Western Union has reportedly made an offer to buy MoneyGram, another money transfer service provider that has a business partnership with Ripple.
MoneyGram is struggling
MoneyGram has $878 million worth of debt and has been hit hard by the COVID-19 pandemic. MoneyGram’s brick and mortar locations were forced to close during the coronavirus shutdown, and as a result, the money transfer service has struggled.
Although this had led to an increase in MoneyGram’s digital transactions, the amount of MoneyGram’s digital transactions only accounted for 18% of its total money transfers in Q1 2020. However, shortly after Bloomberg broke the news about Western Union looking to acquire MoneyGram, shares of MoneyGram increased by roughly 50%, at the time of writing $MGI is up 33%.
What does this mean for Ripple?
Ripple owns 9.95% of MoneyGram and signed a two-year strategic business deal with MoneyGram on June 17, 2019.
According to the original press release that announced the strategic partnership, MoneyGram uses Ripple’s “xRapid product, a solution for on-demand liquidity, which reduces reliance on pre-funding by enabling money to be sent from one currency and instantly settled in the destination currency.” However, recent comments made by MoneyGram chairman and chief executive, Alexander Holmes show that Ripple has not quite found their product-market-fit in their MoneyGram partnership yet.
According to Holmes, Q1 was not a very active quarter in terms of Ripple providing value to MoneyGram.
“I would say it was a little bit of a relatively quiet quarter, in the sense of really pushing anything particularly new into the market or expanding the service,” said Holmes.
“We continue to flex with them as they continue to expand the service and move some things around, and really figure out what they want, the product to look and feel like, and how they want to take that to various markets. So I think it’ll change over time. I think the results of what we’re doing will vary by quarter and by month.”
From the looks of it, there seems to be continuous changes being made on Ripple’s end. So much so, that it seems like they are uncertain of what they envision the product to look like and how they want it to operate.
Who pays their partners?
Although MoneyGram and Ripple are business partners, it is unclear how the two add value to one another—especially given the recent statement made by Holmes.
As part of the business agreement, Ripple had to invest $50 million into MoneyGram. It is also well-known that Ripple continually pays MoneyGram every quarter.
In Q4 2020, Ripple paid MoneyGram $11.3 million in XRP. It is unusual for a business to pay its partners for the partnership and Ripple has drawn a lot of media attention for doing so. It will be interesting to see what happens with Ripple if Western Union does decide to acquire MoneyGram, Ripple’s partner company in which they have a significant ownership stake in.
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