It is evident the current remittance industry is prone to disruption. Whether it is due to decentralized ledgers or cryptocurrencies, there is plenty of room for improvement. MoneyGram CEO Alexander Holmes is quite pleased with the improvements Ripple has offered to his company. He now firmly believes blockchain technology will change the remittance market for good.
A Booming Industry Suffers Stagnation
Recent statistics by World Bank confirm nearly $700bn was remitted globally throughout 2018. That in itself tells many different tales. First of all, people continue to send money around the world through traditional payment providers. Secondly, while the fees remain high, they are not necessarily a hurdle for those in dire need of transferring money. Third, India, China, and Mexico are the largest receive markets. Two of those countries genuinely oppose cryptocurrencies and their technology.
As such, it is not entirely abnormal, the remittance industry suffers from a fair degree of stagnation. It is not cheap to send money around the world, even though the industry is still booming regardless. Finding solutions to not only make operations cheaper but also vastly more efficient, needs to be the number one priority. That is why companies such as MoneyGram are looking at innovative services and technology to further solidify their position in this industry.
MoneyGram Leads the way
Transforming existing money transfer companies into an innovative venture is not all that easy. MoneyGram, which is partially owned by private equity and partially a public company, is in a prime position to make changes as they see fit. This is also why the company is banking heavily on Ripple’s blockchain technology. Once the company communicated this shift to distributed ledger-based transfers, the MoneyGram stock price soared by 160%.
There are downsides to the business model operated by this company until earlier this year. Letting users deposit money in one country and having others pick it up abroad works well, yet no funds are moved between these two markets at any time. With Ripple and XRP, those are no longer concerns. Although Ripple can’t provide a pool of global liquidity just yet, they do allow remittance providers to create liquidity all over the world. Blockchain technology, according to Holmes, allows money to be moved instantly and anywhere in the world.
Consumer Benefits Haven’t Materialized yet
On paper, one would expect the shift to xRapid to provide ample benefits to MoneyGram customers, So far, that hasn’t happened, nor will it for quite some time to come. That said, the company remains hopeful cryptocurrencies and digital assets such as XRP gain the same “leverage” as traditional fiat currencies at some pint. If that were to be the case, the disruptive effect these currencies would have on the remittance industry cannot be underestimated.
Unfortunately, it seems unlikely the governments around the world will suddenly openly embrace cryptocurrencies. The opposite outcome seems a lot more plausible under the current circumstances. That doesn’t mean blockchain technology itself won’t make a lasting impact, however, One can have blockchain without cryptocurrencies, but not the other way around. As such, an interesting future leis ahead for the remittance industry as a whole.