(3 of 5)
Brand awareness remains crucial in the money-transfer market, where transactions are up in part because of increased migration but also because more of the cash sent by the workers of the world is starting to travel through formal channels. Even gargantuan Western Union gets only a 12% slice of the total remittance market because so many people still send money by mailing a check or getting someone to hand-deliver the money. Every month in Los Angeles, German, 33, sends $100 to his sister in Nicaragua via Western Union or, whenever possible, by a courier who charges a couple of dollars less. "Two dollars is not a big difference here, but it's a big difference in Nicaragua," he says.
Many migrant workers also use black-market currency traders. Known as hawala in the Middle East, hundi in India and fei chien ("flying money") in China, these unlicensed remittance networks were targeted by the U.S. after 9/11, because some had been used by al-Qaeda and other terrorist networks. The following month the U.S.A. Patriot Act made participating in these networks a felony, and the law has been used more than 20 times against alleged violators.
Pakistan has taken a different approach to encourage the use of formal banking channels. The government set up an incentive program that gives overseas Pakistanis who send home more than $10,000 a year higher duty-free allowances and access to VIP airport-customs counters. The program also establishes remittance-based admissions quotas at the country's public universities. Official remittances to Pakistan, which has some 1,300 Western Union outlets, are expected to reach $4 billion this year, nearly triple the amount logged three years ago.
Meanwhile, governments in Latin America are working to get remitters out of Western Union and into less expensive banks. People from this region, responsible for 60% of worldwide growth in money transfers since 1999, sent home $32 billion last year. They also shelled out $4 billion in remittance fees, or about 12.5% of the money they sent--nearly 50% more than what Turks pay to wire funds from Germany or Filipinos pay to send money from the Persian Gulf. Latin American migrant workers pay more because they tend to steer clear of banks in their home countries as well as abroad. In Mexico, for example, only 1 in 5 citizens has a bank account. Unstable local currencies don't help matters, nor does the memory of mid-century bracero contracts, which temporarily withheld 10% of the wages of Mexican guest workers in the U.S. That money was never deposited as promised into Mexican savings accounts.