Shares of MoneyGram International (NASDAQ:MGI) plunged nearly 25% on Wednesday. The decline came one day after the money transfer company surged 168% on news of a deal with cryptocurrency giant Ripple.
On Tuesday, MoneyGram stock soared following news that it had entered into a strategic partnership with Ripple. The blockchain company is investing $30 million in MoneyGram in exchange for an equity stake. Ripple also has the option to invest another $20 million to boost its stake in the future.
Notably, Ripple is buying the stock at $4.10 per share. It closed at only $1.45 on Monday, before news of the deal broke.
As part of the deal, Ripple will become MoneyGram's key partner for cross-border settlement. MoneyGram will use Ripple's xRapid product, which leverages its controversial XRP digital token in foreign exchange settlement.
The XRP token's key features include low transaction fees and ultra-fast transaction speeds. Yet the company has struggled to gain wide adoption for its cryptocurrency among banks and payments firms. The partnership with MoneyGram is no doubt geared toward proving XRP's utility and effectiveness in real-world operations. Should MoneyGram recognize the benefits that Ripple claims, it could go a long way toward highlighting XRP's value.
As for MoneyGram's decline on Wednesday, it may simply be a case of profit-taking after Tuesday's massive gains. It could also be related to Facebook's blockbuster announcement of its new payments-focused cryptocurrency, which could become a formidable new rival to Ripple's products.
One thing is certain: Competition is intensifying in digital payments.
Companies that are able to adapt their business models and implement disruptive new technologies like cryptocurrency stand to benefit, while those that don't will likely be left behind. Whether MoneyGram can continue to compete effectively in this rapidly changing world remains to be seen.