A shock wave was sent through the digital currency community yesterday when news broke about the partnership between Western Union and Ripple. With Bitcoin remittance solutions popping up left, right and center, it was only a matter of time until one of the dominant players in the market decided to do something about it. But, why the choice of Ripple?
Ripple & ZipZap Take on Western Union
At the beginning of October in 2014, Ripple Labs Inc. expanded the distribution of their digital currency Ripple (XRP) and money transfer software by partnering up with ZipZap Inc. For those of you who have never heard of ZipZap Inc., the company has created a cash transaction network and decided to open it up to alternate payment methods.
Due to the nature of this agreement between both parties, Ripple Wallets can be linked to ZipZap accounts. As a result, sending payments between users through Ripple – by using an existing infrastructure – has been made possible. Needless to say, this project has all the potential to become a direct competitor for Western Union and their high money remittance fees.
In the early days, Ripple Labs raised nearly USD3 million in funding. Notable participants in this round of funding were Google Ventures, Andreessen Horowitz, Bitcoin Opportunity Fund, and many others, resulting in this major announcement putting this virtual currency on the radar of any and every financial institution in the world.
If You Can’t Beat Them, Join Them?
Fast forward to the news we received yesterday afternoon and, all of a sudden, Western Union is planning to “give Ripple a try and see what it can bring to the table”. Do keep in mind that this is just an experiment being conducted on behalf of both parties, and nothing has been set in stone just yet.
The reason why Western Union is showing a genuine interest in Ripple labs is not because of its digital currency per se, but, rather the distributed ledger value transfer tool. And, it is exactly this tool that poses such a threat to Western Union’s business model, as it allows people to move funds faster and far cheaper.
On the other hand, the distributed ledger value transfer tool can be seen as an opportunity for Western Union, as well. While the topic of fees remains the subject of heavy debate, the company is showing a willingness to adopt new technology because it could be beneficial. Hardly anyone in the Bitcoin and digital currency world expect this attitude, and certainly not at this point.
To give our readers an idea as to what Ripple Labs’ distributed ledger value transfer tool does, you can easily compare it to the Bitcoin blockchain. Considering the fact the blockchain is often deemed to be “Bitcoin’s killer app”, this distributed ledger value transfer tool seems to be Ripple’s killer app.
It remains to be seen what will come of this “experiment” between Western Union and Ripple labs, but, it sets a precedent for future integration with other payment protocols and networks.
All images courtesy of Western Union and Ripple Labs