The CEO of global money transfer company Western Union, Hikmet Ersek, shocked the Ripple (XRP) community on Wednesday by saying that while Western Union is still continuing its trial of xRapid (which is the only Ripple product that uses the XRP token), it has not seen any cost savings so far.
The Western Union CEO, who, during an earnings call on 13 February 2018, had mentioned that Western Union was experimenting with various Ripple products, said on Wednesday — during an interview with Fortune at the Economic Club of New York — that Western Union had not saved any money so far by using XRP:
“We are always criticized that Western Union is not cost-efficient, blah blah blah, but we did not see that part of the efficiency yet during our tests… The practical matter is it’s still too expensive.”
He added that Western Union would only start using xRapid in volume if the trial proves Ripple’s claim that using xRapid leads to “dramatically lower cost.” We have to remember that it was only last month, on May 10th, when Ripple announced the first aggregated pilot results for xRapid:
“For payments in the critical remittance corridor between the U.S. and Mexico, financial institutions using xRapid saw a savings of 40-70 percent compared to what they normally pay foreign exchange brokers.”
However, it should be noted that by Ersek’s own admission, the size of this trial is “too small” to draw any conclusions; in fact, they have, so far, only used XRP for transfers along the US-Mexico corridor 10 times!
Birla explained why Ripple is not too surprised by Western Union’s early findings:
“If they were to move volume at scale, then maybe you would see something, but with 10, it’s not surprising that they’re not seeing cost savings… They do millions of transactions a month, and I’m not surprised that with 10 transactions it didn’t have earth-shattering results.”
Birla estimated that Western Union could cut save at least 50% of the cost per transaction if it expanded the pilot to all of its cross-border payments. He explained that the main problem was that Western Union was still carrying the fixed costs of transferring money using the legacy method: “Unless you’re going to take those fixed costs out of the ecosystem, it’s not going to be worth it for them to move on.”
Despite not seen any positive results so far, Ersek said that he still wants Western Union to continue testing Ripple’s products, and that he didn’t want “to kill” his company’s partnership with Ripple, and that he had found the Ripple team that is working with Western Union to be “very good” and “very innovative” people.
Also, on Wednesday, at the same venue as the interview with Fortune, Ersek said that Western Union is not ready at this time to do any cryptocurrency transfers since most people still prefer fiat currency:
““The consumers tell us what they want… People aren’t paying their hospital bills in cryptos.”
Featured Image Credit: “Bitcoin” by “Marco Verch” via Flickr; licensed under “CC BY 2.0”
