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Posted on Thu, Dec. 15, 2005

Banks court $45B remittance industry
As more banks enter the remittance business, a report calls for more federal oversight of the industry.
BY LAURA WIDES-MUNOZ
Associated Press

U.S. banks have leaped into the remittance industry in recent years, seeking a share of the billions of dollars immigrants send to their native countries, especially around the holiday season.

But many are struggling to get a piece, with immigrants reluctant to shift their business from the smaller mom-and-pop stores they are accustomed to using.

With remittances to Latin America and the Caribbean estimated to be a roughly $45 billion industry, it's no surprise banks are interested. Many also see remittances as a way to attract new customers to other bank services.

In the last year alone, a number of major banks have unveiled an array of services to court immigrants away from the more than 100 money transfer services operating in the United States. For example, Wachovia Bank unveiled a card that allows families in Latin America and the Caribbean to withdraw money from an ATM linked to U.S. bank accounts. Wells Fargo Bank expanded its money transfer service to El Salvador and Guatemala and Bank of America announced it was offering free money transfers to Mexico.

Danny Ayala, head of Wells Fargo's global remittance program, said many U.S. banks are new to the market of immigrant remittances.

Wells Fargo has worked with Mexican banks to facilitate remittances for more than a decade, but for many banks the learning curve is steep, he said.

''We're starting from zero for the most part,'' Ayala said.

Immigrants continue to shy away from sending money through banks for a variety of reasons. For some it's simply about price.

A report to be released today by the national nonprofit Appleseed Center for Law & Justice found that while the entry of banks into the remittance business has helped bring down the price of money transfers, in some cases by as much as $10, banks don't necessarily offer the cheapest services. Many still charge higher rates than nonbank transfer companies for sending $300 or less, according to the report. The report put the total average cost of sending $300 at about $15.

The report calls for more oversight of remittance pricing. Federal lawmakers are also looking into more uniformed regulations for the entire industry, as some banks claim they face stricter regulations than money wiring companies.

Still many immigrants, especially those here illegally, don't have forms of identification required to do business with banks. Some U.S. banks now accept consular identification cards from countries such as Mexico, Guatemala and Argentina, but customers still need a backup form of ID such as a drivers license or birth certificate.

Leopoldo Gomez, 36, who came to South Florida illegally and works at a plant nursery, said after hearing radio ads touting Bank of America's free transfer program, he tried to open an account there with his consular card.

''I thought it's more safe to deposit the money,'' he said, ``but they told me I needed another form of ID. I just came here eight months ago. I don't have any.''

Still for others it's a question of custom and convenience.

On the brick-paved Washington Avenue in Homestead, about 35 miles southwest of Miami, migrant workers spent a recent evening perusing stores for Christmas gifts such as T-shirts, cowboy boots and perfumes -- as well as using the stores' wiring services.

Santos Gonzalez, 33, who arrived from Chiapas a month ago, said he liked coming to the street to buy presents, see friends and send money home.

Manuel Orozco, of the Washington, D.C.-based think tank Inter-American Dialogue, who studies remittances, said banks have succeeded in attracting more Hispanic customers but not in getting them to send money.

''They don't think of the bank as a place to send money. They think of the bank as a place to save money,'' Orozco said.