BOSTON – Two reports released by the Federal Bank of Boston deal with remittance programs for immigrants who send home billions of dollars. Many of these people are the "unbanked." Credit unions fees were reported as being higher than special targeted bank programs. Now banks consider this a potential market which many credit unions are already serving through WOCCU's IRnet. Low paid or illegal immigrants working in the United States are often the major source of income for their families in third-world countries. Some US$45 billion was remitted in 2004 according to the Inter-American Development Bank. Remittances grew 161% between 1990 and 2003 making it an interesting product. The number of people living outside their home country is about 3% of the world's population When the sender needs to be an account holder, he or she has little choice but to go to places that charge high rates. WOCCU identified this problem and in 2000 set up IRnet working with VIGO, MoneyGram and Travelex for money transfers between U.S. credit unions and other country's credit unions. Although VIGO, a privately-held company, has announced it will be sold to First Data, the owner of Western Union, WOCCU's spokesperson Kim Johnston does not expect to see a change in services or rates. Banks Wake Up To World Remittance Market "Banking Unbanked Immigrants through Remittances" by George Samuels reports a change in attitude of the banking world toward immigrant business. "The establishment of remittance programs by mainstream financial institutions (MFIs) is one way to reach the unbanked United States immigrant population. Bringing this population and others who lack basic savings and checking accounts into the conventional financial world is a major goal of the community development field. It is an important step towards building individual and community." They recommend hiring bilingual staff to handle the target marketplace. One Boston bank has staff that can speak seven different dialects of Chinese. A second report "International Remittances: Information for New England Financial Institutions" by Mamie Marcuss said, ". financial institutions around the country are investigating ways to enter the market and capture a share of this growing source of revenue." Although their data is only from the United States they were able to determine some averages. ".remittance sent to India was $1,104. Pakistani immigrants typically remit $790, while Philippine immigrants send $397, on average." Immigrants they say use three methods of getting money to their loved ones: "informal channels, wire transfers by money transfer companies (MTC), and remittance services at regulated financial institutions. Many immigrants use either friends or professional delivery agencies to hand-carry money. Arabs call them "hawala", The Chinese call them "hundi". Money Transfer Centers are considered surer and faster. Two of the largest are Money Gram and Western Union. The latter with 12% global market share operates in 195 countries, and has 169,000 offices. They are located in grocery stores and other convenient places in immigrant communities. They can charge up to 34% in transmission and money conversion fees. "Banks with targeted remittance programs and credit unions had the lowest fees" but credit unions were still slightly higher than those banks," Marcuss' report said. "A new wave of remittance products priced for the individual sender is emerging in the banking world, offering some of the lowest fees in the market. Service charges average less than $10 per transaction, and foreign exchange rates are more favorable than those offered by money transfer companies," the report showed. Like WOCCU's IRnet through its credit union network, "U.S. financial institutions have created low-priced remittance services by establishing a relationship with one or more foreign banks." Another method of transfer is to have the immigrant open an account and to give him or her two ATM cards, one for the person in the receiving country. This is the most economical method of all, the report said. This works only where there is an ATM network available. Marcuss' report also cited WOCCU's program. ". credit unions typically do not charge more than $10 to send funds, and some offer service for less than $7.30 In part, credit unions are able to offer these low prices because IRnet." However, the average cost through a credit union, according to the report was $13.77 against a bank's targeted remittance program of $11.58. Not all bank costs are cheaper. When it is a regular bank money wire the average cost is $17.25. Remittance fee income can be substantial. Wells Fargo earned over $100 million in 2003 on remittance fees, according to Marcuss. In encouraging banks to set up a remittance program Marcuss cites costs at about $6 per transaction. While banks are looking to cash in on the remittance market credit unions already are set up to deal with 35 countries. WOCCU has said that credit union membership can be increased when the remittance system is used. Marcuss does not see long-term huge financial gains from remittances. "Instead, banks and credit unions will see the largest long term gains from sales to the new customer base generated by remittance programs." [email protected]