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From the Front Lobby to the Back Office Building a Successful Remittance Program The Payments Institute Atlanta, GA July 30, 2008.

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Presentation on theme: "From the Front Lobby to the Back Office Building a Successful Remittance Program The Payments Institute Atlanta, GA July 30, 2008."— Presentation transcript:

1 From the Front Lobby to the Back Office Building a Successful Remittance Program The Payments Institute Atlanta, GA July 30, 2008

2 2 Agenda Understanding the Global Remittance Market Remittances and Financial Institutions Is your Bank or Credit Union Immigrant Friendly? Ensuring Success Take-Home Tips / Other Resources

3 3 Remittances to Developing Countries - $301 billion USD 150 million immigrants worldwide sent US$301 billion in remittances in 2006

4 4 World Migration and Remittance Facts United States Top destination country for emigrants million Top remittance sending country - $42.2 billion USD Accounts for 1/3 of worldwide remittance flows Top migration corridors involving US (*Top ten) Mexico* (10.3M); Philippines* (1.6M); Germany (1.4M); India (1.1M); China (1.1M); Vietnam (1.1M); Canada (1M) Top remittance receiving countries India ($27B); China ($25.7B); Mexico ($25B); Philippines ($17B) Sources: World Bank (Migration data 2005; remittance data 2006); Citigroup

5 5 Remittance Flows – Africa Remittances to Africa totaled $38.9 billion in 2006 The top five recipient countries are Morocco, Algeria, Nigeria, Egypt and Tunisia Migration is predominantly intra-regional with significant international migration to former European colonial powers The US is also a major migrant destination, with the majority coming from Nigeria and Ghana

6 6 Remittance Flows – Asia Asia and Oceania receive $113.9 billion in remittances annually, making it the largest regional recipient in the world India, China and the Philippines are the top three recipients of remittances in the region US to Asia remittances = $24B in 2006 Main destinations for migrants are the US, Russian Federation, and New Zealand Significant intra-regional migration to Australia, China, Japan and Singapore The US is among the main migrant destinations for Filipinos in particular

7 7 Remittance Flows – Latin America Almost $68B in 2006 Mexico is the largest recipient at $24.3B or 36% of all transfers to Latin America & Caribbean US has historically been main destination for Latin American migrants Increased migration to Europe (mainly Italy & Spain) and intra-regional migration is changing trend Mexico $24.3 billion

8 8 Focus on US-to-Mexico Remittances Item data is estimated based on average value of $350 per remittance

9 9 Whats driving remittances? Globalization and mobility of labor Transnational ties Insurance – In case of crop failure, natural disaster, job loss of other family members, etc. Holiday gifts (Mothers Day) Ease of communications brings expectations and a sense of obligation

10 10 Who are the remitters? According to a Pew Hispanic Center survey of Latino remitters: Nearly half of those born outside the US send money regularly 43% do not have a bank account Average remitter spends 13 years in the US 63% watch TV, listen to radio predominately in Spanish 3 out of 5 are male with an average age of 37 59% did not complete high school 57% make less than $30,000/year Most of those employed are unskilled laborers

11 11 Sizing your Market US Census Hispanic population data - County-by-county look at Hispanic population Data does not show Mexican population alone, but rather Hispanic population in general Migrant corridors People from a certain community in the home country emigrate to a specific area in the US Talk to embassies or consulates, churches and community organizations in your area

12 12 Hispanic Population Projections

13 13 Hispanic Market Potential Census Data Example – St. Louis County, MO 19,364 Hispanic residents in 2006 Nearly 2% of total population in % of Hispanic population is age % is of working age (15-64) Hispanic population grew 30.5% from Total population declined 1.6%.

14 14 Hispanic Growth Compared to Total Growth 995,000 1,000,000 1,005,000 1,010,000 1,015,000 1,020, Year Total population 14,000 15,000 16,000 17,000 18,000 19,000 20,000 Hispanic population Total popHisp pop

15 15 Agenda Understanding the Global Remittance Market Remittances and Financial Institutions Is your Bank or Credit Union Immigrant Friendly? Ensuring Success Take-Home Tips / Other Resources

16 16 Remitters as Financial Institution Customers - Challenges Potential customers might be unbanked Lack of traditional documentation Special marketing and customer service needs Language barrier Hours of operation dont suit immigrant populations needs Money transfer businesses dominate remittance market Estimates of remittances sent through banks vary from 5% to 19% of transfers

17 17 Remitters as Financial Institution Customers - Opportunities US Hispanic purchasing power - $870 billion in 2008; $1.3 trillion by 2015* Hispanic growth rate is three times the national rate 59% of Hispanic adults have a cell phone** Remitters need broad range of financial services Building blocks for customer attainment, retention and cross-selling Strong customer loyalty Possible Community Reinvestment Act (CRA) credit for offering remittances Sources: *www.yahoo.com (Research and Markets report); **Pew Internet and American Life Projectwww.yahoo.com

