628 billion in 2018 — Ripple’s low-friction model could prove to be an essential technology for MoneyGram as it streamlines its operations.The pilot program will use Ripple’s existing token, XRP, and make use of Ripple’s xRapid on-demand liquidity solution. The press release noted Ripple’s low transaction fees (often a fraction of a penny) and 2-3 second average transaction times as the primary selling points for MoneyGram. By contrast, bitcoin’s miner-determined fees can be relatively high, and can take anywhere from a few minutes to a few hours to fully confirm. Since its founding in 2012, Ripple has increasingly positioned itself as a cryptocurrency solution for the financial and banking industries, and has long been rumored to have testing agreements with both MoneyGram and Western Union, among others.
“Every day blockchain technology is changing the norm and encouraging innovation,” Alex Holmes, Chief Executive Officer of MoneyGram, said in the press release. “Ripple is at the forefront of blockchain technology and we look forward to piloting xRapid. We’re hopeful it will increase efficiency and improve services to MoneyGram’s customers.”
The MoneyGram announcement is just the latest development in Ripple’s turbulent recent history. Last September, Ripple announced that its platform was being tested for use in domestic and international money transfers by banks in Japan and South Korea. In early December, rumors began to circulate that Coinbase had plans to add Ripple to its basket of cryptocurrency offerings. That rumor would later turn out to be untrue, but rampant speculation pushed XRP’s price to an all-time high $3.82, briefly unseating ETH from its long-held second place position in overall cryptocurrency market cap. (XRP is currently priced at $2.02.)
There is some room for skepticism about Ripple’s future as a general-use cryptocurrency. Unlike bitcoin and most other major cryptocurrencies, Ripple is a fully centralized platform. The vast majority of XRP tokens are pre-mined, and the currency itself isn’t mineable by users. An estimated 95% of the total XRP supply is held by Ripple itself, giving the company near-complete control over both the availability and price of XRP. This level of centralization may be concerning to typical cryptocurrency users, but it’s not hard to see why a company like MoneyGram would prefer it over over alternatives like bitcoin or Ethereum, which tend to be less predictable and stable. As a “bitcoin for banks,” however, Ripple may just have a bright future ahead of it.