The competition is growing in the international remittance market, and while credit union leaders say their International Remittance Network (IRnet) offers much more than just money transfers, awareness and lagging volumes remain issues of concern.
"The one thing that we as credit unions can offer that the others don't is full financial services," said Linda Webb-Manon, communications director for the Texas Credit Union League. "We can help build financial wealth."
The challenge: getting credit unions and their target audience to realize it.
With more financial providers entering the market, credit unions need to work even harder to promote IRnet, Webb-Manon said.
"This is not a new product," she said. "Western Union and MoneyGram have been around a lot longer than we have-and they're having the same challenges."
U.S. Bancorp recently added to the competition by partnering with Viad Corp's MoneyGram Payment Systems Inc. to offer money transfers at more than 200 of its branches in Chicago, Los Angeles, Milwaukee, and San Diego. Its plans are to extend the service to as many as 1,500 branches in 24 states by early next year.
The World Council of Credit Unions in conjunction with Vigo Remittance Corp.-the world's third largest remittance sender-partnered in late 2000 to offer low-cost money transfer services to the nation's underserved. Credit unions now have more than 950 points of service in the United States and more than 1,000 distribution networks in six countries.
Of 180 participating CUs in 35 U.S. states, 56 are in Texas, 45 are in California. In both states, according the U.S. Census data, Hispanics account for 32% of the total populations. By 2040, demographers predict, one-in-three Americans will be Hispanic. Still, credit unions represent just 2% of the entire remittance market.
"It's not a huge money generator for us," said Webb-Manon. "It's more of a way to get people familiar with the credit union system."
IRnet does contribute to a credit union's fee income -$7 per $1,000 sent-but perhaps more importantly, she said, it demonstrates a commitment to serve the underserved.
That said, IRnet is having its challenges.
"The volumes are low and the credit unions are frustrated," she acknowledged. "Some of the Vigo outlets are having monthly volumes of $200 to $400 a month. Some are doing none. They're just not performing, but we don't think it's because it's not a viable product."
Location, Location, Location
In California, location makes a huge difference, said Letty Cordon-Hernandez, Credit Union Development Coordinator of the California league. "Some that are located in Central California (where there is a heavy Hispanic workforce) are doing very well," she said. "And there's one in Long Beach in a highly Hispanic neighborhood that has a better quantity of transactions for remittances than others."
She said some have suggested that part of the problem in attracting community members to IRnet is that the IRnet logo isn't familiar. "They recognize VIGO, but not IRnet," she said.
Cordon-Hernandez said she hopes to change that with a new marketing campaign to promote IRnet and VIGO together. Officials at Arrowhead CU in San Bernardino, Calif., have expressed an interest in developing a plan that can be used as a model for all credit unions, she said.
To participate in IRnet, credit unions with assets less than $10 million pay a one-time fee of $300. All other CUs pay $750 to join.
There is also a quarterly support fee of $90, which goes toward marketing and public relations assistance, operational planning for establishing the service and ongoing brand promotion and development.
Recently, the TCUL, WOCCU and Vigo Remittance Corp. have launched a campaign to beef up that support. "The three organizations are doing a road show," Webb-Manon said. "We've just conducted three remittance workshops in Dallas, Austin and Houston."
They focus on the importance of IRnet as low-cost money transfer tool, but also as a first step to financial stability for those who use it.
In addition, the group is planning several classes that will focus how to teach financial education to communities.
The Target Audience
Cordon-Hernandez said her team at the California league has similar IRnet workshops scheduled in September. "We want to bring on more credit unions and find ways to market IRnet."
The target audiences of IRnet services are Hispanics, about 90% of whom come to the United States "unbanked," she said. "Not only are they having to familiarize themselves with a new country and a new language, they don't know anything about our banking system."
Check-cashers that set up shop in their communities have the advantage because they don't ask a lot of questions about immigration status and make the process easy.
"These people don't realize that there are being charged interest on top of interest," she said. "To belong to credit unions, they have to understand checking accounts, service fees and all these other different things that they aren't familiar with."
In places such as Texas and California where Hispanics are expected to become the majority in coming decades, credit unions need to work harder to capture those relationships now.
"The statistics tell us where the trend is going and that the Hispanic market is viable for credit unions," Webb-Manon said. "But, it's going to take a full commitment for us to take on this market. We believe this is a great product and we want to do everything we can to make it work for credit unions and their members," Webb-Manon said.
