Ripple On-Demand Liquidity makes up 10% of US-Mexico volume, MoneyGram says
Six months after Ripple bought its stake in MoneyGram, the remittance company is using more XRP for its transfers.
It's a sizable amount, given the business of the corridor and the quickness of the development. It's been about 6 months since Ripple paid $50 million for a 10% stake in MoneyGram, after which MoneyGram announced that it would start using On-Demand Liquidity.
On-Demand Liquidity, or ODL, is essentially just the process of buying and selling the XRP cryptocurrency in originating and destination countries to create a source of liquidity on demand.
Going back to basics, a remittance service will typically hold money in each currency in each country. Because the remittance company is already holding the money in both countries, when someone wants to send money from the US to Mexico, they can pay with cash in the USA so the recipient can almost immediately pick up their pesos in Mexico.
One of the problems with this system, which Ripple aims to address with ODL, is the way funds need to be locked up on both sides of the transfer. Instead of having that money there, the remittance company basically just buys XRP at one cryptocurrency exchange, then sells XRP for local currency in the destination country.
Simple as it is, it may be an effective alternative to legacy systems, and MoneyGram isn't the only company getting involved in ODL.
"What has amazed me the most is the amount of pressure that legacy players face," Holmes said. "The fundamental challenge of moving money around the world is that there isn’t a lot of coordination between financial institutions and there should be more solutions to connect all of these pieces. More and more companies are looking to make the economy move like it should... despite any challenges in today’s landscape, whether political or economic, money continues to move and every industry must be omnipresent and understand what their customers want."
Of course, many customers still prefer using banks, even though they're almost universally slower and more expensive than specialised money transfer services. That's a problem no amount of Ripple can solve.
Disclosure: The author holds BNB, BTC at the time of writing.