The remittance industry is one of the key markets that cryptocurrencies and blockchain have been reforming for the better. Banks and fintech companies are now exploring blockchain technology and cryptocurrencies for cross-border payments. Prior to this, the cost of remittance was close to 5%, blockchain has reduced the costs to less than 1% while reducing the various risks involved with traditional payment methods.
There are plenty of blockchain companies working to transform the remittance industry, but Ripple is by far the most sought after. With its On-Demand Liquidity (ODL) product, Ripple has been using the popular cryptocurrency XRP as a bridge between two different currencies thereby eliminating the need for any kind of pre-funding.
ODL has sparked a lot of customer interests and many payment processors are trying to implement it to meet customer demands while providing better security and transparency. ODL already has 24 members around the world namely Mexico, Philippines, Australia and would soon launch in Brazil. Among the list of businesses currently using ODL, payments giant Moneygram is the most notable.
Earlier this year, Ripple joined hands with Moneygram after a $30 million investment in the company’s equity and a commercial agreement for cross-border settlement using digital assets. The partnership saw Moneygram using ODL in their day to day operations. Six months into the partnership, Moneygram CEO Alex Holmes announced at the Swell 2019 conference that Moneygram has been moving 10% of its Mexican peso foreign exchange transaction volume via ODL.
On November 25, Ripple further tightened the partnership with another investment of $20 million raising its stake in Moneygram to 9.95%. Alongside this, Ripple has also obtained warrants which give it the right to increase its stake to 15% in the future, a filing with the U.S Securities and Exchange Commission confirmed. This completed the acquisition of $50 million stake in Moneygram as a part of the original commitment.
These partnerships are also fuelling the growth of Ripple’s digital currency XRP which saw its transactions hit an all-time high above 4 million per day. The funding is also said to be supporting MoneyGram’s operations as it continues to increase the volume and use of ODL. Holmes commented on this on-going partnership saying:
“Our partnership with Ripple is transformative for both the traditional money transfer and digital asset industry – for the first time ever, we’re settling currencies in seconds.”
At present, ODL can process 1500 transactions per second and helps businesses move money across borders by leveraging the speed and cost benefits of cryptocurrencies. Praising ODL, Nicholas Steiger, CEO of Australian remittance company FlashFX had said that implementing ODL has allowed FlashFX to meet customer demands by providing a newer payments service. He said:
“It’s been a long road for digital assets, but the end customer doesn’t necessarily need, or want, to know how their transactions are being handled in the back end. They want the transparency, low-cost and above all else, speed of transactions.”