In a renewed effort to encourage money transfers to Mexico using the automated clearing house network, the U.S. and Mexican central banks have begun promoting an online service to let workers here open accounts on behalf of recipients there.
Bankers hope the service will encourage more Mexicans to participate in the formal financial services market in both countries, but an analyst said adoption would probably be slow because of legal and cultural factors.
The Federal Reserve banks and Banco de Mexico announced last week that they had started offering the beneficiary account registration service as part of the FedACH International Mexico Service, which is marketed as Directo a Mexico.
The service lets U.S. bankers pre-open and fund accounts at Banco del Ahorro Nacional y Servicios Financieros S.N.C. (National Savings and Financial Services Bank), which is known as Bansefi and has 527 locations in Mexico.
Elizabeth McQuerry, an assistant vice president in the Fed’s retail payments office, called the service “a tool for financial inclusion, not an Internet payments engine.”
Bansefi, a government-owned development bank that serves lower-income Mexicans, offers them a “no-cost, no-frills account, which enables them to begin to establish a financial identity,” Ms. McQuerry said. The account has a minimum balance of 50 pesos — less than $5.
The service went live this month after a four-month pilot test with three U.S. banks, Ms. McQuerry said. The Fed and Banco de Mexico plan online seminars in September and October to introduce the system to U.S. bankers.
Mitchell Bank of Milwaukee was one of the pilot banks. James P. Maloney, the chairman of the $83.8 million-asset Mitchell Bank, which is mostly owned by M.S. Investment Co. of Milwaukee, said the service would make sending money home more affordable for Mexicans, which “means more pesos to their family and at a lesser cost to the migrant here.”
Immigrant workers often lack bank accounts, and so do their families in Mexico, Mr. Maloney said. “We can use the remittance product to bring the unbanked migrant into the banking system,” he said. “The fact that we can pre-open the account is removing the last barrier.”
Mitchell, which promotes its Mexican ACH service through social organizations and churches, can set up an account with Bansefi and fund it in a single transaction that takes less than five minutes, Mr. Maloney said. The banker gives the customer a printout with the information that the recipient will need.
Mitchell Bank, whose main office is in a neighborhood with a large Hispanic population, uses a variety of incentives for Directo a Mexico. It offers two free transfers, then charges $2.50 for account holders to send as much as $5,000 a day, and $4 for noncustomers to send up to $2,500 a day, Mr. Maloney said.
That pricing gives banks great advantages over money transfer businesses, which may charge $20 or more for a remittance, but it will not be easy for Mitchell Bank to persuade the migrant workers that they need bank accounts, which are viewed in Mexico as a luxury for the wealthy, Mr. Maloney said. He and others estimated that only a third of Mexicans have bank accounts.
“We’re almost having to sell Bansefi to the migrants in Milwaukee,” Mr. Maloney said.
Iliana de Silva Munoz, a subdirector in new product management at Bansefi, said the bank has plans to double the reach of its network. It acts as a banker’s bank to 600 local credit unions and plans to bring one or two of them into the beneficiary account registration service each month, starting in September. It plans to have 1,200 distribution points eventually.
The service will get more Mexicans into the financial system, Ms. de Silva said. “This is a very good incentive for the people in Mexico to open an account, because the money is waiting for them,” she said.
Beth Robertson, a senior analyst at MasterCard International’s TowerGroup market research unit in Needham, Mass., said the service is a step forward, but, “I don’t think it’s going to make a huge difference.”
Mexico’s financial system is not as well developed as that of the United States, and a general lack of comfort with the banking system, along with illegal immigrants’ fears of becoming exposed to legal problems, are hurdles the service will face, Ms. Robertson said. “It’s going to require a lot of cultural education in the United States to get more Hispanic people to establish bank accounts.”
