New Kids on the Block

When it comes to financial behavior, one of the most salient features of immigrant communities is their tendency to send much of their earnings to families back home. Handling these payments, known as "remittances," can provide a lucrative source of fee income for financial institutions, as well as a platform for potential cross-selling.

Cracking that market appears daunting, given the market share wielded by the top two players: Western Union (24% of the global market) and MoneyGram, which handles 12% of the remittances sent from U.S. Hispanics. Western Union is especially formidable, with 151,000 agents in 195 countries and territories.

But the picture is changing as ATM networks proliferate in developing countries. Boston-based Celent Communications estimates there were 1.2 million ATMs worldwide in 2001, compared with 120,000 Western Union locations and 50,000 MoneyGram offices. Today, a bank can issue an immigrant two ATM cards, one for the worker and another for the family back home. The U.S.-based customer simply maintains enough funds in his or her checking account to provide for withdrawals in the home country.

Price comparisons between these various services can be a bit misleading, since total costs include currency conversions, which vary among competitors and add hidden costs for the sender. In general, however, the bank programs are competitive.

Bank of America Corp., for example, launched its SafeSend remittance program in May 2002 with a flat fee of $10 for customers and $15 for non-customers, with a $500 daily limit. In April 2003 the bank lowered the fee for non-customers to $10 and raised the daily limit to $1,000. This compares with a $14.99 fee for amounts up to $300 for instant cash from Western Union, and $9.99 for amounts up to $500 for MoneyGram.

"We're doing well in meeting our goals," says Jeff Bierer, SafeSend product manager in Charlotte, N.C., adding that one out of every three customers that comes into a branch to send a remittance via SafeSend ends up opening a checking account.

Large institutions, such as BofA, are devoting special attention to the big Mexican remittance market, which totals more than $10 billion a year and constitutes nearly 2% of that country's gross domestic product, according to the central bank, Banco de Mexico. To bolster its presence south of the border, BofA last March acquired a 24.9% stake in Mexico's third-largest bank, Grupo Financiero Santander Serfin, which has 926 branches and 1,770 ATMs. Withdrawals on BofA's SafeSend card can now be made at any of the roughly 20,000 ATMs in Mexico.

Citigroup Inc. has an even stronger banking tie in Mexico that has proved helpful in tapping the U.S. Hispanic market. In May 2001, Citigroup acquired Mexico's second-largest bank, Banamex. Then, in July 2002, the New York City-based company introduced the Citibank Money Card account for its U.S. customers. This is separate from the standard debit card issued with an account.

Under the joint Citigroup-Banamex effort, the designated recipient in Mexico obtains an ATM card from Banamex that allows him or her to withdraw funds from the U.S.-based Money Card account. Because the funds are located in a sub-account of the sender's main checking account, the recipient cannot withdraw funds from the checking account itself. The spokesman says the Citibank Money Card has garnered "a very good response," from customers, but declined to elaborate.

— Robert Stowe England