Atlanta Fed Hosts Conference on International Remittances
Atlanta Fed recently hosted a conference about one of the
fastest-growing markets in global finance: cross-border payments,
particularly remittances sent to Latin America. This market
is one in which North American banks are eager to gain a larger
The Payments in the Americas conference, held in October, addressed various technical and policy issues concerning transferring funds from individuals in one country to another. Issues include the need to lower costs and broaden distribution channels in both sending and receiving countries. But even with these challenges, remittances continue to grow.
Ignored no longer
John B. Taylor, under secretary of the U.S. Treasury for International
Affairs, emphasized the importance of cross-border payments
in an increasingly interconnected global economy. Over
the past two years alone, remittance flows to developing economies
jumped by 20 percent to nearly $100 billion dollars and likely
will keep growing, he said.
Remittance flows from the United States to Latin America,
estimated by the Inter-American Development Bank (IDB) to
be $38 billion annually, make up almost a third of the worlds
recorded flows. This level of activity has increased during
a period of weak economic growth in the United States coming
out of the the 2001 recession. For the first time, remittance
flows from the United States surpassed net foreign direct
investment in Latin America, Taylor added.
Lowering barriers paramount
Policymakers at the conference agreed on the need to lower
costs and other barriers to cross-border payments. International
transactions typically take longer to execute than domestic
payments and often involve hidden or explicit currency conversion
charges in addition to transfer fees. But increased competition
has lowered payment costs.
The typical remittance users in the United States are unbanked
immigrants from Mexico or the Caribbean who want to send money
home to relatives. Donald F. Terry, manager of the Multilateral
Investment Fund of the IDB, described the growth of remittances,
which followed an increase in immigration to the United States
over the past decade. The system of remittances had
been hidden in plain view for generations and is now coming
out of the shadows, he said. People are moving north
by the millions, and money is moving south by the billions.
Conference participants shared views on a broad range of issues, underscoring
the consensus that the remittances market has evolved rapidly in recent years and attracted a great deal of attention among
major financial institutions. Among the other conference topics:
- Carol Clark of the Chicago Fed discussed emerging standards in global payments.
- Aman Verjee of Paypal described the strategy behind the rapidly growing Internet-based payment system.
- Henrik Parl of Eurogiro Network and Enoch Chng of the Monetary Authority of Singapore discussed the growing markets for cross-border payments in Europe and Southeast Asia, respectively.
- Larry Schulz of the Atlanta Fed described the lessons learned from the launch of automated clearinghouse (ACH) service to Canada, and Francisco Solís Robleda of Banco de México offered his perspective on the recent development of FedACH Service to Mexico.