Remittance schemes can span a range of technology capabilities and access barriers, but the opportunity exists for banks to simplify both execution and fraud prevention by using the Web channel.

"[Online bank remittance] is like having an exclusive club. The banks are the ticket takers and security guards. And the only people that can get into this club are legitimate," says James Van Dyke, president of Javelin Research.

Wells Fargo, which recently expanded its ExpressSend remittance service to the Internet, hopes the offering will combine easy authentication with additional customer retention strategies, such as connecting with expanding demographic groups of new arrivals in the U.S., increasing self service, and achieving goodwill by occasionally playing hero.

"When someone gets an urgent call from a relative in Mexico who has an emergency and needs money, you can quickly transfer the money from home or work. You don't have to initiate the transfer over the phone or wait for banking hours to go through the process," says Daniel Ayala, svp, and head of global remittance services for Wells Fargo, which achieved its remittance expansion via an internal proprietary deployment.

Consumers will be able to send a remittance at all times to countries including Mexico, El Salvador, Guatemala, India, the Philippines, Vietnam and China. The service features email notification, access to up to 18 months of remittance transaction history and a detailed alert in the user's online session - with account-to-account, account-to-cash and cash-to-account payments available.

"There's a preponderance of this segment that's already online, so it's a natural fit. Foreign born immigrants often keep up with news back home through the Internet, and they use VOIP and messaging-type technology to stay in touch with their families," Ayala says, adding the bank charges a consistent fee for the service (generally around $10 per transaction), though it may tailor pricing in the future as the bank analyzes customer use.

Wells hopes to sell its authentication and execution as easier than online remittance payments with nonbanks; Wells payments requiring navigation through three "screens" on the site and completed in a few minutes. Non-bank online remittance payments typically involve some combination of card and ACH debits, and sometimes raise red flags when the card issuer suspects the four or five figure wire transfers are part of a card theft scheme. That can delay settlement for a day or more, and create extra steps for senders to authenticate themselves.

"With the Wells service, you avoid that...Wells Fargo controls the checking accounts, so they can get people authenticated when they sign up for online banking," says Gwenn Bezard, an analyst for Aite Group.

A Western Union spokesperson says its users sign up for a profile and undergo an authentication process similar to online retail purchases. The firm, which offers online remittance for a fee that's in the mid-teens per transaction, has signed online remittance agreements with North American banks including Scotiabank and Fifth Third. It requires first-time users create a profile, so the initial remittance takes about ten minutes, with each subsequent remittance payments taking about five minutes to execute. Other established non-bank brands offering online remittance include MoneyGram.

Among bank competitors, Wells is taking on Citigroup, which offers a mix of global transfers to Citi accounts outside the U.S., inter-institution and online transfers for fees ranging from $8 to $30. Additionally, some mobile vendors such as Nokia are positioning to provide real-time mobile remittance payments by connecting unbanked populations with consumers who do have bank relationships, a strategy that's part of Nokia's investment in Obopay. "We want to be able to provide delivery capabilities so anyone can use their mobile phone to put money into accounts," says Olivier Cognet, head of Nokia's business development group.

Beyond this stiff competition, there are other barriers to entry for banks looking to tap online remittance. The scale required means it's a market that's likely only open to the largest banks. And while Gareth Lodge, an analyst for TowerGroup, calls the online remittance market's potential "massive," the analyst also says remittance customers may not be the most loyal, making it harder to use online remittance as a retention play.

"These customers are sophisticated and monitor foreign exchange rates on particular days to get the best rate, so there will be a lot dropping and account changes among customers," Lodge says, adding the segment will be harder to cross-sell, which would have the affect of increasing the cost of customer acquisition.

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