It’s trendy to bash big banks, but for some immigrants, the mammoth financial institutions are making it a lot easier and cheaper to send money to their home countries. Bank of America, which was founded in San Francisco by A.P. Giannini, the son of an Italian immigrant, announced last week that it would eliminate by year’s end all transfer fees to Mexico for customers with a checking account.
This isn’t charity, of course. Traditional banks, which not long ago snubbed immigrant workers, are playing catch-up to money-wiring services like Western Union and the more-informal outfits that still dominate the remittances market.
Bank of America, following in the footsteps of Citigroup and Wells Fargo, now realizes that one of the best ways to gain market share in the important Latino market is by allowing people to essentially share accounts across borders. Deposit your paycheck here, and your relatives back home can withdraw funds with an ATM card.
Not long ago, transaction fees for modest transfers of funds to Latin America could easily reach an exorbitant 20%. Technology and increased competition have driven down average costs to 7%. With some $30 billion flowing to Latin America a year, the savings from these lowered transaction costs add up to $4 billion. That’s $4 billion more that can help improve living standards across the hemisphere.
Mexico, which takes in about $15 billion in remittances, almost as much as it receives in oil receipts, would benefit from a more drastic decline in fees.
The financial and labor markets of the United States and Mexico have converged, which is why Bank of America is acknowledging that sending money to Guadalajara from Los Angeles should be as easy as sending money to Chicago.