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The Remittance Landscape

Canada and the United States

The transfer of money, most
commonly, by a foreign worker to
his/her home country.

According the the World Bank, global remittance flows
amounted to $305 billion USD in 2008. [map shows 2006 figures –
when the total number was $300 billion USD]

Remittances Have A Huge Impact On Developing
Countries and the Global Economy
Amount of money that flows through remittances is
The World Bank estimates global remittances totaled $397
billion in 2008 ($305 billion of this going to developing

The money sent home by migrants is the second largest

financial in-flow to many developing countries, exceeding
international aid.

Many Developing Countries Are
Dependent On Remittances
Highest Total Remittances Received
Top Three Countries (2001)

Philippines (total remittances accounted for 8.9% of GDP)
 India (total remittances accounted for 2.0% of GDP)

Mexico (total remittances accounted for 1.6% of GDP)

Many Developing Countries Are
Dependent On Remittances
Latin America and the Caribbean received a total of over 66.5
billion USD in 2007 (75% of this money from senders in the
US), accounting for more than 10% of GDP and exceeding the
dollar flows of the largest export product in almost every
country in the region.

Remittances to Somalia represent 25-40% of the total gross

national product.

Countries Most Dependent on Remittances
(based on remittance contribution to GDP – higher than
7.5%) [2006]
g Eritrea 37.9% Suriname 21.2% Philippines 12.5%
Tajikistan 36.7% Haiti 21.1% Mali 12.5%
Laos 34.5% Comoros 21.1% Sierra Leone 11.5%
Cape Verde 34.2% Georgia 20.2% Belize 11.4%
Kyrgystan 31.4% Jordan 18.9% Vietnam 11.2%
Grenada 31.2% Armenia 18.5% Morocco 10.7%
West Bank/Gaza 30.2% St. Kitts 18.5% St. Lucia 10.4%
Guyana 30.1% Jamaica 18.3% Guatemala 10.1%
Afghanistan 26.9% El Salvador 18.2% Dominican Republic 9.8%
St. Vincent 26.4% Fiji 18.2% Barbados 9.4%
Liberia 25.8% Gambia 17.0% Azerbaijan 9.3%
Lebanon 25.2% E. Timor 17.1% Bolivia 8.7%
Lesotho 24.1% Uzbekistan 17.0% Guinea 8.6%
Honduras 24.8% Nicaragua 14.9% Burkina Faso 8.2%
Burundi 22.8% Nepal 14.1% Ecuador 7.8%
Bangladesh 13.1% Cambodia 7.8%
Sri Lanka 12.7%

Not Just Money Flowing Out:
Remittances Also Benefit Developed
Revenue is generated for developed country economies by businesses
involved in money transfer.

Canada and the United States need immigrant labor. The opportunity for
remittances is a major draw for immigrants.

The dependency relationships sustained by immigrants through

remittances create telecommunications, travel and other revenue that
are financially important to their host countries.

Who Sends Remittances?
● Immigrants from ● Immigrants from
developing countries that export
countries. large numbers of low-
● Newer skilled migrants
immigrants vs. ● Temporary migrants
those who have more and heavier users
been settled in than permanent
Canada or the US immigrants.
for years.
These statements present only a partial profile. We were not able to
find much demographic material on overall remittance senders.

Major Remittance Sending Countries

 United States
 Canada

 United Kingdom

 Germany

 Switzerland

 Saudi Arabia

 Spain

 France

Major Remittance Receiving Countries
 Mexico
 China

 India

 Philippines

 Latin American and

Caribbean countries
 Pakistan

 Bangladesh

 Moldova

 Bosnia

How Remittances Are Transferred from
Canada and the United States
● Money transfer agencies ● Money hand delivered
● Banks ● Informal value transfer
systems (halawahs, hundi,
● Postal service money orders
fei chi'en, phoe kuan)
and money transfer services
● Cell Phone companies
● Online money transfer
(PayPal, Ikobo, Moneybookers,

Remittances = Money Transfer Services

Money transfer agencies still dominate the formal

remittance market, although they have been losing
share in recent years to banks and other remittance
methods (cell phone remittance in the Philippines, for
*Some countries (ex: Somalia and Cuba) use
informal remittance channels almost exclusively.

