Fed Launches New Remittance Service

Fed Launches New Remittance Service

Led by the Atlanta Fed–based Retail Payments Office (RPO), the Federal Reserve and three Latin American partners have launched an international payments service that allows funds from U.S. bank accounts to be sent to unbanked recipients in 11 Latin American countries.

The Account-to-Receiver service—a collaboration among the Fed, Banco de México, Banco Rendimento, and Microfinance International Corp.—is an expansion of the FedGlobal ACH Payments suite that enables automated clearinghouse transactions between the United States and Canada, Mexico, Europe and Latin America.

Service furthers existing goals
"This initiative is in keeping with the Federal Reserve Banks' responsibility for making the payments system more efficient and effective," said Jim McKee, senior vice president in the RPO. "This service responds to demand from U.S. depository financial institutions which would like to offer a lower-cost alternative for sending funds internationally along with an opportunity to attract new customers."

globe graphic

The Account-to-Receiver service improves the ability of U.S. depository institutions to enroll new customers who want to send money back home to family members without bank accounts. The Reserve Banks work directly with Banco de México, the Mexican central bank, to provide the service to receivers in Mexico, and with Banco Rendimento and MFIC to reach receivers in 10 other countries.

"Banco de México has worked closely with the Federal Reserve Banks for several years to develop innovative services to support the huge demand for cross-border payments between our countries," said Ricardo Medina, director of payment systems at Banco de México. "This latest offering will be especially beneficial to families here in Mexico with friends and relatives in the United States."

Facilitating an existing flow
The United States originates more than $110 billion in individual remittances annually, according to an estimate by Manuel Orozco, chair of Central America and the Caribbean at the U.S. Foreign Service Institute and senior researcher at the Institute for the Study of International Migration. Because financial systems are underdeveloped in some countries that receive large numbers of remittances, a majority of recipients lack a bank account and prefer to collect money in cash. At the same time, this product allows financial institutions in the United States to offer remittance services to their customers.

June 28 , 2010