MoneyGram announced that they are working with Ripple to provide international remittances in Ripple’s cryptocurrency, XRP. An article in American Banker explains why:
To execute cross-border payments today requires financial institutions to rely on a complex web of relationships with correspondent banks in other countries. Worse, they must hold dormant cash in overseas accounts to provide liquidity for payments. Under the Basel III regime, these reserves count against banks as balance-sheet assets, forcing them to hold even more cash to cover their supposed liabilities.
Enter Ripple. The San Francisco startup is offering on-demand liquidity and rapid foreign exchange through XRP, theoretically allowing financial institutions to send payments around the world without the need for multiple corresponding accounts. Fees would be lower and the payment flows more transparent.
“The payments problem doesn’t just affect banks, it also affects companies like MoneyGram, which help people get money to the ones they care about,” Brad Garlinghouse, Ripple’s CEO, said in a news release on Thursday. “By using a digital asset like XRP that settles in three seconds or less, our clients can move money as quickly as information.”
Beyond offering a new product, another reason for the partnership might be the up-tick in stock price that Money Gram achieved yesterday after the announcement that it was integrating a cryptocurrency solution. This was most likely appreciated after the disappointing new last week that their acquisition by Ant Financial was called off.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
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