Mexican immigrants living in the United States have less expensive ways to send money to relatives in Mexico, using private and government money-transfer programs aimed at encouraging immigrants to join the U.S. banking system.
Bank of America Corp. last week announced the launch of SafeSend, a free money-transfer service between the bank's branches in the United States and several Mexican financial institutions.
The Federal Reserve and the Central Bank of Mexico are promoting a joint program called Directo a México, under which participating U.S. banks charge low fees to send money to Mexico by using the central banks as intermediaries.
People sending money to Mexico pay as much as $15 per transaction -- known as a remittance -- to companies such as First Data Corp.'s Western Union Financial Services Inc. and MoneyGram International Inc. Those companies handle most of the estimated $20 billion a year sent between the United States and Mexico. Banks account for only about 5 percent of that amount.
"The end goal is to get a banking relationship started," said Diane Wagner, a Bank of America spokeswoman.
The SafeSend service is available free to any Bank of America customer with a personal checking account. It links the bank's U.S. branches to 4,500 locations across Mexico, including branches of Grupo Financiero Banorte SA and Santander Central Hispano SA. When a customer in the United States requests a transfer, the banks in the two countries exchange dollars for pesos. Depending on the time of day a transfer is sent, the money is available in Mexico within two hours or on the next business day.
Hispanics are an attractive target for U.S. banks, analysts said, because a smaller percentage of Hispanics have bank accounts than among the overall U.S. population.
The joint initiative between the Federal Reserve and the Central Bank of Mexico allows customers of participating U.S. banks to send money transfers to private Mexican banks, with the two central banks acting as go-betweens. The money can be available within a day in Mexico, where the local banks do not charge recipients.
Directo a México has been operating for a year, but the Federal Reserve began marketing it aggressively only last month. Representatives of the Fed and Mexican consulates have launched a 16-city U.S. promotional tour that includes a Baltimore stop next month. They are providing banks with posters and educational materials in Spanish.
The central banks' initiative also is aimed at encouraging more immigrants to open bank accounts.
"The whole [remittance] system goes from cash to accounts," said Donald F. Terry, manager of the Inter-American Development Bank's Multilateral Investment Fund. "This is the most effective way of getting this $20 billion into the [banking] system."
So far, seven U.S. banks -- mainly small and mid-size institutions with branches in 21 states -- participate in the Fed program. Although those banks are not bound to keep their fees in any particular range, they charge customers $2 to $5 per transaction to send money to Mexico. The banks in turn must pay 67 cents to the Federal Reserve and the Central Bank of Mexico for delivering each payment in Mexico.
Traditional money-transfer companies charge high U.S.-Mexico remittance fees in part because they must hire agents in Mexico to distribute the money. Nevertheless, the companies earned big profits as the remittance business grew over the years.
Tough to compete
Banks may have a hard time competing with money-transfer companies for the remittance business, despite their new low-price or even free transactions. Undocumented immigrants in the United States often fear that banks will inquire into their immigration status, experts say. Such fears persist even though U.S. law allows banks to accept taxpayer identification numbers and identification cards issued by the Mexican consulate -- both of which can be acquired by undocumented immigrants.
Some immigrants fear banks because they remember bank failures and financial crises in their home countries, or because some U.S. financial institutions do not have Spanish-speaking personnel, said Manuel Orozco, a remittance expert at Georgetown University.
In some cases, banks are hesitant to transfer money for undocumented immigrants. For example, last year, the American Bankers Association expressed concern about new regulations that increased banks' "know your customer" responsibilities, and some banks said they should not even open accounts for immigrants living in the United States without proper documents.
"There is a lot of uncertainty in the industry about which is the right direction to go and that uncertainty is in part due to lack of information," said Elizabeth McQuerry, assistant vice president at the Federal Reserve Bank of Atlanta, which leads the Directo a México program.
Mexico benefits from the program because it could bring more of its citizens into its banking system, said Alberto Mendoza, head officer for retail payments at the Central Bank of Mexico. Only about one-third of Mexicans have bank accounts, but remittance recipients are more likely to have accounts than those who do not receive money from relatives living abroad, Orozco said.
The Directo a México program is part of the U.S.-Mexico Partnership for Prosperity launched three years ago by President Bush and Mexican President Vicente Fox. The Federal Reserve has no plan for such a program in other Latin American countries soon.