Remittances

Overview

Remittances are the money that immigrants living in the United States send to their family and friends abroad. In 2004, the flow of remittances from the United States to Latin America reached a total of $45 billion. Although many financial institutions are now offering low-cost remittance transfer products, many Latinos pay high fees to remit funds. By some estimates, the cost of remitting funds through wire transfer companies often exceeds 20% of the total amount of the transaction. These charges are passed to the consumer through hidden fees and variations in the exchange rate. Meanwhile, studies show that lowering the cost of remittance transfers by five percentage points could generate annual savings of $1 billion for Latinos’ households and their families abroad.

Familiarity, convenience, and simplicity have driven consumers to use wire transfer companies, even though mainstream financial institutions can provide a wider menu of products, such as banking and savings accounts. Currently, half of all Latinos living in the U.S. do not have a relationship with a financial institution. Since having a bank account is essential for building and managing assets, remittance transfers can serve as a gateway for opening such accounts and accessing an array of financial services.

NCLR Position

Lowering transaction fees would enable Latinos to save more of their hard-earned money. This may be achieved by expanding the number of providers offering remittance transfer services to include banks and credit unions. Additionally, improving transparency in the remitting process would empower Latinos to make more informed consumer choices.

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