January 26, 2005
By Oscar Avila
Miguel Hernandez makes just $7 an hour, but the Waukegan factory worker and other Mexican immigrants have been wooed relentlessly in recent years by the nation's richest and largest banks, who see a growing, almost untapped market.
On Thursday the competition will intensify when Bank of America rolls out a program that allows immigrants to send money to Mexico without paying any fees, believed to be a first among major banks.
The program will begin in Chicago and spread to other cities later this year.
Although the free service is limited--to qualify, senders must hold checking accounts at the bank and recipients can pick up the money only at certain Mexican banks or ATMs--financial regulators say the decision is a milestone.
Michael Frias, who works with 37 Midwest banks and Mexican government officials to promote financial access for immigrants, said he knows of no other banks that offer money transfers without fees.
"Ten years ago, they were paying 12 to 15 percent," said Frias, community affairs officer for the Federal Deposit Insurance Corp., a government regulator. "Others were literally taking thousands of dollars [in cash] and giving it to a relative going to Mexico during Christmas."
Bank officials hope to entice immigrants with a cheap way to send money to relatives in Mexico and then steer them toward more lucrative services such as credit cards and home mortgages.
Mexico has a stake, too, because it receives more than $13 billion annually from immigrants in the United States, the second-largest source of revenue for Mexico.
Officials hope to attract workers like Hernandez, 47, who says he is
satisfied using wire-transfer services to send cash to his wife and
three children in Veracruz, despite a $10 fee per transfer.
"I don't mind paying the fees," Hernandez said. "That's just part of sending money."
Major banks still make up only 3 percent of a market dominated by wire-transfer companies and mom-and-pop stores. But the rush is on, according to banking experts.
Thanks to competition, the average surcharge for a $200 money transfer to Mexico dropped from 13 percent in 2000 to 7.3 percent in 2004, according to the Pew Hispanic Center.
Citibank, for example, recently launched Global Transfer, which charges $5 per transfer to Mexico under $500. Harris Bank normally charges $12 per transfer but has started offering coupons to account holders.
Bank of America's announcement removes fees for many customers in its SafeSend program, which charged $10 per transfer without requiring an account.
Account holders will be able to transfer money without fees for amounts up to $3,000 a month. The bank also is eliminating currency conversion fees of 3 percent per transaction.
Anna Paulson, a senior economist at the Federal Reserve Bank of Chicago and an expert on financial access for immigrants, cautioned that price alone will not persuade most immigrants to send money through banks.
"There's something to be said for sending money from the corner grocery store where they speak Spanish and will ask about your cousin," Paulson said.
Carlos Manuel Sada, Mexico's consul general in Chicago, said Mexican officials will encourage more banks to lower their fees.
"To look at that remittance fee and see that 'zero,' that's a major symbolic victory," Sada said.