Financial services giant Western Union has indicated an interest in acquiring money transfer company, MoneyGram, according to a report by Bloomberg. This was revealed by an anonymous individual familiar with the development although it has not been officially announced by any of the two companies yet.
This is coming in the wake of the COVID-19 pandemic which has affected several businesses, Moneygram and Western Union inclusive. The acquisition may be motivated by the need to join forces of the two largest American remittance services providers to keep the industry afloat. The impact is worse for legacy remittance companies like Western Union and MoneyGram because of the high fees users pay to send funds across borders which are an average of 7% of the amount sent.
Ripple and XRP may expand
Moneygram in a bid to make cross-border payments more affordable, partnered with Ripple last year. Ripple bought 10% stake in the company with a $50 million investment which made the two to be partners. Moneygram is also currently using Ripple’s On Demand Liquidity (ODL) with XRP as a liquidity source to provide instant money transfer between North and South America, the company reported last year. ODL accounts for 10% of Moneygram’s transactions as at the end of 2019.
The company indicated an interest in expanding Ripple’s coverage of payments with ODL which cuts transaction fees by at least 70%. If the acquisition deal between the two companies works out, Ripple’s payment network known as RippleNet may gain more grounds as it has become necessary to cut the cost of transfer and increase the speed of transactions to keep the two companies compete in the evolving remittance services industry.
Ripple boasts of having well over 300 institutional clients who use its remittance services to provide cheap and fast transfer of funds for their customers. The two companies have not worked together before but their cooperation has been expected for some time now.
Earlier this year, Western Union “quitely” tested Ripple’s payment technology possibly with an intention to adopt it. This partnership may flourish if Western Union eventually acquires MoneyGram and Ripple may see another level of growth in the remittance industry.