On Wednesday, Western Union confirmed what has been rumored for over a month: it is testing out use of the cross-border payments platform Ripple.
Ripple has two main payment products for banks: xCurrent and xRapid. Only xRapid utilizes Ripple’s XRP token. More than 100 banking clients are testing xCurrent. Western Union becomes just the fifth customer to test xRapid.
The price of XRP moved more than 14% on Wednesday on the news.
“We’ve been testing different products with Western Union for a while,” a Ripple spokesperson tells Yahoo Finance. “We’re excited about our work towards a pilot implementation of xRapid, which uses XRP in payment flows.”
Western Union CTO Sheri Rhodes sent Yahoo Finance this statement on why Western Union is trying out Ripple: “We continue to explore possible blockchain applications for our business, and we are piloting some settlement tests with Ripple for certain corridors. For blockchain in general, we’re looking at areas such as transaction processing and settlement, working capital optimization, regulatory technology, and digital identity. We have a strong platform and system that work well today, but we continue to explore and test whether these technologies could potentially reduce costs and improve the customer experience.”
Ripple: xCurrent vs. xRapid
The difference between Ripple’s two products, and the use of XRP, is a point of confusion for many consumers and, often, for the business media. At the Yahoo Finance All Markets Summit: Crypto on Feb. 7, Ripple CEO Brad Garlinghouse tried to explain it all in plain terms.
Garlinghouse described xCurrent as “enabling real-time messaging, real-time settlement between banks.” That sounds pretty simple: xCurrent allows banks to settle transactions faster, with less friction; this was also originally a popular value proposition of bitcoin.
“What xRapid allows you to do,” Garlinghouse said, “is to have real-time liquidity. The Bank of Andy can sell $1, buy XRP. That XRP can then be moved to an Argentinian digital asset exchange, you can sell the XRP and buy an Argentinian peso, and now you have good liquid funds in less than 10 seconds in another market.”
In emerging markets, banks typically need to have pre-funded accounts with funds in the local currency. “There’s over $20 trillion parked in pre-funded accounts around the world,” Garlinghouse said. “This is dormant capital. We’re solving a problem measured in the trillions of dollars. And if we can activate that asset, if we can make global commerce more efficient, there’s an opportunity to drive a lot of velocity.”
Still, despite the expensive problem xRapid seeks to alleviate, Garlinghouse acknowledged, “I talk to senior banks, people who are close to the company Ripple, they’re invested in us. And they’re like, ‘Hey look, we love what you’re doing around xCurrent… not sure yet about xRapid.’ That’s fine.”
5 clients now trying out xRapid
Five big-name customers are now impressed enough with xRapid that they have publicly announced pilot-testing: MoneyGram, Mercury FX, IDT, Cuallix, and Western Union.
Indeed, CoinDesk research director Nolan Bauerle, speaking on a separate panel at the same Yahoo Finance cryptocurrency summit, had praise for Ripple’s potential: “It is an incredibly innovative consensus mechanism… This is a multi-trillion-dollar industry that they’re attacking.”
Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.