Banks aim to help immigrants send money home

Currently, some states don't even require remittance servers to be licensed, much less provide detailed receipts. As part of a global effort to lower remittance costs, the US government recently began working with the Mexican government, numerous banks, and nonprofit groups to launch two initiatives.

One, the New Alliance Task Force (NATF), focuses on providing immigrants' accounts with low-cost remittance services while promoting financial literacy. The other initiative allows US bank customers to send money to a Mexican bank account at low cost through the Federal Reserve's Automated Clearing House's international wire-transfer service, Directo a Mexico. Most banks offering this service charge the sender between $2.50 and $3 per transaction, according to the GAO. The recipient Mexican bank receives a share of 67 cents, and is not permitted to charge the recipient any other fees.

Both programs are geared toward Latin Americans, who send an estimated $30 billion abroad each year. Most of the institutions participating in NATF are community banks in Illinois, Indiana, and Wisconsin; however, the program was recently launched in Austin, Texas, and Los Angeles. Since October, as many as 50 banks across 20 states have enrolled in the Directo a Mexico program, with more expected to join in the coming months.

These fee-reducing initiatives, along with the fact that US banks have been able to accept the Mexican consular identity card as a valid form of identification to open an account since 2002, have made sending remittances easier and more affordable for immigrants. Bank executives now hope that Latino immigrants will take advantage not only of their remittance services but also other financial offerings as well.

Banks' entry into the market will be particularly hard on small ethnic operations like Delgado's. The family-owned business takes, for the most part, a 4 percent cut of whatever is sent, says Linda Delgado, the company's vice president. With all the advantages the big players have, she says, "we slowly see ourselves being closed out of the business."

Delgado competitor HSBC, for example, recently began a new program called EasySend. A person living in the US can now open an account and transfer money freely to a secondary account which is accessible to family members in another country. These accounts are subject to changes in exchange rates, but otherwise they're free as long as the balance remains above $1,500. If the balance falls below that, there's an $8 fee per transaction.

HSBC expects to sign up tens of thousands of new customers in the next few years. Despite meeting its current targets, the bank admits that widespread acceptance of these accounts by immigrants will take time. "This is a radically different way of interacting with money transfers than what people are used to," says HSBC spokesman Stephen Cohen.

The transition could ultimately save laborers millions of dollars. If immigrants start using banks, they could feasibly start saving money, establish credit, and eventually obtain a mortgage to buy a home, says Tomás R. Jiménez, assistant professor of sociology at the University of California, San Diego.

Immigrants might also invest their money, putting it toward education for a child or themselves. "I don't imagine that this type of thing would happen en masse," Mr. Jiménez says, "but you can certainly imagine where one area of assimilation can affect others."

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