MoneyGram International, Inc. (NASDAQ:MGI) will team up with Visa Inc. (NYSE:V) to enhance its person-to-person (P2P) debit card deposit service internationally. The pilot program will initially focus on payments to Spain and to the Philippines. Plans are to expand to other jurisdictions soon thereafter.
MoneyGram, like its direct competitor Western Union, has always tried to be all things to all comers, a service of last resort, so to speak, in situations where traditional banking transfers would never suffice. Their correspondent networks are extensive, but even after years of attempting to automate the processes with the latest in technology, the vast majority of transactions suffer from antiquated intermediary-driven legacy networks. The need to evolve into the digital age is an imperative that must be addressed.
Apparently, MGI has solicited support from Visa to improve upon early success with its own debit card direct service. As reporters from the Payments Journal relate:
This move is in line with MoneyGram’s efforts to grow its cross-border digital business. The successful launch of the service in the United States, which helped the company to increase its customer base by 50%, is another positive. Solid customer retention rates coupled with good customer response has prompted further roll out of this service.
The “backbone” of the expanded debit card push service will be Visa Direct, a real-time capability to push a credit to another 16-digit account number. The Visa organization is finally recognizing the potential of this service, which was developed in the nineties to assuage government officials in the EU. At the time, the EU demanded a simple cross-border payment system that would effectively make payments between citizens of member states a straightforward and cost effective process.
Visa and Mastercard stonewalled the EU for years, primarily because banking members did not want to give up their lucrative markups on foreign currency transactions. Visa eventually developed the Visa Direct service; Mastercard followed with its “Send” equivalent. Banks, however, failed to promote the two services for obvious reasons, and the associations were loath to allow private enterprise to leverage the software either.
Both Visa and Mastercard now see the potential, and each has made recent acquisitions to enhance interfaces and operational characteristics of the older models. Visa acquired Earthport this year, while Mastercard purchased Transfast. The nature of these systems is to replicate what blockchain technology does in the crypto world – eliminate the need for intermediaries by providing an online, real-time link from account to account. In the case of MGI, it will act as an aggregated account for its customers. All that will be required is a 16-digit account number linked to a bank account for the ultimate endpoint delivery of funds.
MGI also hopes to leverage the Visa brand to attract customers and expand globally without the need for a major ad campaign. The action plan going forward will clearly be to target obvious concentrations in the business where automation can do the most good. The market is also much broader than just simple remittances from family members back home to other family members. For example, there are vast networks of missionaries that must be paid effectively from their respective home countries. A Visa Direct payment could deliver payroll directed funds immediately to the missionary’s local bank account in country.
The more interesting aspect of this Visa/MGI union, however, is that the Ripple Network is already a significant partner with MoneyGram. Ripple’s mission is to use the XRP token and blockchain technology to revolutionize outdated cross-border payment networks. In mid-November, we reported that:
MoneyGram, one of the market leaders in remittances, has recently announced that its U.S. to Mexico remittances are now crypto-enabled by 10%, an achievement that has been reached after Ripple made a $50 million investment in the firm and partnered with them back in June.
It will be interesting to see what kind of “mischief” these three giants generate in future.