Immigrants' Remittance Options Rise

PHOENIX (By Daniel González, Arizona Republic) April 25, 2004 - Nabis Telix makes about $275 a week washing dishes and preparing food in a Phoenix restaurant.

But twice a month the Mexican immigrant saves enough money to send $100 to his aging mother and father in Mexico so they can buy tortillas, clothing and other necessities to live.

"They are older and they can't work very much," said Telix, 40, whose parents live in Xochipala, a village near Chilpancingo in the southern Mexican state of Guerrero.

In the past, Telix sent the money via Western Union or MoneyGram, which for years have dominated the multibillion-dollar money-transfer market. But last week Telix was invited to a free dinner at Herrera Elementary School in central Phoenix where he and other Mexican immigrants were fed cheese enchiladas and serenaded with taped mariachi music while they learned about a new way of sending money to Mexico called the Poni PIN Card.

The new card, launched this month in the Phoenix, Tucson and Las Vegas markets, is the latest player to try to cash in on the billions of dollars immigrants send home every year.

Last year, immigrants sent $13.2 billion to Mexico, up from $10.2 billion in 2002, according to Pedro de Vasconcelos, who tracks the remittance market for the Multilateral Investment Fund of the Inter-American Development Bank. Immigrants in Arizona accounted for $600 million, according to a survey to be released in May by Inter-American Dialogue, a Washington, D.C.-based policy analysis institute that focuses on issues in the Western Hemisphere.

Just five years ago, Western Union and MoneyGram controlled 75 percent of the remittance market nationally, but an increase in competition has dropped their combined share to less than 50 percent, Vasconcelos said.

As a result, the cost of sending money to other countries has gotten cheaper. The ones who benefit are immigrants, who on average now pay commissions on remittances from 7 percent to 8 percent compared with as high as 20 percent five years ago, he said.

Vasconcelos predicts that within five years, increasing competition will drop the average commission to 3 percent. By then, remittances to Mexico are expected to double.

Developed by the American Cash Exchange, a Pennington, N.J.-based company, the Poni card is being marketed as a more convenient way to send money to Mexico than existing money-transfer services such as Western Union, said Debra Lynn Porter, the company's senior vice president for marketing and sales.

Unlike with other money-transfer services, Poni customers don't have to fill out any paperwork to transfer money and can benefit from lower international bank exchange rates, she said.

Porter said the Poni cards also are more convenient than money-transfer services offered by many banks, which typically require customers to show two forms of identification to either enroll or open a bank account before they can transfer money.

But Manuel Orozco, a remittance expert at Inter-American Dialogue, questioned how the American Cash Exchange complies with the anti-money-laundering provisions of the USA Patriot Act if Poni customers don't have to reveal their identities to transfer money. Passed by Congress after the Sept. 11, 2001, terrorist attacks in part to curb the money-laundering activities of terrorist groups, the Patriot Act requires money-transferring companies to document their customers.

Porter said the American Cash Exchange has registered with the federal government and is in compliance with the Patriot Act through a variety of ways, including limiting the amount of money that can be transferred and requiring recipients in Mexico to register instead of customers in the United States.

"People who want to transfer large amounts of money wouldn't want to do it through Poni," Porter said.

Orozco raised another concern about the Poni card. Unlike money-transfer services offered by banks and credit unions, the Poni card doesn't tie immigrants to financial institutions and the benefits that go with them.

"There is no value added," he said. "The whole idea is to tie them to financial institutions so the customers can also save money, not just withdraw it."

However, Porter said the Poni card is being marketed to "unbanked" immigrants looking for convenience.

Ken Preston, a spokesman for Bank of America, said the Poni card sounds similar to the prepaid cards offered through his bank's SafeSend program that can be sent to Latin America and used to withdraw cash from automated teller machines on the Visa Plus network. But unlike Poni, the SafeSend cards also can be used to make purchases in stores that accept the Visa card.

"With us, you wouldn't have to carry the money, and you can send money from home, on a computer or by phone," Preston said.

By the end of April, the American Cash Exchange plans to offer the cards for sale at 37 restaurants and stores in Phoenix, primarily in neighborhoods with large concentrations of Mexican immigrants, Porter said during a recent interview at Joyeria Diaz, a jewelry store on 35th Avenue in west Phoenix that has agreed to carry the cards.

Here's how the card works:

A customer selects a card worth 1,000, 2,000 or 3,000 pesos and then pays a fee based on the international bank exchange rate published that day in major U.S. newspapers, plus a $12 commission.

Included in the price of the card is a free 5-minute call to Mexico, which the customer uses to disclose a PIN number hidden on the back of the card under a scratch-off panel. The recipient in Mexico then uses the PIN number to withdraw the pesos from an automated teller machine using an ATM card distributed free by Poni.

"They can withdraw the exact pesos the relative (in the United States) has bought," Porter said.