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MoneyGram and Ripple Seek to Rebuild by Joining Forces

In a recent announcement, MoneyGram International Inc. shared that it would be joining forces with blockchain-services developer Ripple Labs Inc. While it’s long-term prospects for success are far from clear, MoneyGram, an investment and cross-order payments wire-transfer provider, is hopeful it can beat its current situation with this new partnership.

The announcement certainly did make waves, quickly producing a short-term jolt by doubling the value of MoneyGram’s weak stock. Just before the announcement, MoneyGram’s stock closed at $1.45 per share. Immediately following the news, it jumped to $2.89 per share – up 100 percent. Ripple invested $30 million into MoneyGram through purchases of new common stock. It is also considering buying up another $20 million in stock or warrants down the road.

New Partnership, Hopeful Future

Dallas-based MoneyGram and San Francisco-based Ripple are not complete strangers. Another announcement was made last year saying that MoneyGram would test Ripple’s XRP digital currency. This new, two-year agreement would involve MoneyGram using xRapid product and the RippleNet platform. Meanwhile, it would also be deploying XRP in foreign exchange settlement as part of its cross-border payment process.

The goal? MoneyGram is sure that this partnership will reduce costs. The company also expressed the hope that it would also better match the timing and funding needs of cross-border payments than traditional processes.

In the release, Ripple CEO Brad Garlinghouse shared that “this is a huge milestone in helping to transform cross-border payments. 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.”

Those on the outside are much more skeptical, however. MoneyGram has experienced seven straight quarters of year-over-year revenue declines. It also has a deferred-prosecution agreement with the U.S. Department of Justice hanging over its head. Likewise, Ripple has been unable to convert multiple trials into a win for xRapid. But will these two companies be able to pull together and achieve success?

Researcher Tim Sloane, vice president for payments innovation at Maynard Mass.-based Mercator Advisory Group, explains “If Ripple does save money for international remittances, then MoneyGram should become much more competitive in its market,” he says. “This will be a very important proof point for Ripple and for other cryptocurrencies used for remittances.”

In his words, the real question is: “Can two wounded ducks teach each other to fly high?”

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