Partners (Number 3, 2006)
Partners (Number 3, 2006)
Vol. 16, No. 3, 2006
FEATURES Keeping Pace in a Changing Environment
Banking the Unbanked on Both Sides of the Border
The Federal Reserve Banks and their central bank counterpart in Mexico, Banco de México, continue to innovate as they refine their cross-border ACH payments services in response to the needs and desires of the Mexican remittance market.
In mid-2005, the Federal Reserve Banks and Banco de México launched Directo a MéxicoSM, a campaign to spread the word about the benefits of using the FedACH International® Mexico Service for cross-border payments. Thanks to promotional events and user-friendly marketing materials, Directo a México is now widely known as an efficient payments system that makes it possible for U.S. financial institutions to provide reliable ACH service to Mexico for their customers.
Not only is Directo a México committed to low fees and next-day clearing of payments, but the program also provides foreign exchange rate conversions at highly competitive rates. This service has helped U.S. banks and credit unions increase their historically small share of the rapidly growing U.S.-to-Mexico remittance market.
Nevertheless, banks and credit unions still find it difficult to attract the many customers who would benefit from sending remittance payments through Directo a México. An account-to-account transfer, Directo a México requires that both the sender and beneficiary (recipient) maintain accounts at financial institutions. Because the majority of those sending money to Mexico (or receiving it) do not have bank accounts, they do not participate. Estimates show that only about five percent of remittances are sent to and from bank accounts.
New Fed partnership gets the unbanked on board
In an effort to help bank the unbanked on both sides of the border, the Federal Reserve Banks and Banco de México have collaborated with Banco del Ahorro Nacional y Servicios Financieros, S.N.C, commonly known as Bansefi, a government-owned development bank in Mexico. Through this new relationship, Bansefi and the Federal Reserve Banks have created an innovative internet tool, the Beneficiary Account Registration (BAR) website, which provides access to formal financial services as well as low-cost delivery of money transfers from the United States.
The BAR website, owned and managed by Bansefi, allows banks and credit unions in the U.S. to pre-open an account for a third-party beneficiary in Mexico (who will receive the remittance transfer) at any Bansefi branch throughout Mexico. Through this service, which is available to any financial institution enrolled in Directo a México, users with passwords can access the BAR website to register the beneficiary. The registration process generates a CLABE (Clave Bancaria Estandarizada)—a unique, 18-digit number designated to identify each bank account in Mexico—which can be used immediately by the financial institution to send a money transfer via Directo a México.
To formalize the account and withdraw the funds, the beneficiary needs only to go to the designated Bansefi branch in Mexico with proper identification. The fact that the funds are waiting for the beneficiary creates a great incentive to formalize the account, and more importantly, to enter into the formal financial system. If the beneficiary does not go to the Bansefi branch within 10 business days, the account is formally closed and the uncollected funds are returned to the sender's account in the United States.
The beneficiary's new account is an entry-level savings arrangement called Cuenta con tu Gente, "account with your people." No fees are required to open the account or to access funds at any Bansefi branch. The minimum initial deposit and minimum balance is 50 pesos (approximately U.S. $5).
Currently, the BAR website makes it possible to pre-open an account at any of more than 500 Bansefi branches. The next step is to include the credit union members of L@Red de la Gente in Mexico (see sidebar). If all L@Red de la Gente credit unions choose to participate, more than one thousand locations will be available for U.S. financial institutions to pre-open accounts.
Directo a México's overall goal is to promote efficient, low-cost, account-to-account funds transfers to Mexico. The creation of Bansefi's BAR website has provided another incentive for Mexican consumers in the United States to look to financial institutions for their banking and money transfer needs.
This article was written by Elena Whisler, retail payments project coordinator and program specialist for Directo a México at the Atlanta Fed.