The Independent Community Bankers of America (ICBA) and Travelex will launch a new money transfer service that provides U.S.-based customers with a lower-cost option to send money to Mexico.
The Internet-based system will enable ICBA member banks to provide money transfer and remittance services to customers and community members through Travelex's Worldwide Money division in a less expensive and more efficient fashion. Customers will pay $9 for every $300 that they wire through Travelex compared to the $14.99 charged by Western Union, one of the leading money wiring companies to Mexico.
The service will initially target banks located in the states that border Mexico. ICBA and Travelex will later look into expanding the program into states with large Hispanic populations.
The service is intended to make remittances more efficient for banks, according to Dan Clancy, director of services at ICBA.
The impetus came from a meeting between Lloyd Dorfman, CEO of Travelex, and President Vicente Fox of Mexico in April 2001. Fox acknowledged that remittances helped drive the Mexican economy, and expressed concern about money wiring being expensive and inefficient. He wanted to improve the money sending resources available to immigrants.
"President Fox's government was involved in creating the initiative, funding the committees and projects and driving the vision out towards the vendors," said Thomas P. Tucker, senior vice president and head of sales at Travelex.
According to a recent Wall Street Journal article, money wiring is the primary way Mexican immigrants send money home due to an embedded fear of American banks and government. The article said that only 50 percent of Mexicans living in the United States had domestic bank accounts in 2001.
"Culturally there is some distrust with banks in this segment of the population," Clancy said. "We have to make sure Travelex works with them to let the potential customer know that we're not doing this as a front to report them to immigration. But at the same time, Travelex is going to make sure that the banks live up to the USA PATRIOT act."
Tucker said, "There is definitely an historical lack of trust that is ingrained in the Mexican culture. But a community bank, which we plan on using, can go through the employers to create money transfer. The strength of community bank network is that they are close to their customers."
ICBA and Travelex are both optimistic about the potential of the international money-transfer system.
"Hopefully this will translate into cross-selling opportunities like mortgages and consumer loans to a very underserved portion of the market," Clancy said.