Funds transfer company MoneyGram has entered a strategic agreement with Ripple, to boost its cross-border payment offering, increasing efficiency and reducing costs.
MoneyGram will use Ripple’s xRapid product to leverage XRP in foreign exchange settlements.
xRapid is a platform specifically designed for payment providers and financial institutions looking to minimise liquidity costs; xRapid lowers the capital requirements for liquidity by offering on-demand liquidity via digital asset XRP.
Under the partnership, which has an initial term of two years, Ripple will be MoneyGram’s key partner for cross-border settlement using digital assets.
Ripple has invested US$30 million in MoneyGram equity, made up of common stock and a warrant to purchase common stock.
“I’m extremely excited about Ripple’s investment in MoneyGram and the related strategic partnership,” said MoneyGram chairman and CEO Alex Holmes.
“As the payments industry evolves, we are focused on continuing to improve our platform and utilising the best technology as part of our overall settlement process.
“Through our partnership with Ripple, we will also have the opportunity to further enhance our operations and streamline our global liquidity management.”
Currently, MoneyGram relies on traditional foreign exchange markets to meet its settlement obligations, which require advance purchases of most currencies.
By leveraging Ripple’s technology MoneyGram anticipates it will be able to settle key currencies and match the timing of funding with its settlement requirements, reducing operating costs, working capital needs and improving earnings and free cash flow.
“This is a huge milestone in helping to transform cross-border payments,” said Ripple CEO Brad Garlinghouse.
“MoneyGram is one of the largest money transfer companies in the world and the partnership will continue to further the reach of Ripple’s network. I look forward to a long-term, very strategic partnership between our companies.”
Ripple purchased the MoneyGram newly-issued common stock (including the shares underlying the warrant) from MoneyGram at US$4.10 per share, representing a significant premium to MoneyGram’s current market price.
At MoneyGram’s election, Ripple may fund additional purchases of common stock or warrants up to US$20 million at a minimum price of US$4.10 per share.