Ripple Takes on Western Union With Deal to Grow Payments

Ripple Labs Inc. is expanding the distribution of its digital currency and money-transfer software through an agreement with cash-transaction network ZipZap Inc., signaling the growth of alternative payment methods.

Ripple, a San Francisco-based startup, operates payments software and a digital currency that resides in a consumer’s account known as a Ripple Wallet. Under the agreement, Ripple will let consumers link those Wallets to ZipZap accounts. San Francisco-based ZipZap -- which has payment centers across the U.S. in locations such as CVS Caremark Corp. pharmacies and hotels -- can then send a payment that someone makes through their Ripple Wallet to a recipient elsewhere who also has the software.

The move puts Ripple in competition with Western Union Co., which typically charges $40 for sending $500 in cash in person from one U.S. location to another in minutes. ZipZap charges a $3.95 fee when customers top up their Ripple Wallet account with as much as $500, according to the company.

“If we have more places an average person can go to and load value, it’s more valuable,” Chris Larsen, chief executive officer of Ripple, said in an interview. “It goes to utility.”

Dan Diaz, a spokesman for Western Union, didn’t return a request for comment.

Virtual Currencies

Ripple’s agreement with ZipZap underscores the proliferation of alternative methods of payment. Bitcoin and several dozen other virtual currencies have sprung up in recent years to let users buy everything from luxury cars to cupcakes online and in the real world.

Ripple issues a virtual currency known as Ripples, of which it holds a 25 percent slice. Each Ripple Wallet has to hold at least 50 Ripples -- which people pay for using currencies from U.S. dollars to Japanese yen to Bitcoins -- to function. The company’s virtual currency and payments software are intended to make it easy for people to exchange money, loyalty points or airline miles for another currency.

Some 27,000 people have Ripple Wallet accounts, Larsen said.

“There’ll still have to be massive adoption,” Ugo Egbunike, senior ETF specialist at index-fund researcher IndexUniverse, said in an interview. “It might be cheaper than Western Union, but there might be risks.”

Ripple was invented and developed by a group of programmers at OpenCoin Inc., now called Ripple Labs. The first version was released this year, and the software has recently been open sourced, which means that anyone can build it into websites and applications, as well as modify and develop it.

Ripple has raised about $3 million from venture capital firms including Andreessen Horowitz, Google Ventures, FF Angel IV, IDG Capital Partners, Lightspeed Venture Partners, Vast Ventures and Bitcoin Opportunity Fund.

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