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WASHINGTON (U.S.
Newswire) June 7, 2004 - On the eve of the annual summit meeting of the world's leading
industrialized nations, the Pew Hispanic Center today released a detailed
evaluation of how much it costs for immigrants to send money back home to
their families in Latin America.
The study revealed that although the
cost of transferring money has dropped since the late 1990s, the rate of
decline has slowed markedly in the past three years. The slowing has come
despite rapidly growing volume and increased competition in the marketplace.
This suggests that further price reductions might be difficult to achieve
under current market conditions.
The report also showed that a
substantial number of banks and credit unions in the United States have
launched major initiatives in remittance services over the past three years.
However, they have captured only a small fraction of the market which
continues to be dominated by wire transfer firms. In the U.S.-Mexico
channel, which has been the target of most of the effort, American financial
institutions account for no more than three percent of the remittance
traffic. Currently, with the exception of debit card withdrawals, the cost
of sending the average remittance from the United States to Mexico is about
the same whether it is sent via a bank or a wire transfer firm.
A growing number of countries,
including the United States, have committed themselves to facilitating
remittance transfers by immigrants who send money back to their home
countries. On the agenda for tomorrow's G-8 Summit in Sea Island, Georgia,
is an initiative to reduce the costs of transfers and efforts to promote a
greater role by banks and other financial institutions in an industry
currently dominated by wire transfer agencies such as Western Union.
The Pew Hispanic Center commissioned a
detailed assessment of the marketplace for remittance transfer services by
Manuel Orozco, a senior researcher at Georgetown University's Institute for
the Study of International Migration, to better understand the challenges
involved in assisting immigrants who send money to their family and friends
back home.
The transfer of money from immigrants
in the United States to Latin America is considered a powerful means of
fighting poverty in these countries. It has become an important issue for
the Bush administration, for other wealthy nations and for the governments
of the receiving nations.
The Pew Hispanic Center's findings are
based on the most extensive examination of the U.S. remittance transfer
industry ever conducted. No government agencies or industry associations
systematically collect data on the costs of transfer services, market shares
or the types of products on the market. As a result, data had to be
developed for this study by soliciting information from a wide array of
individual companies.
Cost information was developed from a
pool of 84 firms offering remittance transfer services, representing the
most active firms in the market as well as some recent entrants. In
addition, executives at 14 banks and eight credit unions were interviewed in
depth about efforts to offer a broader array of financial services, such as
savings and checking accounts, to remittance senders.
Some of the major findings of the study
include:
-- Since the late 1990s the cost of
sending a $200 remittance to Mexico has fallen by half from about 15 percent
of the amount sent to 7.32 percent in early 2004. However, most of the
reduction took place at the beginning of this time span. By 2001 the cost
stood at 8.07 percent and the declines have been minor since then.
Meanwhile, the amount of money sent to Mexico has increased dramatically
from $9.2 billion in 2001 to $13.2 billion in 2004, a growth of 43 percent.
-- With increased competition new
products have come on the market that offer lower prices for senders who
transmit larger amounts. The cost of sending the amount of an average
remittance to Mexico, now nearing $400, has come down somewhat more quickly
in recent years, from 6.29 percent of the amount sent in 2001 to 4.4 percent
in 2004.
-- Using this measure of costs -- the
price of the average amount sent -- banks and credit unions do not offer a
significant advantage to the consumer in the U.S.-Mexico remittance market.
The cost of sending an average remittance by banks is 4.1 percent which is
only slightly below the average for the entire marketplace which is 4.4
percent.
-- Despite substantial marketing
campaigns and very large investments over the past three years, U.S. banks
have only captured a small fraction of the remittance transfer market. The
four largest banks in this field -- Citibank, Wells Fargo, Harris Bank and
Bank of America -- conduct less than 100,000 remittance transactions a
month. The vast majority goes to Mexico. In 2004, an estimated 40 million
remittance transactions carried money from the United States to Mexico,
which means the banks have captured about three percent of that market.
-- Marketing campaigns designed to
encourage Latino immigrants to open accounts with banks and credit unions,
often with remittance services as an enticement, have had somewhat more
success. About 400,000 new accounts have been opened as a result of these
efforts. That is about 5 percent of the estimated eight million Hispanic
immigrants who currently do not have bank accounts.
The Pew Hispanic Center (http://www.pewhispanic.org),
a non- partisan research organization, is a project of the USC Annenberg
School for Communication and is supported by The Pew Charitable Trusts. |
