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Remittance
The transfer of money, most
commonly, by a foreign worker to
his/her home country.
2
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]
3
Remittances Have A Huge Impact On Developing
Countries and the Global Economy
Amount of money that flows through remittances is
massive.
The World Bank estimates global remittances totaled $397
billion in 2008 ($305 billion of this going to developing
countries).
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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)
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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.
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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%
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Not Just Money Flowing Out:
Remittances Also Benefit Developed
Countries
g
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.
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Who Sends Remittances?
g
● 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.
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Major Remittance Sending Countries
g
United States
Canada
United Kingdom
Germany
Switzerland
Saudi Arabia
Spain
France
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Major Remittance Receiving Countries
g
Mexico
China
India
Philippines
Caribbean countries
Pakistan
Bangladesh
Moldova
Bosnia
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How Remittances Are Transferred from
Canada and the United States
FORMAL g INFORMAL
● 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,
etc.)
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Remittances = Money Transfer Services
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Overall Remittance Market
Dominators – Canada and the United
States
g
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.
g
Western Union/Vigo
MoneyGram
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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
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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.
g
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.
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Financial Barriers to Entry For Banks
The need to build or buy into distribution networks in other countries.
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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.
g
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.
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Major Players (Banks) in Remittance
Market - Canada
g
Bank of Nova Scotia/Scotiabank
Canadian Imperial Bank of
Commerce (CIBC)
Bank of Montreal (BMO)
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Major Players (Banks) in Remittance
Market – United States
g
Citibank
Wells Fargo
Harris Bank
Bank of America
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Factors That Impact What Senders Pay
g
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Key Features Senders Pay For
Money transfer service gcustomers ostensibly pay for...
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Money Transfer Fees
Money Transfer Services g Bank Wire Transfer
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.
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Bank Wire Transfer Pricing - Canada
(International transfer of money only)g
Highest Wire Transfer Fees
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Major Money Transfer Service Pricing
g
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Niche Money Transfer Service Pricing
g
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.
$3 USD.)
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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.
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Conclusions
g
OVERALL
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Conclusions
United States g
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Conclusions
Canada g
Aside from price, there are several obstacles to convenient use of bank
services for remittances.
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