On Wednesday, Western Union confirmed what has been rumored for over a month: it is testing out use of cross-border payments platform Ripple.
More than 100 banking clients are using Ripple’s product xCurrent. But Western Union becomes just the fifth customer to use xRapid, the separate Ripple product that employs Ripple’s cryptocurrency XRP. The price of XRP moved more than 10% 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.”
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 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. More than 100 banking clients have signed on to use xCurrent.
What xRapid does, Garlinghouse said, is “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 dollars 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.”
Five big-name customers are now impressed enough with xRapid to do 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, and it looks like it’s the next one that can really be affected by this technology.”
Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.