'We sell XRP as soon as we receive it,' says MoneyGram on Ripple incentive payments

The publicly-traded remittance company MoneyGram made waves in the crypto space last month when it disclosed $11.3 million in incentive payments from Ripple during the third and fourth quarters of 2019.

Those incentives were paid in the form of XRP, as MoneyGram noted in a Form 10-K document filed with the U.S. Securities and Exchange Commission. 

"The Company is compensated by Ripple in XRP for developing and bringing liquidity to foreign exchange markets, facilitated by the ODL [Ripple's On-Demand Liquidity] platform, and providing a reliable level of foreign exchange trading activity. We refer to this compensation as market development fees." MoneyGram said at the time. 

Despite receiving compensation in the form of the digital asset, MoneyGram itself does not hold the XRP for long, opting to sell it upon receipt, The Block has learned.

"We sell XRP as soon as we receive it – we don't hold any XRP," a MoneyGram spokesperson told The Block.

The spokesperson, however, declined to comment on how the incentive payments are determined or which conditions must be met before they are paid.

Ripple and MoneyGram partnered last June. As part of the agreement, Ripple invested a total of $50 million into the remittance firm. The agreement is scheduled to expire on July 1, 2023, per the 10-K filing.

In public statements, MoneyGram has struck a positive tone about its partnership with Ripple, and during the Q4 earnings call, MoneyGram CEO Alex Holmes disclosed an expansion of its work with Ripple set to take place this year.

"I couldn't be more pleased with the partnership and the success we've had with Ripple. Today our trading volume continues to grow and we're partnering to expand the service to more corridors," Holmes remarked. "I'm also excited to announce that we are working to integrate RippleNet for account-to-account transfers in 2020. This new integration will further accelerate our progress in accomplishing our vision of real-time global settlement."

Ripple's incentive program 

Ripple started its incentive program in October 2017, according to a blog post from the company at the time. The "Adoption Marketing Incentive" program matches "eligible" clients' marketing spends when they promote Ripple solutions to their customers and compensates either in XRP or cash, per the blog post.  

"We're borrowing a page from the likes of PayPal (with their early days adoption and referral bonuses), implementing incentives to accelerate network effects on RippleNet," Monica Long, vice president of marketing at Ripple, said in the blog post.

Reiterating this point, a Ripple spokesperson told The Block that incentive programs are "standard practice" for any growing business. "In payments, even established players continue to run robust incentive programs, including Visa, Mastercard and Paypal to name a few," the spokesperson said.

Ripple does not provide incentives to all of its customers, according to the spokesperson.

"We offer incentives strategically, based on their role on the network… incentives are used to offset the investments made by our customers to develop this infrastructure, which takes time, money and effort," they said. 

Ripple CEO Brad Garlinghouse recently said that clients are paid incentives depending upon "the shape and size and type and how high a priority" they are.

The Ripple spokesperson, however, declined to comment on how many clients are currently receiving incentives and what amounts are being paid out. They also declined to comment on how specifically incentives are determined. 

GoLance, PNC Bank confirm incentive payments

Efforts to contact major clients of Ripple revealed that at least two companies have received incentive payments. One of those is goLance, an online workforce platform that connects employers with freelancers.

"Yes, we have received incentives from Ripple," Michael Brooks, founder and CEO of goLance, told The Block. However, Brooks did not comment on the amounts involved or whether those incentives were in XRP or cash. He also did not comment on the process by which those payments are made.

"I've shared publicly in the past that through Ripple's ODL [On-Demand Liquidity] solution, goLance has experienced the lowest cost and fastest payout for payments to our most challenging corridors. We choose to work with Ripple first because of that, and the impact on our business. This is more significant for us than incentive payments put in place to offset the time and financial investment we've made to pilot the product," Brooks told The Block. 

GoLance claims to serve 500,000 users and has paid out more than $70 million to freelancers worldwide, according to Ripple.

Another major client of Ripple, PNC Bank, also confirmed that the receipt of incentive payments from Ripple.

"We can't comment on the specifics of our relationship with Ripple, but we do have some incentives built into our contract," a PNC Bank spokesperson told The Block. 

"The incentives were decided through discussions with Ripple about what would be mutually beneficial for both partners. We can't disclose additional details about the incentives at this time," the PNC Bank spokesperson added.

Another top client of Ripple, American Express, declined to comment on details of its partnership but said it does not use XPR. "As a matter of policy and principle, American Express does not discuss our relationship with our partners. American Express does not use Ripple's XRP digital currency," an American Express spokesperson told The Block.

Spanish banking giant Santander also shared a similar response. "Santander does not comment on contracts. Santander does not have cryptocurrency," a Santander spokesperson told The Block.

Two other top clients of Ripple, Viamericas Corporation and Bitso, did not respond to The Block's multiple requests for comment by press time. 

As previously reported by The Block, Bitso has experienced rapid growth in its XRP remittance service. The Mexico-based crypto exchange hit ~$3.5 million in XRP/Peso volumes in 2019, compared to less than $500,000 at the beginning of the year. 

The million-dollar amount translated to over 2% of the remittance market from the U.S. to Mexico last year. Bitso told The Block that it aims to achieve a 20% market share by the end of 2020.