Ripple Labs CEO Chris Larsen sent the digital currency community buzzing this week when he tweeted that Ripple Labs is working with Western Union on real-time payment settlements. Many view such a partnership as a sign of Western Union’s willingness to become more active in the digital currency space.
The partnership also signifies a growing recognition of Ripple Labs’ open protocol that lets people send digital currency across the Internet-based distributed network. Ripple Labs signed an agreement in the fall with two U.S. banks (Cross River Bank in New Jersey and Kansas-based CBW Bank) to allow the banks to use Ripple Labs’ open source payment protocol, according to CCN. The agreements marked another step in allowing instant money transfers.
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Ripple Labs facilitates money transfers
Two years ago, Ripple Labs partnered with SnapSwap Inc. and ZipZap Inc. to facilitate transactions for both traditional and digital currencies.
SnapSwap, which describes itself as a U.S. gateway to Ripple, leverages the Ripple network to allow users to trade U.S. currency for a variety of fiat and digital currencies. It allows people to make payments from their bank accounts to Ripple.
ZipZap, a payment platform for international money transfers, bridges the gap between digital currencies and traditional payment platforms. ZipZap utilized Ripple’s network to allow people to conduct online transactions at ZipZap’s merchant locations throughout the U.S.
The Zip Zap partnership put Ripple Labs in competition with Western Union, according to an October 2013 Bloomberg News report.
A new stance for Western Union?
A Western Union partnership with Ripple could be another signal of the money transfer giant’s willingness to respond to competitors offering online and mobile payments. The Wall Street Journal reported in 2013 that Western Union was looking at digital currencies in light of the competition they posed.
The Wall Street Journal observed Western Union faced a challenge competing with digital currency transfer services since such services did not think they had to comply with anti-money laundering rules. However, the federal government has since said digital currencies would also be subject to anti-money laundering rules. Hence, Western Union’s compliance programs could be a competitive advantage in employing digital currency commerce to conduct money transfers.