Ripple SVP: $11.3M MoneyGram Payout Is No Different Than A Visa Or PayPal “Incentive Program”
- In a business move “MoneyGram continued to expand its strategic partnership with Ripple as the first money transfer company to scale the use of blockchain capabilities”
- Ripple’s “financial benefit” of $8.9 million in the Q4 and $2.4 million in Q3 will be accounted for as contra expenses
- We are building new infrastructure together and it costs money – Ripple SVP, Asheesh Birla
Ripple partner, MoneyGram, which uses Ripple's On-Demand Liquidity (ODL), using the digital asset for cross-border remittances, received over $11 million over 2019 from the firm, according to a legal filing with the US' Securities and Exchange Commission (SEC).
MoneyGram has stated that it's currently looking to expand its existing partnership with Ripple.
“MoneyGram continued to expand its strategic partnership with Ripple as the first money transfer company to scale the use of blockchain capabilities,” the announcement continues. “As the first money transfer company to scale the use of blockchain capabilities.”
MoneyGram's end of year financial results of the company for 2018 revealed their income at a little over three hundred million. This income coincided with a decline of 6% from 4Q18 and excluded “$8.9 million of benefit from Ripple.”
Overall, in 2019, MoneyGram’s reported a revenue decline of 11%.
According to MoneyGram, this amount will be accounted for as “contra expenses” rather than revenue after consulting with the SEC.
In the prior quarter, the company had treated “Ripple market development fees” as revenue. But now, this Ripple “financial benefit” of $8.9 million in the fourth quarter, and $2.4 million in the third quarter are considered as amounts to offset existing operating expenses in its Transaction and Operations Support.
Ripple Paying MoneyGram to use their Software & XRP
In June 2019, Ripple announced a $50m strategic partnership deal with the money transfer giant. However, there was no mention of the $11.3 million MoneyGram received from Ripple until now.
In Jan. 2018, the first reports came in that MoneyGram would test Ripple's xRapid solution. In Nov. last year, it was revealed that XRP has been powering 10% of MoneyGram’s Mexico-US corridor transactions through ODL.
A few months ago, it was disclosed by MoneyGram’s Q3 filing that the company “allows MoneyGram to utilize Ripple's On-Demand Liquidity blockchain product (formerly known as xRapid)” and XRP to facilitate cross-border settlements.”
The reimbursements by Ripple to MoneyGram aimed to develop and bring liquidity to foreign exchange markets.
If this surprises you, you should check your belief system.
Whenever an enterprise announces a blockchain pilot, rest assured: a transaction occurred where value was transferred from “blockchain solution provider” to said enterprise, to compensate for the enterprise’s trouble https://t.co/2ujPp6dJe0
— Udi Wertheimer〔🧱½🎉〕 (@udiWertheimer) February 25, 2020
While the new filing doesn’t specify what the $11.3 million was for but it looks like the $2.4 million in Q3 and $8.9 million are given to the MoneyGram to use XRP.
I had a feeling public filings would eventually bite them in the ass
— nic carter (@nic__carter) February 25, 2020
Market Development Costs Money
On this investment, Ripple SVP, Asheesh Birla said:
“Ripple and MGI are strategic partners – we are building new infrastructure together. This market development requires a ton of work, effort, and resources. Surprise, that costs money!”
He further pointed out that Visa (which “allocated a casual $4.1B on incentives in 2019”) and PayPal had also employed “incentive programs” to boost their network adoption. Birla finished saying,
“MGI said today that they are actively expanding to new corridors, and even working to integrate RippleNet for account-to-account transfers in 2020. ODL reduces their capital costs because of the product’s efficiencies, not because they are receiving any fee on the other side.”