If Western Union buys MoneyGram, where does that leave Ripple?

Western Union and MoneyGram: a match made in cross-border payments heaven? If so, it might also be a dream come true for Ripple.

Last week, Bloomberg reported that Western Union had made a takeover offer to MoneyGram, though its unnamed source stressed that nothing was finalized. And of course, similar talk swirled back in 2015 and never came to fruition.

Nevertheless, thus far it seems that this time around the stock market is buying. Despite the firms staying mum on the reported offer, MoneyGram's stock has climbed nearly a dollar – from about $2.59 to $3.40 as of the time of writing – since the news of Western Union's takeover bid.

Meanwhile, some crypto industry observers may be more interested in another aspect of the potential deal: What does it all mean for Ripple?

Ripple + MoneyGram

Remember, Ripple and Moneygram struck a deal just under a year ago. At the time, Ripple agreed to buy shares in MoneyGram — giving it a 9.95% stake — and what's more, it bought those shares at a premium of $4.10 per share.

The reward? Ripple obtained a valuable ally (and advocate, based on the statements of MoneyGram's executives) in the payments industry, and a significant user of its payment liquidity system.

As The Block has reported, Ripple has also paid MoneyGram (in the form of XRP) to use its RippleNet product. In the first quarter of 2020, for example, Ripple doled out $16.6 million to MoneyGram. Though, it should be noted that MoneyGram does not hold XRP, as The Block's Yogita Khatri reported earlier this year.

MoneyGram has appeared to be enjoying the arrangement. As Alexander Holmes, chairman and CEO of MoneyGram, said during the Q1 earnings call: "We continue to be extremely pleased with the Ripple partnership."

But what happens to this deal if Western Union takes over? At this point, all we can do is speculate, and my request for comment to Ripple went unanswered. But from Ripple's standpoint there must be at least one very tantalizing —and for all we know, plausible — scenario: that Western Union might absorb Ripple's deal with MoneyGram.

If that happened, Ripple would gain a client it has sought for years.

Blasts from the past

The story of Ripple and Western Union stretches back to 2015, when Ripple's CEO at the time, Chris Larsen, revealed the existence of a "pilot" with the money-mover. A representative later told CoinDesk that discussions around a pilot were "preliminary," but suggested that it had to do with settlement.

In 2018, word got out that Western Union didn't actually see much to gain from using Ripple's tech, and that seemed to put a damper on things. Those comments came from Western Union CEO Hikmet Ersek, and referred specifically to xRapid, a liquidity product developed for use with the XRP digital asset that later became known as On-Demand Liquidity.

However, comments from June 2019 — around the same time that MoneyGram and Ripple tied the proverbial knot — threw some fuel back onto the fire. During an event appearance, Ersek seemed to strike a bullish tone on Ripple: "Look, hey, I'm open, any cost savings, any innovation. I'm there. We can sign a deal tomorrow," he said.

Meanwhile, Western Union may have another incentive to keep Ripple around: the need to invest in digital payments.

Forbes contributor Daniel Webber explored this idea in a column late last month in the context of the COVID-19 pandemic. He noted that payments giants like Western Union and MoneyGram have seen a significant uptick in digital payments during the pandemic because people are staying at home and making more purchases online.

In a March 31 press release, Western Union said that it was expanding its digital money services to 75 countries.

"Western Union's strong balance sheet and financial position allows us to continue to expand our digital services to more people than ever before, in more parts of the world, including the world's largest sending and receiving countries, especially during these challenging times," Ersek said in a statement at the time.

Of course, all of this hinges on whether Ripple can find a place in those plans. Whether the firm's lingering civil lawsuits, questions about the exact legal status of XRP and its public spat with YouTube get in the way remain to be seen.

But ultimately, a closer relationship with Western Union would set the stage for Ripple's long-running bid to increase its footprint in the world of payments to finally come to fruition in a big way.