Western Union Not Giving Up on Ripple

Siamak Masnavi

It seems that cross-border payments specialist Western Union has not given on the idea of using Ripple's technology. In fact, in a recent interview, Molly Shea, Western Union's General Manager for the Asia-Pacific (APAC) region, confirmed that Western Union was still exploring the use of blockchain and cryptocurrencies.

But before we examine Shea's comments, especially those regarding Ripple, we need a brief recap of the history of the relationship between Western Union and Californian FinTech company Ripple, which specializes in proving technological solutions for cross-border payments.

On 14 February 2018, Fortune reported that during an earnings call, Western Union CEO Hikmet Ersek had "told analysts that the company is experimenting with Ripple for settling transactions and for capital optimization." Later in the day, this news was confirmed by Ripple via a tweet that indicated that Western Union was interested in a pilot study involving Ripple's xRapid product (which uses XRP as the bridging currency in cross-border, cross-currency payments):

Also, a Ripple spokesperson told Fortune at that time:

“We’ve been testing different products with Western Union for a while. We’re excited about our work towards a pilot implementation of xRapid, which uses XRP in payment flows."

However, just a few months later, to the surprise of Ripple and many/most XRP investors, the Western Union CEO made a shocking revelation to Fortune in another interview. He said that although he didn't “want to kill” the xRapid trial, early results had failed to convince him that Ripple's solution was more cost-efficiency than Western Union's existing solution.

But it is worth noting that Ersek had warned that this pilot might be too early and too small to serve as conclusive evidence that xRapid was not suitable for their business (since Western Union had only done a small amount of testing along the U.S.-Mexico payment corridor). Indeed, Asheesh Birla, Ripple’s Senior Vice President of Product, did confirm that Western Union had only sent 10 payments using xRapid up to that point and that most of the past several months had been spent by Western Union getting ready for the experiment and "so the actual pilot was only a matter of a week or two." Birla also said:

“If they were to move volume at scale, then maybe you would see something, but with 10, it’s not surprising that they’re not seeing cost savings. They do millions of transactions a month, and I’m not surprised that with 10 transactions it didn’t have earth-shattering results.”

Then, on 17 December 2018, in an interview with Reuters PLUS, Odilon Almeida, the President of Global Money Transfer at Western Union, confirmed that his company was still exploring the use of cryptocurrencies and blockchain technology:

"There are two elements to the cryptocurrency: the first element is the digital currency itself, and the second one is the technology behind it, the blockchain. The blockchain technology has many applications... It's all about storing information an exchanging information in a very efficient and effective way. This technology, I believe, has a lot of potential... On the other hand, if you want to have a digital currency that is broadly accepted and used, you need to have at least three things. You need to solve for volatility, compliance, and governance. We are starting to see now some digital currencies solving for volatility when they peg its value to a strong currency like the dollar, but you still need to solve for governance and compliance...

Our pilot for Ripple goes into the same space. It's about learning. So, we are looking at the blockchain technology and really seeing if it can make us more efficient...

Western Union is ready today to adopt any kind of currency. We already operate with 130 currencies. If one day we feel like it is the right strategy to introduce cryptocurrencies to our platform, technology-wise, it's just one more currency. I think cryptocurrencies may become one more option of currency or assets around the globe to be exchanged between people and businesses. If that happens, we would be ready to launch."

Now, we can come back to the latest comments by Western Union about cryptocurrencies and more specifically Ripple.

In episode 284 of the "Analyse Asia" podcast, Shea was interviewed by the host, Bernard Leong, and asked various questions about Western Union's money transfer business. Around the 28:10 mark, Leong asked Shea what were her current views towards blockchain and its applications to remittance. Shea answered:

"We believe physical currency, as we know it today, is not going away. Cash is still the predominant form of payment in most of the developing world, and it's difficult to see that changing quickly. It's too early to predict the impact of virtual currency on the money transfer business. It really is, but you’ve got to be studying it as it evolves. But as the company that invented the concept of digitizing money, Western Union is well positioned to connect the cash and digital worlds for our consumers, and we will continue to leverage our capabilities where we see those opportunities. We are open to exploring new business opportunities, particularly, those that give us the opportunity to offer more choices to our customers. So, Blockchain and cryptocurrency space is rapidly evolving, and we continue to explore possible applications for our business. As some examples, we are piloting some settlement tests with Ripple for certain corridors, I think the USD and the MXN is one example, and really learning about possible opportunities. The options that we choose will need to be legitimate and widely acceptable for consumer use.”

Since we know that Western Union started looking at xRapid for settlement along the U.S.-Mexico payment corridor around the beginning of 2018, Shea's remarks seem to suggest that Western Union has been continuing its xRapid trial, which could mean that their experiments involving xRapid and XRP must be at least promising.

Featured Image Courtesy of Ripple