Ripple has agreed to invest up to $50 million in MoneyGram as part of a two-year partnership that will see the old-school money transfer player tap the blockchain startup's XRP digital currency for cross-border payment and foreign exchange settlement.
MoneyGram's share price more than doubled on Tuesday on the news.
The partnership, which will have an initial term of two years and builds on a pilot begun last year, will see MoneyGram use XRP in payment flows through Ripple's payment network xRapid in an effort to speed up and cut the cost of transferring money.
Ripple claims that XRP is the most efficient digital asset for payments with transaction fees at just fractions of a penny, compared to Bitcoin fees of about $30 per transaction. The firm also boasts average transaction times for XRP of two to three seconds.
Alex Holmes, CEO, MoneyGram, says: “Through Ripple’s xRapid product, we will have the ability to instantly settle funds from US dollars to destination currencies on a 24/7 basis, which has the potential to revolutionize our operations and dramatically streamline our global liquidity management.”
MoneyGram's decision to embrace blockchain technology comes as it faces increased competition from newer rivals. Last year, Chinese giant Ant Financial reacted to being blocked from buying MoneyGram by building its own home-grown blockchain-based cross-border remittance service.
Meanwhile, the hullabaloo this week surrounding Facebook's digital currency offering sent Western Union' share price tumbling.