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Presentation Prepared for the FDIC Advisory Committee on Economic Inclusion Providing Access to Financial Services: The Roles of Banks and Money Transfer Organizations Washington, DC, October 24, 2007. Summary. Remittances are radically different international payment flows.

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Presentation Transcript
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Presentation Prepared for the

FDIC Advisory Committee on Economic Inclusion

Providing Access to Financial Services: The Roles of Banks and Money Transfer Organizations

Washington, DC, October 24, 2007


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Summary

  • Remittances are radically different international payment flows.

  • Licensed Remittance Companies (LRCs) play a critical role in channeling remittance payments.

  • LRCs face a crisis due to lack of access to US bank accounts

  • Money Transfer Operators are in a unique position to serve transnational families.


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Remittances are Different

A steady, non-volatile, growing source of balance of payments support

US billion,

worldwide figures

Source: World Bank (Dilip Ratha). 2003. “Workers’ Remittances—An Important and Stable Source of External Development Finance.” In Global Development Finance 2003 (chapter 7). Washington, D.C.: World Bank.


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Remittances are Different

Family Remittances

FDI, Capital Market Flows

Official Flows


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Account Discontinuance

  • Access to Bank accounts for Licensed Remittance Companies (LRCs) is extremely limited

  • Most large national banks are completely closed to the industry

    • No case by case review, no due process: banks are simply closed to the sector

    • Zero account access in some geographic areas; problem is nationwide in scope

  • The largest, publicly traded LRCs are able to maintain corporate accounts: This is a significant competitive issue.


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MTOs are easy targets

“Bummer of a birthmark, Hal.”

The combination of historical regulatory hostility and some banks’ desire to enter the market makes it tough to be a competitive LRC with an account at a large bank.


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The Emperor Has No Clothes

Accounts are closing left and right. Why?


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Competition

  • Competition drives down prices, increases innovation

  • Role of Government to assure competitive landscape

    • Examples of other subsidized/regulated networks where governmental intervention in favor of competition had a huge impact on development and innovation: Railroads and Telephony

  • Account discontinuance impedes competition, and is therefore bad for the consumer.


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Closing accounts: bad policy

  • The trend toward account discontinuance is bad regulatory policy on several levels

    • Impedes competition: bad for consumers (senders and recipients)

    • Drives money transfer activity underground: bad for law enforcement

    • Encourages marginal players to disguise accounts at banks: bad for banks


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Money Transfer Services

Lower fees, better forex

Open nights, weekends

Faster than bank wires

Licensed, bonded, examined

Specialized Compliance

Recipients have a voice

We’re in touch with both the sender and the recipient, and are truly in a position to do this.

The Factors:

How do LRCs stack up?

  • Cost

  • Convenience

  • Speed

  • Safety / security

  • Financial democracy

  • Empowering options for the use of funds


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Example: Health Care

Public and private health care systems in developing countries can come under severe pressure from non-participation or from premium payment arrears.

Remittance senders effectively self-insure against sickness of their families.

Offering remittance senders the option of directing partial payment to ensure that their recipient is up to date on health care premiums is a win-win-win proposition:

  • Senders win; no major bills as a self-insurer

  • Recipients win; medical care when they need it

  • System wins; greater participation

    LRCs, with sender/receiver relationships, are in a unique position to offer this specialized payments service.



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Unique Joint Opportunity

  • Licensed Remittance Companies are in a unique position to serve transnational families, and should be permitted to do so in partnership with US banks.

  • This Committee is in a unique position to help assure that competition in the remittance industry survives.

    Together, we can make sure that remittance customers are well served, and that the massive capital flows that remittances represent can have the greatest poverty alleviation and development impact possible.


Contact information paul dwyer ceo pdwyer@viamericas com 301 215 9294 ext 102 l.jpg

CONTACT INFORMATION

Paul Dwyer, CEO

pdwyer@viamericas.com

(301) 215-9294 ext 102