16 July 2019 14:00, UTC

MoneyGram and Ripple, and blockchain company has come to an agreement. Ripple paid almost 3 times the closing price for MoneyGram shares. In a statement, Ripple CEO Brad GARLINGHOUSE said

“This strategic partnership will enable MoneyGram to greatly improve its operations and enable millions of people around the world to benefit from its improved efficiency.”

The results of MoneyGram’s worth is clear, with shares more than doubling since the deal. It was projected that distribution was a key obstacle for Ripple, which is why MoneyGram offer a far-reaching infrastructure, allowing people to send Ripple anywhere in the world now.

Ripple’s aim is to send money anywhere in the world without fees, and their partnership with MoneyGram may have some synergy in this respect. Although, according to Shane FLEURY (CIO of Elevate Capital Advisors) told Benzinga

“If MoneyGram is right now using traditional banking services behind the scenes in order to make the app work, to send money, if they're using traditional finance, they have to deal with fees by working with Ripple."

The actual change in service to MoneyGram is still unclear, with no changes as of yet. It is speculated though, that they will become the first big money transfer company to utilize blockchain and cryptocurrencies.

Clutching at straws?

What comes of the new deal with Ripple remains to be seen, but what is known is the recent struggles that MoneyGram has endured.

MoneyGram have struggled since the 2008 subprime mortgage crisis, where they had many large investments in mortgage-backed. The stock price plummeted to $1. A few years later they were hit by another threat, when Walmart introduced their own in-house transfer service. This wasn’t a threat in terms of competing services, but it meant they lost Walmart as a client, of which it was responsible for 20% of MoneyGram’s volume.

In the last 7 years, MoneyGram have also been fined over $100 million due to noncompliance. MoneyGram’s revenue has been decreasing each quarter since 2018, and at an accelerating rate. The deal with Ripple almost seems like a last-ditch grasp at staying relevant in regards to their suffering performance and rise of fresh fintech firms like TransferWise.

It comes as no surprise that MoneyGram’s online review isn’t positive. For example, many customers’s feedback claim that they received a poor quality of service, high cost of transfers, lack of responsiveness from the company among other criticisms.

It seems that MoneyGram is really trying something new and far reaching (compared to their recent previous track record). They desperately need such innovation to spark something fresh about the company, because it is becoming extremely stale, both in its services and in its public perception.

Blockchain is proving to be difficult to assess in its risk. Providing the option, for example like Revolut are doing, to handle cryptocurrencies inside their “bank” accounts is proven to be successful because there is no reliance on the cryptocurrency; it is simply an optional feature.

It isn’t just volatile cryptocurrencies that pose as a risk, either. Blockchain is increasingly being used for anonymous transactions to facilitate illegal money activities, such as scams, payment for contraband, and money laundering.

When looking into the MoneyGram reviews, many denounce the service due to it being used heavily in money transfer scams. Whilst this may be something that MoneyGram cannot control and shouldn’t be too heavily faulted for, including blockchain into their service may perpetuate these risks. MoneyGram needs to be careful here because negative public perception, warranted or not, is one of the largest problems that face the company and is driving the demand for new fintech transfer companies who operate as cheaper alternatives. It says a lot when customer’s feel safer in depositing large amounts of cash into semi-regulated, new mobile money transfer companies than they do with MoneyGram, which was founded 79 years ago.

Providing that MoneyGram take on board the ways in which other money transfer companies are limiting, but still including, the use of cryptocurrency, then they could have a success on their hands. Ripple’s strive for frictionless experiences in sending money is precisely what the market revolves around currently: sending times, flexibility, low or no fees, minimal currency spread.

Whilst the future cannot be predicted, least of all MoneyGram’s, the attempt at something fresh is exactly what shareholders needed.

Image courtesy of Ripple Guide

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