Wells Fargo & Co., which has announced two international remittance partnerships in a month, is planning to expand its business even farther.
On Wednesday, Wells announced that it has teamed up with ICICI Bank Ltd., the second-largest bank in India, to develop a multichannel remittance service. On Nov. 5 the San Francisco banking company introduced a similar service for sending funds to the Philippines. Wells has provided remittances to Mexico since 1995.
Daniel Ayala, the head of Wells’ cross-border payments group, said it plans additional announcements over the next year with other distribution partners in Latin America and Asia.
Though he would not name specific countries, he said that California is one of the country’s most ethnically diverse states and offers a large pool of potential remittance markets.
Wells estimates the annual global remittance market at $110 billion, including almost $11 billion sent to India. Approximately half of the transfers to India originate from the 1.5 million Asian-Indians living in the United States.
Mr. Ayala said that 150,000 of them live in California — about half of them in the San Francisco area.
According to a 2003 World Bank report, remitted funds are often the second-largest source of income for developing countries, behind direct foreign investment by companies.
Dilip Ratha, a senior economist at the World Bank in Washington, said U.S. banks have become more interested in the retail remittance market in recent years, because it offers a steady source of business with relatively high fees. “Some of the larger … [banks] have shown extraordinary performance by tapping into this market.”
Remitters are likely candidates for conventional deposit accounts and other bank products, because they typically direct payments to the same recipients on a regular basis, Mr. Ratha said. “You eventually get car loans and even mortgages at the high end, and that means money.”
According to Mr. Ayala, that’s exactly what Wells has in mind. “We’re not in this business for the pure transactions,” he said. “We’re in this business for the relationship and the acquisition of new households.”
Gail Hillebrand, a senior attorney in the San Francisco office of Consumers Union, said the entry of banks into the remittance market could benefit people who often pay high fees to wire transfer services such as First Data Corp.’s Western Union.
“Banks have finally realized how large” the international remittance market is and how loyal remittance customers can be, Ms. Hillebrand said.
Bank services could carry relatively high set-up fees, but “once you get past the first one, it’s still better than the rate you get at a lot of money transmitters,” she said.
The new Wells-ICICI service lets U.S. customers fund a remittance account online or through a branch, a call center, or an automated teller machine. Customers can send up to $3,000 a day from their U.S. accounts to ICICI Bank accounts in India. ICICI has 470 branches and nearly 1,800 ATMs.
Wells charges a $10 annual fee but it will waive that fee if the customer has another Wells account. Mr. Ayala said it also charges an $8 transaction fee and a “nominal” foreign exchange spread for converting the funds from U.S. dollars to Indian rupees.
Recipients do not have to withdraw the money all at once.
Wells plans to conduct a national print and broadcast advertising campaign focusing on ethnic publications and programs, and it will participate in ethnic community events to promote the service.
The company conducted a two-month pilot test in the San Francisco area before Wednesday’s announcement. Mr. Ayala said Wells noticed an increase in new customers in its area branches during the test. The service has already become “a point of differentiation between Wells Fargo and other banks in the area.”
A large percentage of the transactions conducted during the test were initiated through the Internet, and the average transaction was about $1,500, he said.
Gwen Bezard, an analyst at the Boston research and consulting firm Celent Communications LLC, said that even though the Indian remittance market could bring a bank new customers, the more lucrative potential market is Latin America, which receives a lot of money from unbanked workers in the United States.
“The U.S.-India corridor is all about stealing business from other banking organizations,” Mr. Bezard said in an interview. “With the Latin American community, you are talking about a sea change, tens of thousands of customers who could potentially join the banking system.”
