International Remittance Legal Guide for Banks

New Appleseed Guide Helps Banks Provide Fair and Efficient Services to Growing International Remittance Market
January 8, 2008

Appleseed, a network of public interest justice centers in the U.S. and Mexico, this morning released a first-of-its kind guide to assist banks and other financial institutions in better serving the growing remittance market. Immigrants living in the U.S. sent $45 billion to Mexico and Latin America in 2006, according to recent estimates from the Inter-American Development Bank.

In addition to providing a detailed market overview, “Banking in a Global Market” offers a comprehensive hands-on approach to setting up transparent and efficient remittance services, drawing on the experiences of large and small financial institutions throughout the U.S.
“Appleseed has found banks need guidance in starting remittance programs and serving the immigrant market. It’s win-win: by offering remittance services, financial institutions get new customers, and immigrants have more safe and convenient places to remit money, keep savings, build credit without paying high and unpredictable transaction fees,” said Betsy Cavendish, executive director of Appleseed. Over the past four years, Appleseed has educated immigrant communities about the U.S. financial services system and highlighted the market potential in immigrant communities to financial institutions. Appleseed has pressed for transparency in the remittance market, urged that a history of sending remittances be considered evidence of credit-worthiness, and fought taxation of remittances.

Approximately 100 banks and credit unions in the U.S. currently offer and actively market consumer remittance products. “That is a fraction of the number that could be providing remittance services to growing immigrant communities,” according to Ann Baddour, senior policy analyst for Texas Appleseed and lead author of the guide. Among Latin American immigrants, 70 percent of remittance senders use cash-to-cash transfer services through money transfer businesses such as Western Union and MoneyGram, while estimates of remittances sent through banks range from five percent to 19 percent.

Through detailed profiles of 11 financial institutions, Appleseed’s guide illustrates six approaches to setting up remittance programs. The profiled financial institutions are:BankCherokee , Central Bank of Kansas, Citizens State Bank, First Bank, Harris Bank, Latino Community Credit Union, Mitchell Bank, Pinnacle Bank, United Americas Bank, U.S. Bank and Wells Fargo.

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Appleseed, a nonprofit network of 16 public interest justice centers in the United States and Mexico, uncovers and corrects social injustices through legal, legislative and market-based structural reform. Appleseed and Appleseed Centers bring together volunteers from the law, business and academic professions to devise long-term solutions to problems affecting the underprivileged and underrepresented in such areas as education and financial access. For more information, visit: www.appleseednetwork.org.

APPLESEED CONTACTS:
Patti RiippaCommunications Associate202-347-7960, ext. 104
Eric GutiérrezImmigration Policy Director202-347-7960, ext. 120(Available for Spanish-language media)
Ann BaddourSenior Policy Analyst and lead report authorAppleseed Financial Access Project512-473-2800, ext. 104512-203-3556 (cell)

CONTACTS FOR PROFILED FINANCIAL INSTITUTIONS:
Latino Community Credit UnionAngel RomeroMedia Relations919-688-9270
United Americas BankJorge FormentPresident and CEO404-240-0101
Mitchell BankJames MaloneyPresident and CEO414-277-9080
Wells FargoLisa Westermann Assistant Vice President, Public Relations Wells Fargo Card Services415-222-6236 415-845-7759 (cell)
Pinnacle BankDaniel PadillaDirector of Latino Banking402-434-3134

America's Great Divide

Hat Tip: Bank Technology News

About 73 million people in the U.S. are unbanked or underbanked, a marketplace that is as diverse as it is unknown-often new to the U.S., frequently entrepreneurial and all lacking credit histories. Banks will find a bevy of new risk tools to help reach out to this market of emerging creditors

By Michael Sisk

The subprime mortgage troubles have grabbed a lot of headlines this year as delinquencies and foreclosures mount and lenders scramble to tighten underwriting standards and head off onerous new rules from a populist-minded Washington. But this story has masked another lending phenomenon gathering momentum: lending to unbanked or lightly banked consumers, whom some are calling "emerging credit."

Make no mistake, there is a significant difference between subprime and unbanked. The former have established and blemished credit histories that can be viewed through the three major credit repositories, while unbanked can't be easily tracked because they have never had a credit card, car loan, mortgage or other financial product that would leave a credit trail. However, these two groups do have two major commonalities: risk profiles that fall outside the norm and must be carefully studied before extending credit; each group also represents a deep pool of potential customers.

