MoneyGram Revamps Money-Wiring Service

MoneyGram Payment Systems Inc. on Tuesday unveiled simplified and reduced rates for customers wiring money to Mexico, a strategy designed to win back some of the business the company has lost in recent years to new competitors.

Called Cambio Plus, the new program allows customers to transfer any amount of money to Mexico for a flat fee of $15. MoneyGram also is offering a more favorable exchange rate than previously.

The competitive pricing is significant: An estimated $7 billion a year flows from the paychecks of immigrants in the United States to family in Mexico. Lower fees and better exchange rates mean significant savings for some of the poorest residents of both countries.

Latino politicians in the U.S. have embraced the call for more reasonable money transmission rates, as has Mexican President Vicente Fox.

MoneyGram, a subsidiary of Phoenix-based Viad Corp., controlled about a third of the U.S.-Mexico money-transfer market just four years ago. But its share had dropped to about 12% by late last year as competitors flooded the market with better rates and culturally sensitive campaigns.

Market leader Western Union has also lost ground. A flurry of class-action consumer lawsuits alleging the companies charged steep hidden fees to customers wiring money to Mexico didn’t help. The majority of the lawsuits were settled last month, but they nevertheless damaged public relations.

The Cambio Plus program is MoneyGram’s effort to regain its once-steady foothold in the market.

“We have experienced a severe decline in our sales to Mexico, and a lot of that had to do with the offering,” said Ann Doelling, vice president of worldwide marketing for MoneyGram. “It just wasn’t competitive anymore.”

Doelling said the U.S.-Mexico money-transfer market is expected to continue growing at 12% to 15% a year, but new competition has made it harder for MoneyGram and Western Union to cash in on that growth. “MoneyGram needed to do something,” she said.

Most companies charge fees based on the about of money transferred. But MoneyGram market research conducted last summer showed that customers wanted a simplified fee, Doelling said. Most important, they wanted better exchange rates.

The Cambio Plus rate offered Tuesday was 9.48 pesos per dollar, comparable to that offered by competitors such as Los Angeles-based FinMex Inc. and New York-based Vigo Remittance Corp. However, FinMex offered a $10 fee to send as much as $600, and Vigo’s fee was $10 to send as much as $1,000--both lower than MoneyGram’s.