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

Ripple CEO Gives His Thoughts on JP Morgan’s JPM Coin at DC Blockchain Summit 2019

On Wednesday (March 6th), Brad Garlinghouse, the CEO of Ripple, presented his latest thoughts on JPMorgan Chase's dollar-collateralized stablecoin project JPM Coin at DC Blockchain Summit 2019 (March 6–7, 2019), which was held at Georgetown University in Washington, D.C.

This event is the Chamber of Digital Commerce’s "annual in-person gathering held in partnership with Georgetown University’s Center for Financial Markets and Policy." The mission of the Chamber of Digital Commerce is "to promote the acceptance and use of digital assets and blockchain-based technologies. "

While being interviewed by Nasdaq reporter Jill Malandrino on stage at this event, the Ripple CEO was asked what he thinks about JPM Coin, which was annaounced by JPMorgan Chase on February 14th. This is what the Ripple CEO said about JPM Coin back then:

This tweet linked to a post titled "The Case Against BankCoin" that Garlinghouse had made on Linkedin roughly three years (24 february 2016), where he described why such "BankCoin" projects were "misguided" efforts:

"UBS, Deutsche Bank, Santander and BNY Mellon announced their 'utility settlement coin,' a new digital asset they hope will become the industry standard for blockchain settlements. They expect banks will initially use the coin for post-trade settlement and clearing by early 2018, after they secure blessing from regulators and central banks. While this development signals significant market traction for an institutional use of digital assets, I have to say it’s deeply misguided. A bank-issued digital asset can only really efficiently settle between the banks who issued it. Then, two scenarios can play out. Scenario one: all banks around the world put aside competitive and geopolitical differences, adopt the same digital asset, agree on its rules, and harmoniously govern its usage. Fat chance. Scenario two (the more likely scenario): banks not in the issuing group issue their own digital assets with their own sets of rules and governance."

"We’re kinda seeing this already, as the FT points out, with Citi’s Citicoin and Goldman Sachs’ SETLcoin. The result would be an even more fragmented currency landscape than what we have today. If banks of different digital asset groups want to settle trades with one another, they’ll have to make markets between their unique digital assets or trade between their digital assets and a common fiat currency. What a mess! The second big problem with the 'utility settlement coin' is it seems it’ll be backed by a basket of currencies. Once backed by cash, it’s no longer an asset; it’s a liability. Trading liabilities then ultimately requires moving cash across borders, re-creating today’s system but adding more friction!"

And the final point that he had made in that 2016 Linkedin post was why banks needed an independent digial asset such as XRP:

"We strongly believe banks need an independent digital asset to enable truly efficient settlement and we believe XRP is best positioned for that role. It goes back to the fundamentals of what makes digital assets unique and special - they’re universal currencies, meaning anyone can use them as units of value anywhere in the world. That universality gives digital assets global reach and the ability to settle much faster than traditional assets."

Now, coming back to yesterday's interview at the 4th annual DC Blockchain Summit, this was Malandrino's question about JPM Coin:

"Is that similar to a traditional cryptocurrency? Because to me, it doesn't sound like a decentralized product, even though cryptocurrency promotes decentralization. So, what are the differences with what we traditionally consider crypto?"

Garlinghouse replied:

"Well, let me start by saying [that] I think it's great for the blockchain and crypto industry to have players like JPM leaning in. Thumbs up! That's great! That's the only nice thing I'm going to say about this."

He then continued by starting to explain why he was not a big fan of JPM Coin:

"OK, so I got asked this last week. I was speaking at a Morgan Stanley conference, and someone asked me...there was this headline about JPM Coin. This guy was from Morgan Stanley who was interviewing me. So, I asked him 'Is Morgan Stanley going to use the JPM Coin?'. He said 'probably not'. Or is Citi going to use the JPM Coin? Is BBVA? Is PNC? And the answer is no. And so does that we're going to have all these different coins, and does that mean we're back to where we are with lack of interoperability? I don't get it."

Next, Garlinghouse talked about his second major objection to JPM Coin:

"So, let's think about this. JPM Coin, they announced for institutional customers, if you give them a dollar in deposits, they’ll give you a JPM Coin that you then can move within the JPM ledger. Wait a minute, just use the dollar!” he said. “I really don’t understand. If you’re just moving within the JPM ledger, and it has to be dollar-to-dollar, one-to-one backing, I don’t understand what problem that solves.”

Another topic that Malandrino asked Garlinghouse about was the need for regulatory certainty in the U.S. The Ripple CEO made this brilliant reply:


And finally, when talking about use cases for blockchain technology, this is what Garlinghouse had to say:


Featured Image Courtesy of Ripple Labs