Banks Offer Remittance Alternatives

The country’s largest banks are using SVC-like, electronic-only accounts to offer a remittance alternative, thereby challenging the market share lead of Western Union. Citibank, for example, turned to SVCs to improve its reach into the burgeoning Latino community through the lucrative $30 billion remittance market. Customers had needed bank accounts to send remittances through Citibank, a substantial obstacle for many Latino immigrants.

To address this, Citibank created the Access Account, a solution that reduces cost, limits risk and offers the customer greater simplicity. Access Account is a debit card that provides customers with a “checkless” checking account and the ability to send inexpensive remittances. There are no minimum balance or deposit requirements, and the $3 monthly fee is waived with a recurring direct deposit. Most direct deposit customers automatically receive a $500 line of credit after six months, providing Citibank with a low-risk method of assessing customer creditworthiness for larger loans.

“We want to support our customers in their efforts to get established in the U.S. and achieve their dreams of buying a house and sending their kids to school,” says Rebeca Vargas, director of Hispanic Segments for New York City-based Citigroup, parent company for Citibank. “With this in mind, we created the Access Account as an entry account for the underbanked segment.”

The product is proving to be attractive to a wide variety of consumers, including other immigrant groups, seniors, students and others who do not use checks. Early indications are that these customers extend their banking relationship to additional products, such as secured credit cards and term life insurance.

Bank of America Corp. has taken a different tack, using an SVC-based remittance product, SafeSend, to build traditional banking relationships with Latinos. Individuals must open a bank account in order to fund a SafeSend remittance account. The bank issues an SVC to the recipient that can be automatically loaded by the sender from his checking account.

According to representatives at Charlotte-based Bank of America, SafeSend is just one example of how the bank intends to bundle SVCs with other products to court the unbanked. The bank is so confident in the potential of the underbanked market that it recently announced plans to scrap the $10 fee to send money via SafeSend.