MoneyGram continues digital pivot in response to cryptocurrency
MoneyGram is going big on a digital future, aiming to beat the rush.
The international money transfer industry has been in a state of ongoing technological flux for a while, as new systems constantly emerge to undercut established providers with lower fees and better rates. The relatively sudden rise of cryptocurrency may have added a new note of urgency, with analysts marking the technology as a fundamental paradigm shift.
MoneyGram emerged in its latest incarnation in 2006 to hit the ground running, and it hasn't really stopped since then.
In its Q1 2018 financial report released on 7 May, MoneyGram marked 2018 as a year of change, and a time to get ahead of the game.
"2018 will be a transition year for MoneyGram as we continue to invest and reposition the company to compete in a fast changing environment," said MoneyGram chairman and CEO Alex Holmes. "We are increasing our investments in digital assets as we accelerate our transition to a digitally enabled customer-first organization."
In the first quarter of 2018, MoneyGram started initiating its "Digital Transformation initiative," putting down expenses of $7.3 million in the process, with total costs expected to run to $15 million. This investment in "new digital touch-points" for customers and agents is expected to bring $30 million of expense reductions in 2018, and $45 million annually on completion.
Two of the new initiatives rolled out so far this year include sending money through Facebook messenger, and a partnership with Ripple to explore the potential of moving money as easily as data with XRP, through Ripple's xVia system.
"Every day blockchain technology is changing the norm and encouraging innovation," Holmes said in January. "Ripple is at the forefront of blockchain technology and we look forward to piloting xRapid. We're hopeful it will increase efficiency and improve services to MoneyGram's customers."
The cost of compliance
One of the effects of cryptocurrency, in addition to simply providing a mechanism that moves money as quickly and easily as data, is to open up the field to a much wider range of players. Some of these are tech companies like IBM, who are taking full advantage of digital money by creating their own cryptocurrency-based payment systems. Others are newer cryptocurrency startups like Coinbase who are most likely angling for a piece of the international money transfer market themselves.
And others are (former) customers, who are already sending money directly peer to peer with fees as low as a fraction of a cent, or zero. Not only is the sector getting more competitive, but it also stands to shrink over time as individual cryptocurrency adoption spreads and wallets get more user-friendly.
This puts MoneyGram and other remittance companies in a race against the clock. And right now, compliance and regulatory obstacles are one of the main barriers to be overcome before they can fully unlock the benefits of cryptocurrency. It's hard to rush regulation, but the next best thing might be to get ahead of the game.
"Our focus on compliance will underpin our future success," Holmes said. "During the quarter, we implemented significant new compliance standards which are above and beyond what is currently required by law and without comparison in the money transfer industry. While these standards are expected to adversely impact transactions and revenue in 2018, we are setting the industry paradigm and intend to be at the forefront of compliance as we lead our business into the future."
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO