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Banks and Remittance


Characteristics of the Remittance Market
And How Banks Can Best Approach It

 Introduction to Remittances

 Opportunities

 Challenges

 Solutions
Introduction to Remittances
 Remittances are the traditional financial support for
families back in their home countries.

 This phenomenon is generated by a movement of labor
across borders that constitutes an international labor
market in which

people move and money moves
north by the MILLIONS south by the BILLIONS..
Introduction to Remittances

 Billions in Flows - Hidden in Plain Sight
 $60 billion to Latin American in 2007
 $250 billion worldwide (estimate)
 Larger than foreign assistance and foreign
investment to Latin America combined
 Total to Latin America to reach $500
billion by 2010
Introduction to Remittances

 Almost unnoticed for decades
 Average remittance is small in size
 Senders typically reside outside the
formal financial system
 Government Officials Now Jumping into
the Game
 Urging banks to enter the market
 Raising compliance hurdles
Remittance Senders and Receivers

 Senders are Migrants Here to Earn Money
 Typically low-income (60% earn $30,000 or
 Half are “Unbanked”
 Faithful in their Remittance Habits

 Receivers are family members back home
 Heavily dependent on these flows
 Often live in rural areas far from formal
financial institutions
Top 20 Remittance Receivers in 2006,
($ billion)
0 5 10 15 20 25
United Kingdom
United States
Opportunities: Hispanic Market

 How big a market? 40 million Latinos

 Purchasing Power? $1 trillion in 2008

 Legal Status? 80% are legal residents

 Time in the US? Three-fourths in US more than 5 years

 Remittance Senders? 13 million senders
Remittance Market is Changing
 Many new entrants over last decade.

 Fees being driven down by:
 New participant
 New technology
 Increased transparency

 Regulatory intervention has changed the business.
 MTOs face growing compliance headaches. (KYC,
BSA, USA-Patriot)
 Many MTOs lost their commercial bank accounts.
(MTOs as high risk businesses)

 The market is undergoing a shakeout and
consolidation period.
Field Wide Open for Banks?

 Remittances can be an anchor service to the
fastest growing retail banking segment in US
-- Unbanked immigrants.

 Requires different ways of doing things.

 Requires serious commitment.

 And, compliance is a major concern.
Specific Challenges for Banks

 Smallvalue, high volume international
 Existing bank infrastructure such as SWIFT
is not practical and too inefficient.
 Relatively high compliance requirements.
 Remittance customers are accustomed to
and expect personal attention.
 All result in high per transaction costs.
Technology is Key
 Revenue -- Roughly 1% of transfer value

 Technology becomes important to reduce
costs and fulfill compliance requirements.
 Remember that remittance senders do
not usually use payment cards or ATMs.
 Tellers are necessary as the point of entry.
 Technology again important to reduce
remittance processing time for tellers.
The Ideal Business Cycle

What is the Ideal Business Cycle for Banks?
 New customers come to the bank to
send remittances;
 Eventually they open checking accounts
and use ATM and payment cards to send
 Ultimately they purchase other services.
Solutions: Options for Banks?
 Rely on card to card transfers.
 Problem: remittance senders don't have bank
accounts and have little incentive to go to a
bank (recipients are also mostly unbanked).

 ACH extension provides great infrastructure
where the remitter and recipient have bank
 Problem: lacks an efficient system to
administer transactions and carry out
compliance checks.

 Summary: To effectively enter the market banks
need a reliable and compliant system that allows
cash payments in addition to ACH.

 ARIAS is one such system.

 ARIAS was developed by MicroFinance
International of Washington, DC to address
the specific challenges faced by banks.
ARIAS Remittance Solution

What is ARIAS?
 State of the art Internet-based
remittance processing system
 Global distribution network to 85
ARIAS Remittance System

 Efficient:
 Transactions – Less than a minute
 Transparent pricing – Keeps it simple for everyone
 Provides daily COB reports and settlement via ACH

 Low-cost to bank and customer:
 Web-based – No investment in hardware or software
 User-friendly – Easy to train employees
 Low fee per transaction – Allows competitive pricing

 Handles the Compliance Issues:
 KYC - All remitters registered & ID required as per bank policy
 Transactions Automatically Monitored:
 System checks senders and recipients against OFAC SDN list

 All transactions monitored for suspicious activity, SAR and CTR

ARIAS Distribution Network

 Global reach: Latin America, Asia, Africa,
Europe and the Middle East
 Convenient locations – even in remote and
poor communities
 Convenient payment options:
 No account ever required
 Choose cash pick-up, deposit to account, home
delivery or deposit to cell phone, (depending on
the market preferences in each country)
 Funds available immediately
User Support
 Help Desk
 Provide user and technical assistance
 Available 24/7
 Multi-lingual
 Marketing
 Full-time multi-lingual marketing staff
 Translation of text
 Design materials
 Promotional events
By choosing a system which:

 Makes transactions and compliance efficient,
and that

 Includes a distribution network of convenient,
professional paying locations,

Banks can offer an affordable and competitive
money transfer product, earning additional fee
income, and gaining access to new customers.
More Information?

For more information on the ARIAS, contact:

Heather Bach
Vice President Business Development
ARIAS Financial Solutions / MFIC
1325 Massachusetts Avenue, NW Suite 250
Washington, DC 20005

Tel: 202 737 5490