Reaching the unbanked is one of those perennial dilemmas for banks, but several new technology tools recently have been unveiled that show great promise in helping to bridge this gap. And it is a gap worth bridging. The Center for Financial Services Innovation estimates 73 million people in the U.S. are either unbanked or underbanked. When one considers that that figure is 56 percent of the total banked population of 130 million, it becomes pretty clear how much business is up for grabs.

Click here to read the rest.

Automation is Washing Money Orders Away

Source: John Adams of Bank Technology News

"Prepaid cards are the new vehicle of choice among the unbanked who have long endured high money order fees. Payments firms better take note."

The amount of walk in payments for bills is decreasing in the face of more availability of stored value debit cards to the unbanked and underbanked. As people are able to transfer money to and from their cards at much less cost than the price of a money order and with more convenience the market movement is obvious.

Companies affiliated with International Personnel Management, Inc. (IPM) will maximize their entry into one of the fastest growing markets in the world.

Click here to read more.

International Remittance Market Sparking Interest from Big Banks

The international remittance market has become so lucrative and beneficial that large international banks are taking an interest in "taking back" a market that has gone to money transfer companies.

Big banks (especially those based in the United States) faces some challenges in the international remittance market because of the many post-911 restrictions imposed upon them by the U.S. government. Despite these challenges the banking industry is exploring opportunities because the remittance market is expected to "grow 10.1% through 2008."

As can be seen in this article on CNN Money.com, the barriers both real and perceived faced by immigrants to use money transfer technology are being broken down by younger generations acceptance of being "plugged into tech."

We at IPM are poised to guide banks, money transfer companies, merchants and end users through this dynamic time in the international remittance market.

Recipients' Interest in Joining the Banking System

From the study conducted by Visa International found on the Payments News website there are listed benefits for remittance recipients to join the banking system. From the article (Thanks to Bankwatch for the source):

"Key findings highlight the recipients' interest in joining the banking system.

• Approximately 50 percent of the remittance volume to the region is distributed through financial institutions, but only 11 percent is received in bank accounts; the remainder is distributed in cash. This shows that despite the participation of financial institutions in the process, recipients are not yet receiving the benefits provided by banking.
• 56 percent of interviewees expressed an interest in establishing some type of formal relationship within the financial system. Similarly, 70 percent showed a favorable attitude toward banks.
• Remittances are not the only source of family income. Nearly half of the beneficiaries are employed part-time or full-time, and for 52 percent of them remittances represent supplemental income. Only one of eight beneficiaries considers remittances the only source of income.
• 15 percent of beneficiaries save or invest the money they receive because remittances increase their income by 50 percent.
• Most frequent uses include purchasing goods, developing a business, savings in foreign or local currency, paying debt, and certain luxuries such as traveling.
• The level of solvency, spending potential, savings and investment are higher among remittance recipients than among people of similar socioeconomic levels who do not receive remittances. Nearly half are economically active people.
• 24 percent of senders interviewed have been living abroad for 10 to 15 years and continue to send remittances periodically, showing the consistency of this business in the long term."

We at IPM are uniquely positioned to benefit provider companies, civil authorities and end users.

The Growing Remittance Market

The remittance market is growing around the world. In the United States, the remittance market is usually associated with the southwestern border states with Mexico.

As seen in the article published by the Federal Reserve Bank of Atlanta, four of the top ten U.S. states where remittances originate are in the southeastern United States.

Banks are interested in building infrastructure and knowhow but there are still many gaps which IPM (International Personnel Management, LLC) is here to fill.

What is SWIFT?

SWIFT stands for "Society for Worldwide Interbank Financial Telecommunication."

In relation to international transactions and remittances, SWIFT is an electronic messaging network of banks (majority), depositories, securities broker-dealers and non-bank corporations. SWIFT was formed as a banking transactional messaging network but has grown and is growing into a network that can be used in addition to other systems for transfers relating to the international remittance market.

To know what SWIFT is and and how it works it is beneficial to reference an overall description of SWIFT at the 9to5andOtherwise.com site.

Click part 1 and part 2.