Ripple has announced a tie-up with money transfer company MoneyGram, a move which is significant because the arrangement involves the use of XRP, Ripple’s digital currency, which has recently soared in value but also faced questions about its practical uses.
The partnership will see MoneyGram pilot the use of XRP through a new Ripple service, called xRapid, designed to provide liquidity to financial institutions. In a release announcing the news, the companies touted the speed and efficiency of XRP:
“XRP remains the most efficient digital asset for payments with transaction fees at just fractions of a penny, compared to Bitcoin fees of about $30 per transaction. Similarly, the average transaction time for XRP is 2-3 seconds with other top digital assets ranging from 15 minutes to an hour”.
In a statement, Ripple CEO Brad Garlinghouse described the MoneyGram tie-up as a strategic one, and said it would demonstrate XRP’s ability to lower costs for money transfers between friends and families
While banks around the world are experimenting with blockchain (the underlying technology behind bitcoin and Ripple) to lower money transfer costs, skeptics of Ripple say its XRP currency is unnecessary to carry out transactions.
Garlinghouse, however, makes the case that XRP obviates the need for money transfer shops to maintain local currency accounts (so-called nostro and vostro accounts) in far-flung locations.
This notion of using digital currency as a form of bridge funding is not unique to XRP. Last year, IBM and a consortium of banks in the South Pacific announced a blockchain transfer arrangement that entails the use of a cryptocurrency called Stellar.