Banks come up short in channeling remittances into products - Mexico
Banks come up short in channeling remittances into products - Mexico
Banks are handling a growing share of the dollars Mexicans abroad send home, but are still looking for a way to channel those funds into financial products like loans, bank executives said at a press conference Wednesday.
Most of the remittances come from US-based Mexicans and amount to billions of dollars each year, the conference heard.
“We and our partner Bank of America have been looking at how to structure these types of transactions so those [remittance] flows would help a Mexican get a mortgage. It’s something we still haven’t developed at the bank and though we are working on it I can’t give any dates at this time,” said Juan Moreno, deputy CEO of Mexico’s third largest bank Santander Serfin.
Bank of America (NYSE: BAC) unveiled its Safe Send remittance product in Mexico on Wednesday, one week after its official launch in the US.
Anyone with a Bank of America checking account can now send up to US$3,000 a month to Mexico free of charge. Recipients can pick up the cash at more than 4,500 locations throughout Mexico through Santander Serfin, federal savings bank Bansefi and its L@Red de la Gente network, telegraph company Telecomm-Telegrafos, and the country’s fifth largest bank Banorte.
For Bank of America, Safe Send is a way to establish a banking relationship with US Hispanics, many of whom are unbanked. According to a Federal Deposit Insurance Corporation (FDIC) announcement issued June 9, nearly half of the 40 million Hispanics who live in the US do not have a bank account.
International banks operating in Mexico like HSBC (NYSE: HBC) and BBVA (NYSE: BBV) and domestic banks such as Banorte also see remittances as the starting point to a long-term banking relationship with people who previously had little contact with a bank.
In June, HSBC launched its Easy-Send free remittance service that allows US accountholders to send money anywhere in the world, while Spain’s BBVA operates its own network of remittance offices in California.
The sheer volume of remittances sent to Mexico and the potential to channel some of that money into financial products is also attracting banks to this market. Mexico received US$16.6bn in remittances last year and that figure is expected to exceed US$20bn in 2005.
Banks have to date focused on the transactional side of the business, which is dominated by wire transfer companies Western Union and MoneyGramm. But evolving from a pure transactional service to one that fosters the uptake of banking products like loans and savings accounts has proven a challenge.
According to Bansefi CEO Javier Gavito, the bank has a number of savings products linked to third party mortgage loans that could be adapted to include remittances as a source of savings income.
Workers who derive a significant amount of their income from undocumented sources like tips can open a Bansefi account and after four to 24 months of regular savings are eligible for a mortgage from government home lender Infonavit.
“If the product exists here [in Mexico] what we need to do is extend it to the remittance [market] for any migrant. We already have agreements with all [the government] housing entities where savings is the detonator for credit,” Gavito said.
Banorte is piloting a loan product for tourism industry workers in areas like Cancún who in many cases receive 70-80% of their salary in tips and cannot prove steady payroll income to qualify for a traditional loan. Instead, Banorte makes personal loans to those individuals with a history of regular and steady deposits.
“Banorte doesn’t have a date either to launch this kind of product [mortgages] but we have some background through experiments that we are doing in tourism areas that have shown good results and could be taken to the remittance [market],” the bank’s CEO Luis Peña said.
“We see remittances as a case that can be applied to this type of income [tips], which cannot be verified but are very stable,” he added.
Source: bnamericas.com