Overall Remittance Market
Dominators – Canada and the United
Banks and credit unions represent a small fraction of the
remittance market in the US and Canada.
Both market leaders are pure money transfer agents.
 Western Union/Vigo
 MoneyGram

Remittance Senders Choose Money
Transfer Services (MTSs) over Banks
If not using informal methods, reasons immigrants choose money transfer services
over banks:
MTSs are fast – Bank wire transfer can Remittance sender and/or receiver are
take up to a week to clear. without bank accounts

MTSs offer wider distribution networks Sender feels unable to meet ID

or have a near monopoly in receiving requirements for a bank account
Higher bank remittance fees (whether this
g Fears around undocumented is the case depends on the country in
immigration status keep some question)
immigrants away from banks
Cultural or religious discomfort with
Banks are not prevalent in the formal financial institutions
immigrant's home country
Language barriers

Banks Push Into Remittance Market More
and More
Traditionally banks did not see remittance transfer as worth their efforts but now that
the market is massive, US banks have been taking steps to attract remittance business:
Banks in the US have made it easier for immigrants to open a bank account by
accepting alternative and foreign forms of ID (ex: IRS Individual Taxpayer ID
Number in lieu of Social Security Number, Mexican Matricula Consular card)

Expanding their presence/services in other countries, so that they can provide the
distribution networks that immigrants want.
Adding foreign banks to their networks. When Citibank bought Mexican banks
Banamex and Serfin it then offered a transnational credit card that allowed for money
to be sent between Mexico and the US easily.

Making pricing more attractive (at US banks) to remittance senders.

Financial Barriers to Entry For Banks
 The need to build or buy into distribution networks in other countries.

Current wire transfer procedures are more teller-intensive than some

other tasks (paperwork must be filled out) while banks have been focusing on
cutting costs by reducing teller services and paperwork.

g Many markets already well covered by Western Union and/or Moneygram

– so banks would have to find a way to break in and compete.

Need to completely overhaul their current wire transfer services (small,

unadvertised parts of their businesses) to become remittance tools.

Cultural Barriers to Entry For Banks
Remittances are sent by low-income people who banks do not see
as their target customers.

Bank may have little experience dealing with the languages and
cultures of the customers who would send remittances and these
kinds of “foreign” customers may be outside of their ideal target.

Remittances are often sent to developing countries and rural areas
while many banks are more interested in positioning themselves in
lucrative, urban markets in affluent countries.

Banks have traditionally focused their energies on large

transactions – so would have to change their thinking to focus on
smaller transactions.

Major Players (Banks) in Remittance
Market - Canada
 Bank of Nova Scotia/Scotiabank
 Canadian Imperial Bank of

Commerce (CIBC)
 Bank of Montreal (BMO)

 Toronto Dominion Bank (TD Bank)

 Royal Bank of Canada (RBC)

 ICICI Bank [Industrial Credit and Investment

Corporation of India - Indian bank]

Note that none of the Canadian banks have a specialized

remittance product. Remittances that flow through these banks
do so through their regular wire transfer services.

Major Players (Banks) in Remittance
Market – United States

 Citibank
 Wells Fargo

 Harris Bank

 Bank of America

 Mitchell Bank (Milwaukee)

These US banks all have specialized remittance

products in addition to their regular wire transfer

Factors That Impact What Senders Pay

 Available options/competition. Prices are higher when

there is little competition.
 Users' awareness of options.

 Conditions in the sending and receiving countries (ex.

Banks will not be an option in rural areas of many developing countries;

banks are not as prevalent as money transfer stores in many N. American
urban neighborhoods)
 Costs associated with the services
 Greed

Key Features Senders Pay For
Money transfer service gcustomers ostensibly pay for...

Speed: Instantaneous transmission of funds.

Wide distribution networks: ”Send to anyone,


Convenience: Multiple locations in many localities; Pay

higher fees for extra conveniences like telephone money
transfers and payment by credit card.

Safe transfer of money: Electronic transfer over a

secure network means there isn't the risk of sending

Money Transfer Fees
Money Transfer Services g Bank Wire Transfer

Transfer Fee – Usually a flat Wire Transfer Fee – Usually a flat

rate;sometimes dependent on your rate;sometimes dependent on your method
method of payment (ex: cash vs. of payment (ex: from checking account vs.
credit card), the payment destination cash), the payment destination or the
or the amount of money being sent amount of money being sent.

