Six months ago, Western Union decided to experiment with Ripple’s cryptocurrency called XRP. But, since the money transfer company began using it for payment, there have been complaints that the cryptocurrency has not brought them any financial gain.
No Significant Gains
From the time the cryptocurrency XRP was introduced into the market, Ripple has lauded it as a fast and cost-effective way to transfer money internationally. Surprisingly, the CEO of Western Union, Hikmet Ersek holds a
different view stating that the company is yet to realise any financial benefit since it started testing Ripple’s xRapid for payment settlement.
In an interview with Fortune, Ersek said that Ripple’s product is quite expensive and that is why Western Union cannot adopt it for payments. They would only be interested in it if it has the potential to reduce company cost.
This decision may adversely affect the business that Ripple has struggled to build over time, managing to turn the XRP into one of the first three most valuable cryptocurrencies in the market.
The cryptocurrency which is reported to offer better technological advantages over other payment methods is worth more than $20 billion.
Speaking further on the pilot, Ersek, however, advised that it may be too early to draw conclusions since Western Union has tested the cryptocurrency for transfer of funds between two currencies only.
According to Ripple’s senior vice president of product, Asheesh Birla, Western Union has in the last six months sent only ten payments using xRapid, which is too small a number to produce significant results.
Birla added that they would begin to reap substantial benefits when they move their volume at scale. Western Union could save at least 50% cost on each transaction if they expanded the pilot to all of their payments.
The vice president explained that Western Union’s lack of financial benefit from the use of their product is also as a result of the legacy cost associated with transferring money the traditional way some of which includes staff maintenance abroad for treasury operations.
Ripple reports that the xRapid product has reduced cost by 40 to 70% for companies like Viamericas and Mercury FX. Therefore, Western Union needs to consider taking some fixed costs out of their ecosystem. Fortunately, Western Union’s CEO isn’t in doubt that blockchain technology could save cost for the company, noting that they are still in business with Ripple.