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Innovation in the P2P cross-border payments industry is fueling financial inclusion worldwide

For many migrant families, cross-border payments, i.e. remittances, have become even more of a critical lifeline during recent economic hardships — from the pandemic to rising global inflation and concerns over a potential recession.

However, many banks continue to offer convoluted cross-border payment options with expensive wire transfer fees and slow, opaque transaction processes. Plus, the majority of those financial institutions require access to a bank account to be able to send money. According to the World Bank, 1.4 billion adults globally are unbanked which means that this requirement leaves numerous families around the globe without essential funds when they need them most.

To address that pivotal gap in access, inclusive cross-border solutions are being provided largely by global remittance companies such as MoneyGram. The reliable flow of peer-to-peer (P2P) payments during trying times, as well as partnerships with innovative blockchain and digital currency companies that are working to further streamline the process, illustrate how these companies can enable more straightforward financial solutions that prioritize accessibility around the world. 

Understanding P2P innovation

The cost of traditional bank-to-bank transfers can quickly pile up, especially if a person is sending smaller sums of money. MoneyGram, on the other hand, allows users to send and receive money directly via a digital medium like the company’s leading mobile app or a mobile wallet partner at a fraction of the cost of traditional wire transfers. 

Due to a pre-pandemic digital transformation, MoneyGram has lowered its cost structure, bringing its average fee to consumers down to 2.9% of funds transferred. That is significantly below the industry average and well ahead of the UN Sustainable Development Goal to reduce transaction costs of remittances to less than 3% by 2030.

MoneyGram also guarantees foreign exchange rates, so consumers aren’t left guessing how much they’ll receive. The ability to post a payment digitally within minutes, along with lower transfer fees and clarity on exchange rates, allows for much more efficient and transparent money movement. Making money transfers user-friendly and digital has expanded MoneyGram’s business to serve more than 150 million people worldwide, with the company’s digital channel being the fastest growing arm of the business.

“We have to think about how customers will view the product, the needs of each individual customer, and the role pricing plays in it,” says Alex Holmes, Chairman and CEO of MoneyGram. “When you look at digitization of the remittance market, price isn’t everything, but it is certainly one of the most important aspects.” 

So how does it all work? To build its fast-growing digital business, MoneyGram overhauled its legacy technology systems, built a direct-to-consumer digital channel, and modernized its operating model to streamline and digitize the organization. Now, MoneyGram’s platform is driven by an API infrastructure allowing third-party finance apps and services to seamlessly integrate into MoneyGram’s global ecosystem. 

For example, MoneyGram recently announced a partnership with urpay – a digital wallet powered by neoleap, the Saudi-based global digital financial solutions company – to enable digital cross-border money transfers from the Middle East, one of the world’s key regions for outbound remittances. The partnership enables urpay to seamlessly connect to MoneyGram’s global network to provide its millions of users the ability to send money around the world.  

Overall, digital transactions, like the ones performed through urpay, now account for 44% of all MoneyGram money transfers.

Bridging the digital divide

Making money transfers more accessible also means addressing the needs of the incredibly large number of people around the world who still rely exclusively on cash. Today, about 60% of the world’s adult workforce gets paid in cash. That’s about 2 billion people worldwide who depend on cash for their livelihoods, without easy access to the digital economy.

The level of cash use varies from country to country, and MoneyGram transactions reflect this divide: In India, approximately 80% of transactions are received digitally, while in Mexico, roughly 95% are still picked up in cash. MoneyGram provides consumers with multiple options for both scenarios with a digital presence in more than 100 countries and one of the largest global cash receive networks in the world. 

Many consumers who deal primarily in cash often are unbanked with current financial systems that don’t meet their needs. Fortunately, the rise of new technologies, such as blockchain and digital currencies, are helping to improve access to affordable financial products and services. 

With a mission to support financial inclusion and further streamline cross-border payments, MoneyGram — the first company to use blockchain technology at scale for cross-border payments — has set out to play a leading role in that change.

“We believe blockchain and crypto will be around in some form in the future, and we see a huge opportunity for MoneyGram to play a role in bridging the digital economy and the fiat world,” Holmes says. “If you own cryptocurrencies or are looking to own them, you should have the ability to buy and sell them at your will.”

The company recently partnered with the Stellar Development Foundation (SDF), a nonprofit that supports the development and growth of the Stellar blockchain, which has a goal is to make it easier for people around the world to access the digital economy. Their new solution makes the worlds of crypto and cash compatible by providing an on/off ramp for consumers who use cash.

This partnership utilizes USD Coin (USDC), a fiat-backed stablecoin that is fully reserved by cash and U.S. Treasuries, to convert cash into crypto and vice versa, making these transactions predictable and secure. In other words, each USDC coin is redeemable one-to-one for the U.S. dollar which removes the price fluctuation concerns of algorithmic stablecoins or traditional cryptocurrencies. 

In the context of remittances, this technology has the potential to further streamline cross-border payments that are so critical for families around the world. It could help to decrease costs, increase the speed of transactions, and more for those who truly rely on these funds for life’s everyday needs.

“In a world where emerging crypto-first companies and legacy financial systems are constantly looking to displace each other, what MoneyGram and SDF have built together is extremely unique,” Holmes says.

Instead of working in parallel worlds, MoneyGram and SDF have created a bridge to connect consumers to the digital economy without having to change any of the current processes in the cash economy. The two companies are also among the few utilizing these innovative technologies to build useful solutions with viable business models while prioritizing interoperability, transparency, accessibility, user experience, and inclusion. 

For crypto to continue to thrive and live up to its hype as a great financial equalizer, the industry needs to develop more products and services like this for use by the masses. In doing so, crypto can evolve beyond its perception of only being an investment asset and embrace functional applications in day-to-day life.

Catch Alex Holmes (MoneyGram Chairman and CEO), Denelle Dixon (Stellar Development Foundation CEO and Executive Director), and Alka Gupta (Venture Partner at Fin Capital), at TechCrunch Disrupt on October 18, 2022, to learn more about the MoneyGram and SDF partnership.