Currency exchange rate – Set by the Currency exchange rate – Set by the bank,
transfer service, usually has little usually has little relationship to the real
relationship to the real currency currency exchange rate. Banks profit from
exchange rate. Companies profit from the difference between the rate they charge
the difference between the rate they and the actual rate.
charge and the actual rate.

Additional fees [not as common] – Additional fees – Most banks charge extra
Some services charge an additional fees (variously called “communications fees”
fee for certain kinds of transactions “service charges” or “commissions for in-
(payment by credit card) or for person wire transfer. Usually a percentage of
delivery to foreign bank accounts. the amount being sent.

Bank Wire Transfer Pricing - Canada
(International transfer of money only)g
Highest Wire Transfer Fees

 CIBC ($30 + “cable” fees)

 RBC (In-branch fee is $35 + $10-15 “communications” fee.)

 HSBC ($30 online; $25 in-branch +.15% of amount being

sent or between $10-$150)

Lowest Wire Transfer Fees

 TD Bank ($10 flat fee)

 RBC ($13 flat online fee)

Major Money Transfer Service Pricing

 Western Union* (Canada – transfer fees between

$10-27 CDN depending on method; US - between $12-25
USD depending on method)
 Moneygram* (Canada – transfer fees between $8-10

CDN; US – between $8-10 USD.)

Paypal (No transaction fee for personal accounts. Paypal
levies a 2.5% currency conversion fee and charges a fee to
make withdrawal from a non-US bank possible.

* Company set exchange rate also applies.

Niche Money Transfer Service Pricing
Outside of Western Union and Moneygram, there are a number
of smaller money transfer providers who concentrate on specific
remittance channels. Since they must compete with the giants,
they often offer consumers better pricing.

 Senvia (Covers Jamaica, Trinidad, India and Guyana. US

and Canada: Fees start at $5/cash transaction. Credit/debit
card transactions charged additional 2.5% of the
 Remit2India (Canada – transfer fee is $15 CDN; US fee is

$3 USD.)

Bank Wire Transfer Pricing –
Major U.S. Banks
Citibank – Regular wire transfer feesg high at $30.00 online and $40.00 in-
person, but have special, low-priced remittance product (Citibank Global).
Prices are lowest for Mexico and India (no transfer fee]), the Philippines and
Poland ($5 transfer fee); a $10 transfer fee applies for other countries.

Wells Fargo – Regular wire transfer fee is a flat $30.00, but the bank has a
special, low-priced remittance product (Wells Fargo Express Send) that it is
using to drive bank account creation. Express Send applies to Mexico, El
Salvador, Guatemala, the Philippines, India, China and Vietnam. Transfer
fees range from $5-10.

Bank of America – Regular outgoing wire transfer fees at $45/transaction in

USD and $35/transaction in foreign currency. Bank of America has a special
remittance product (SafeSend) for Mexico. There are no transfer fees and
offers same day sending and receiving. Must have a Bank of America
checking account to access SafeSend.
Note: All of these programs require recipients to go to particular banks/branches to pick up money.


There are a number of available remittance sending options outside of

Western Union, MoneyGram and the banks and a range of different pricing.

Western Union and MoneyGram continue to dominate the market because

they offer speed, convenience and huge distribution networks. They also
have positioned their services to win immigrant customers (locations in
immigrant neighborhoods, bilingual employees, few formal requirements
for use, etc).

United States g

Most immigrants use informal money transfer or money transfer

services. Many more remittance options are available in the US than
in Canada (specialized transnational credit and debit cards,
specialized bank services, etc).

US banks have developed specialized remittance products with

lower pricing than their wire transfer services to tap the remittance

The banks have designated remittance users as target customers

and taken steps to remove obstacles to their use of the bank.

US banks have bought foreign banks or formed partnerships with

them in order to enter the remittance market.

Canada g

Most immigrants use informal money transfer or money transfer services to

remit money to their home countries. Western Union and MoneyGram

Canadian banks, so far, have not created specialized remittance products.

They continue to offer largely unpublicized, traditional (expensive) wire

transfer services as their only international money transfer product.

Aside from price, there are several obstacles to convenient use of bank
services for remittances.

Entering the remittance market full-scale, as US banks have done, would

require an investment on the part of the banks in marketing, distribution
networks, procedural and cultural changes, etc.