MoneyGram and Ripple: How startups help legacy providers

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  • MoneyGram and XRP cryptocurrency startup Ripple form strategic partnership
  • Collaboration could inspire other legacy providers such as Western Union

Legacy cross-border payments giant MoneyGram is to form a strategic partnership with distributed ledger fintech startup Ripple to pilot the latter’s XRP cryptocurrency in its own “payment flows”.

Legacy remittance providers like MoneyGram have traditionally used pre-funded accounts to handle cross-border payments and other money transfers. However, in the digital age, this process is increasingly being regarded as sluggish, with funds being tied up for longer than is desirable. 
Platforms like Ripple could change all that because they provide a faster and less expensive means of enabling money transfers.

While the new initiative is still in its infancy, it has the potential to assist legacy players like MoneyGram (and Western Union, which is also reportedly considering such a partnership) compete with fast-rising digital fintech upstarts like Ripple, which can pare costs to a minimum largely because they don’t operate from bricks-and-mortar locations. 

In other words, legacy players must contend with retail costs, which makes competitive pricing tricky. But by partnering with the fintech players, they stand to pass on cost savings to consumers (they could also use the savings to invest in their own digital innovations for payments).

MoneyGram’s Alex Holder last week told Bloomberg that the new development should speed processes up. He said: “Ripple is at the forefront of blockchain technology. We’re hopeful it will increase efficiency and improve services to MoneyGram’s customers.”

It’s not clear at this point whether MoneyGram will really adopt XRP, but the attractions are obvious: Ripple’s fees are lower than those charged by legacy operators (and by digital rivals like Bitcoin) and change is in the air. Consumers increasingly expect from legacy operators the faster (and cheaper) money transfers proffered by the new digital services.

While legacy providers remain the dominant beasts in the money transfers market, there is little doubt that digital rivals like Ripple are the new disrupters and they cannot be ignored. 


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