How many transactions per second does MoneyGram complete?

Earlier today, Ripple and Money Gram announced a pilot for Ripple’s new service, xRapid . This new Ripple service is for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience. This service can reduce costs because payments into emerging markets often require pre-funded local currency accounts around the world. xRapid can potentially lower the capital requirements for liquidity. MoneyGram is in over 200 countries so they are an ideal candiate for xRapid.

MoneyGram’s global financial transaction volume is massive. They have about 350,000 agent locations in more than 200 countries and territories around the world. They are second only to Western Union in their industry. In 2016 Money Gram earned $1.6 billion in revenue. Western Union earned $5.4 billon or roughly 3.4 times more. I couldn’t find MoneyGram’s transactions per second reporting, but did find Western Union listed at 31 per second. If we assume the same average transfer size and that they are in the same type of businesses, MoneyGram’s transactions per second are roughly 9. At nine transactions per second, MoneyGram is sending money to and fro nearly 300 million times per year!

How much would Ripple save MoneyGram?

Hard to say. There are many costs associated with transferring money. Ripple’s service impacts a few of them like the need to hold specific amounts of local currency. Ripple’s service may also enable faster transactions which may increase revenue if it enables new demand. MoneyGram only needs about 10 minutes or so for transfers in many parts of the world so I wouldn’t factor in new demand at this point.

If we can assume that a Ripple-based service can save MoneyGram just 3 cents for each transaction, then at their current volume that would result in an annual savings of $9 million. Three cents to me seems reasonable at this point. And $9 million is not an insignificant amount! MoneyGram’s last reported quarter of net income was $7.7 million for the third quarter of 2017. In other words, a savings of just 3 cents per transaction has the same impact as adding more than a whole quarter of net income to MoneyGram’s bottom line.

What’s MoneyGram’s Switching Costs?

That’s a key question. If my estimates are in the ballpark, it will need to cost MoneyGram less than $9 million to switch out their current system for a Ripple based system for it to have a one year pack period. I think my numbers are pretty conservative and from my vantage point, switching should be an outstanding ROI for MoneyGram.

Uses Just a Fraction of Ripple’s Transactions Per Second

Even if all of the money transfer companies used Ripple, it wouldn’t even come close to swallowing up Ripple’s ability to consistently handle 1,500 transactions per second, 24×7. It’s interesting to think about Ripple’s global capacity in these terms. If all of the money transfer companies used Ripple, it would just tickle Ripple’s capacity. There are not that many startup companies that can claim to bring global leaders into the fold without impacting a significant amount of existing capacity.

Two More Global Money Transfer Companies Next!

Ripple CEO Brad Garlinghouse’s tweeted that three of the top five global money transfer companies plan to use XRP in 2018. With MoneyGram taking one of those three spots, we can expect announcements soon from two additional companies. In case you are wondering, the top five are Western Union, MoneyGram, Ria, Transferwise, and WorldRemit.

How much then does Ripple save MoneyGram?

Based on my estimates, $9 million a year minimum. If they budget $9 million to implement a switch to a Ripple-based system, this would be a no-brainer for their CFO assuming the CEO was comfortable with all of the non-financial commitments necessary to make a transition this significant. $9 million is a significant amount of money for MoneyGram. Making this one switch could end up adding 25% more net income from one cost savings measure!

On another note, I wonder if Ripple could help with any of the fraudulent transfers. Western Union reported they stopped 400,000 fraudulent transactions in 2016 alone. How will Ripple deal with fraudulent transactions that have to be reversed? Hmmm…will dig into that a bit later.