President-elect Donald Trump's well-publicized plan to build a border wall and make Mexico pay for it could have significant ramifications for a major sector of the payments industry.
Trump has stated that the U.S. would suspend remittances to Mexico if it did not agree to cover the estimated $10 billion cost of building the wall. That is no small threat; Mexico is the fourth largest recipient of remittances globally, about $28 billion in 2016, according to the World Bank. Some $24 billion of that comes from the U.S., according to Aite Group, which estimates the total remittance market in 2015 was $582 billion.
Remittance is big business for the U.S., too. The United States is the world's biggest sender of remittances worldwide, with nearly $135 billion flowing to other countries each year, according to Brion Nazzaro, group compliance director for WorldRemit Corp.
"Millions of people from abroad work hard in the U.S. and contribute to the economy, sending money to support family and friends overseas," Nazzaro said in an email. "Likewise families all over the world rely on these remittance payments from people working in the U.S."
The use of remittance as a bargaining tool would take an immediate chunk out of Mexico's economy, potentially damage U.S. companies and unintentionally rearrange how digital technology executes payments.
There's a question of whether Trump can cut off remittance to Mexico, either politically or logistically (Trump's office did not return a request for comment on the remittance policy by deadline).
The remittance industry is complex, and it would be difficult to sever any one country, Nazzaro said, though Trump could make use of anti-money laundering regulations to warn banks away from doing business with firms in Mexico.
The logistical challenges involve how funds are transferred. For Western Union or MoneyGram remittances, in which someone wires money via brick and mortar stores, the trail is easier to follow and theoretically easier to shut off because there's a location on each side of the border. But lots of payments are now made through mobile apps, where the origination and destination of the account is less easy to discern.
"What could be classified as a remittance for being cut off is very hard to define," said Richard Crone, a payments consultant. Many digital P-to-P transfers aren't categorized as cross-border transfers because they can involve two U.S. accounts, with one person just happening to be in Mexico. "Does PayPal or Venmo fall in? Does Xoom?," Crone said.
That confusion could actually be good for some companies, Crone said. The impact of "squeezing" one part of the remittance balloon could be explosive for another part of the market, Crone said.
"For the traditional guys in the business, I'd watch out," Crone said. MoneyGram has more than 16,000 locations in Mexico, while Western Union has more than 10,000.
Western Union, MoneyGram and PayPal, which owns Xoom and Venmo and operates its own P-to-P service, did not return requests for comment by deadline.
Trump's proposal earlier this year was met with widespread opposition, including from The Financial Services Roundtable, which blasted the concept in an interview with American Banker. The Roundtable did not return a request for comment for this article.
It's unclear if the president could unilaterally order a remittance portal shutdown, due to the severity of the move, said Talie Baker, an analyst with Aite Group's retail payments and banking practice.
"I question if a U.S. president could make such a change without going through the democratic process to be able to do so," Baker said, adding it's questionable that a Republican House and Senate would allow the president to meddle with American business in this way.
"Not only would the world economy be impacted, but the U.S. would also be impacted as far as all the jobs that the remittance industry provides," Baker said.
U.S. regulators such as the Consumer Financial Protection Bureau may also want to weigh in, Crone said. "This is a lifeline for so many consumers."