Article

Multi-national FIs find new potential for ATM

U.S. and Latin American deployers see growth in remittance.

February 18, 2007 by

*About the author:Ulric Rindebro is a regular contributor to ATM Marketplace who focuses on the Latin American Market. His most recent article, Chile's banks use ATMs to serve the underserved, appeared on ATM Marketplace Jan. 2, 2007. To comment about this article, please contact theeditor. 

 

Financial institutions in the United States and Latin America see room for opportunity in the money-transfer business - a global industry dominated by The Western Union Company and MoneyGram International. In fact, some are already making headway.

 

Wachovia has been a pioneer for ATM-based remittances. The bank's Dinero Directo service allows immigrants to send up to $1,000 a month back to Latin America, the Caribbean and Spain. With prepaid cards issued by the bank, relatives can access funds at any of the 890,000 Visa Plus-networked ATMs located in those regions.

 

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Several U.S. and Latin American FIs now see remittance as a way to gain new clients, said Pedro de Vasconcelos, who oversees remittance financing for the International Fund for Agricultural Development. And New York-based Bank of America is taking its campaign a step further by offering free remittances through a service called SafeSend.

 

B of A spokeswoman Diane Wagner said SafeSend allows B of A accountholders to remit money to relatives, who then access the funds at ATMs in Mexico.

 

On the retail side, in the United States, 7-Eleven's Vcom ATM/kiosk has set the self-service remittance pace. Through an alliance with Western Union, Mexican immigrants living in the United States can actually send money through Vcom terminals.

 

Not surprisingly, experts say, Latin America and the Caribbean are the world's fastest-growing remittance markets, receiving a total of approximately $60 billion in remittances last year. About three-quarters of that money came from immigrants in the United States.

 

According to Washington-based Inter-American Development Bank (IDB), around 12.6 million Latin American immigrants live and work in the United States, making it an expected growth market for outgoing money-transfers. Mexico is the largest recipient of remittances; in 2006, approximately $23.5 billion went into the country via money-transfers.

 

With a little ATM help

 

Because of growing remittance demand, several multilateral entities, including IDB, have challenged the money-transfer industry to cut its costs. According to the IDB, the cost of sending U.S. $200 to Latin America has dropped about 15 percent since last year - namely because of increased competition in the market.

 

ATMs may be the answer, said Brian Bailey, marketing and deployment vice president for NCR Corp.'s Financial Solutions Division in Scotland.

 

"There's a significant opportunity for financial institutions to remit money in a more economical way using ATMs," he said.

 

In some Mexican states, ATMs have already shown promise for money-transfer recipients, de Vasconcelos said. As a case in point, de Vasconcelos points to the Mexican state of Zacatecas, which at the end of 2006 had 184 ATMs. About 44 percent of those ATMs are located in remote areas where remittance offices have traditionally been scarce, according to Mexico's Central Bank.

  

ATM use for remittances has increased in recent years, but it is far from its full potential, Bailey and de Vasconcelos say. That said, the future does look bright, de Vasconcelos adds.

 

According to IDB, the percentage of Latin American immigrants in the United States who used a bank or a credit union to send remittances increased from 8 percent in 2004 to 19 percent in 2006. 

 

"Last year, 300,000 remittance withdrawals were made at ATMs," said an executive from Banco Cuscatlan, which is based in San Salvador, El Salvador. 

 

The executive said those 300,000 withdrawals represent about 4 percent of bank's total ATM withdrawals.

 

"Although the percentage is not high," he said, "it's a product that is gaining importance."