18 18 Remittances 101 Types and features of remittance services Cash-to-cash Predominant consumer preference More convenient but more costly Account-to-account Supports financial inclusion on both ends of transaction Typically a lower-cost option than other types Account-to-cash / Cash-to-account Flexible to accommodate lack of account on either side of the transaction Web options PayPal and Xoom ATM and prepaid cards Flexible to accommodate greater access to financial services

19 19 Remittances 101 Key cost drivers Upfront capital outlay – software, technology, implementation and customer service Build vs. buy Marketing costs As brand gets established, marketing focus shifts from customer acquisition to retention Loyalty and retention programs Variable costs Transaction initiation, customer ID verification, distribution costs, core FX costs Ongoing support costs Technology, product enhancements, data center and program management Source: Citigroup

20 20 Remittances 101 Understanding fees & foreign exchange Pricing varies significantly by service, distribution network, type of product and destination country Costs Remittance fees for sending and possibly for paying out transfer Exchange rate spread Difference between foreign exchange rate at which remittance provider buys currency and retail exchange rate applied to senders transaction Can be a hidden fee to the receiver

21 21 Offer the Right Mix of Products and Services Low-cost check cashing and money orders as transitional services Accounts that do not require high opening balances or high fees Low minimum balance savings options Credit-building products Remittances are a critical part of portfolio of products See Appleseed study on Banking in a Global Market

22 22 Compliance and Remittances Bank Secrecy Act Prevents financial institutions from being used as intermediaries for criminal activity Reporting and record-keeping requirements USA Patriot Act Requires Customer Identification Program Section 326 lists forms of acceptable identification Supports FIs ability to offer account to non-US citizens Office of Foreign Assets Control (OFAC) Requires that international items be screened against the Specially Designated Nationals (SDN) List FIs must have a written procedure for complying with OFAC regulations

23 23 Agenda Understanding the Global Remittance Market Remittances and Financial Institutions Is Your Bank or Credit Union Immigrant Friendly? Ensuring Success Take-Home Tips / Other Resources

24 24 Front Lobby Tips Adapt to serve unbanked and migrant consumers financial service needs Financial education is vital Need to change customer behavior in two countries Reach out to immigrant communities to develop new customer relationships Consider more convenient branch locations and hours Offer more than one type of remittance product to meet the needs of all customers

25 25 Back Office Tips Determine necessary payment information to collect from customers in accordance with origination and compliance practices If using ACH, verify that software accommodates cross-border ACH formats (SEC codes CBR/PBR) Be ready for new cross-border IAT format in March 2009 Pre-fill origination forms for front lobby to streamline required and repetitive information

26 26 Integrating the Remittance Service to Your Environment Remittance corner Separate space dedicated to remittance services No waiting in general teller line for remitters Efficient systems for repeat customers Placards advertising exchange rates Signage directing customers Se habla español Community outreach Make people aware of services offered

27 27 Agenda Understanding the Global Remittance Market Remittances and Financial Institutions Is your Bank or Credit Union Immigrant Friendly? Ensuring Success Take-Home Tips / Other Resources

28 28 Business Plan and Goal Setting Remittances are an important component of overall business growth strategy Determine your objective in offering remittances Transactional vs. relational Be realistic about your goals Number of transactions, new accounts, loans, etc. Cross-selling, up-selling Generally not an overnight success

29 29 Staffing / Staff Education Foreign language-speaking staff Puts immigrant customers at ease Creates customer preference and loyalty Educate all staff on service features and cultural differences Offer employee incentives to increase remittance volumes

30 30 Smart Marketing and Outreach Efforts Target marketing to the community Foreign-language radio, television and publications important Participate in fairs, festivals, community events Utilize familiar customs, music, cuisine, etc. Promote special offerings for high-volume remittance times Ex. Mothers Day and religious holidays Partner with chambers of commerce and consulates Research migration corridors to connect both sides of the transaction Financial education plays important role in success of program Take advantage of existing materials such as FDIC Money Smart in English and Spanish

31 31 Agenda Understanding the Global Remittance Market Remittances and Financial Institutions Is your bank or credit union immigrant friendly? Ensuring Success Take-Home Tips / Other Resources

32 32 Take-Home Tips Remittances can be big business for FIs Do your homework and understand your market Challenges exist, but opportunities abound Connect with the immigrant population Financial education is vital to success Offer targeted financial services Take advantage of available resources

33 33 Contact Information Elena Whisler Federal Reserve Bank of Atlanta

34 Appendix

35 35 Other Resources Appleseeds report on Banking in a Global Market US Census Bureau – World Bank – International Fund for Agricultural Development Inter-American Development Bank (IADB) FedACH International exchange rates page


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