The Ripple cryptocurrency company on Monday announced a major partnership with MoneyGram, which will see the money transfer service use the XRP currency as part of its daily operations.
Under the terms of the agreement, Ripple will pay 4.10 cents US per share to acquire an 8% to 10% stake in MoneyGram. This translates into a $ 30 million investment and also gives MoneyGram the option of another $ 20 million injection of funds over the next two years.
For San Francisco-based Ripple, the agreement will provide an unprecedented opportunity to demonstrate that its product called X-Rapid, which allows the transfer of XRP, is superior to the transfer of money across borders. Ripple has long argued that banks should use the XRP as a form of currency relay, rather than leaving money stuck as collateral on foreign accounts.
"It will eliminate the need to deploy foreign bank accounts. That's why MoneyGram has negative working capital. This will help customers and facilitate their treasury operations, "said Brad Garlinghouse, CEO of Ripple. Fortune.
Ripple's investment came a year after MoneyGram's rival, Western Union, ended an experimental experiment with XRapid, saying the XRP transfer service had produced no significant savings. Ripple has also been involved in many pilot projects with banks over the last three years, but none of them has led to a decisive moment for the XRP.
Garlinghouse, however, says the trend has reversed in recent months, claiming that hundreds of partners are now using the XRP protocol, whose total implicit value rises to about $ 18 billion and is the third larger cryptocurrency after Bitcoin and Ethereum. He added that this has generated a very liquid XRP offer, which means that volatility risk is virtually eliminated as financial companies can move in and out of the currency in seconds.
For MoneyGram, Ripple's investment offers the opportunity to consolidate its finances after recent losses and several dismal results reports that have resulted in the fall of its stock price. 18 months after the US government banned the Chinese company Ant Financial from acquiring the company.
Ripple's purchase of newly issued shares of MoneyGram represents a significant premium over MoneyGram's recent market price, which is around $ 1.50, although it is far from the $ 18 offered by Ant Financial.
According to the companies, Ripple will not be immediately elected to the Board of MoneyGram, but will enjoy observer status.
"We are very pleased with the investment conditions of Ripple, which supports the company with permanent capital and additional liquidity," said Larry Angelilli, MoneyGram's CFO, in a statement. "This partnership also provides MoneyGram with the opportunity to improve operational efficiencies and increase earnings and free cash flow."