Credit unions can take a bow for leading the way in improving service and lowering prices for international remittances after banking giant Wells Fargo announced it is slashing its fees for money transfers to Mexico, says one expert.
The Wells Fargo move to earn market share with the growing Latino population is seen as largely due to credit union efforts with World Council of Credit Union's International Remittance Network (IRnet), according to Dave Grace, Financial Services Regulatory Affairs Manager at WOCCU.
"It goes to prove that when credit unions enter all kinds of different markets, what usually happens is an increase in competition and prices generally fall," Grace told The Credit Union Journal. "Credit unions have been offering remittance products since April of 1999 and we've seen prices go down and competition increase."
WOCCU introduced its discount international money transfer system to allow U.S. residents from Mexico and other Latin American countries to repatriate money to families in their home countries through credit unions. It is estimated that Latin immigrants alone send up to $8 billion home annually. U.S. credit union officials also see it as a way of attracting millions of Latino- Americans to full credit union membership.
The new $10 fee for transfers of up to $1,000 by Wells Fargo matches what credit unions charge for the money transfers. Western Union and Moneygram collect a $15 fee on a comparable wire transfer of up to $300, and charge as much as $50 for sending $1,000 to Mexico. In some cases, Moneygram charges a flat fee of $15 for any amount.
But in addition to the fee, another important cost consideration is the foreign exchange rate for U.S. dollars converted into pesos, according to Grace, who added that until the Wells Fargo exchange rate is known, it is hard to judge how competitive they really are.
"That is very much a real cost to the consumer as part of the transfer," he noted. "For example, the United States Postal Service has a product available where it costs $12 for up to $1,000, however their exchange rate has been horrible. When you look at the total cost of the transfer it can be more than $12."
Based in San Francisco, Wells Fargo plans an April launch of the wire service in one Phoenix branch and seven Texas branches. Operated as a joint venture with Grupo Financiero Bancomer SA, Mexico's second-largest bank, the service eventually will be available in all 3,000 branches located in 23 states.