Senate Finance Committee

Senate Finance Committee

Randall S. James, Commissioner Texas Department of

Banking

September 26, 2006

Interim Charge - Relating to International Wire Transfers

Page 2Offered by:Texas Department of Banking September 26, 2006

Money Service Businesses, or MSBs (Western Union, MoneyGram, etc.)

Banks, Savings Institutions and Credit Unions (Financial institutions’ products such as wire transfers, debit cards, credit cards, ACH debits [Federal Reserve’s Directo a Mexico], and official checks can all be used to transfer money from the U.S. to international destinations.)

What are the primary businesses that transmit money?


People Traveling

Mail

Stored-value Cards

Money Orders

Purchase goods or services from foreign companies operating in the U.S. in exchange for goods delivered to a foreign country

What are other ways that money (or “value”) can be transferred?


How do immigrants usually send money to Latin America?

Source: Bendixen & Associates, “State by State Survey of Remittance Senders: U.S. to Latin America,” April 2004. Information is based upon a survey of 3,802 interviews conducted in 37 states and the District of Columbia. See Industry Data Source #5 listed on page 12.

2004 Estimates

Money Service Businesses

People Traveling

U.S. Bank

Mail

Credit Union

78%

11%

7%

2%

1%

0% 20% 40% 60% 80%


How much is sent from Texas to Latin America?


2004 Estimates

$9.6 Billion

$3.6 Billion

$3.2 Billion

$2.5 Billion

$1.5 Billion

$1.4 Billion

$2B $4B $6B $8B $10B $12B

States that send over $1 billion annually

California

New York

Texas

Florida

Illinois

New Jersey

$0

California


How much is transmitted by Texas-licensed MSBs? In fiscal year 2005, the 58

MSBs licensed in Texas to perform wire transfers initiated 43.4 million transactions totaling $11.7 billion.

These transactions transferred money to locations within Texas, the U.S. and to foreign countries. The number and volume shown include commercial and consumer transfers.

Fiscal Year

Number of Transactions

Dollar Volume of Transactions

2005 43.4 Million $11.7 Billion

2004 34.0 Million $6.1Billion





The Federal Reserve reports in their “Directo a Mexico – Frequently Asked Questions” brochure:

Banks and credit unions currently account for only a small share of the market (likely no more than 3%).

Funds transferred to Mexico from the U.S. reached $20 billion in 2005, up from $16.6 billion in 2004, and has experienced double-digit percentage growth for the past several years.

How active are banks and credit unions in money transmissions to foreign countries?


Where is the money transferred?The IADB map to the right depicts 2005 remittances sent from the U.S., Western Europe and other countries to Latin America. (U.S. millions of dollars)

Texas Department of Banking examiners have observed during routine on-site examinations that the majority of international transmissions leaving Texas are sent to Mexico, Central America (El Salvador and Guatemala), South America (Brazil and Columbia), Vietnam and the Philippines.

Source: Inter-American Development Bank, “Remittances 2005: Promoting Financial Democracy” See Industry Data Source #4 on page 12.


How often do immigrants in the U.S. send money to Latin America?


2004 Estimates

Once a month or more often

Every two to three months

Every four to six months

Once a year

Do not remember

61%

21%

9%

5%

4%4%

0% 10% 20% 30% 40% 50% 60% 70%


The average transmission by Texas licensed MSBs is approximately $270.

The 2004 IADB paper (see Industry Source #2 on page 12) indicates that the average remittance to Latin America from Texas is $225, sent on average 12.9 times per year.

A study conducted by Bendixen & Associates (see Industry Source #5 on page 12) indicates that the average amount sent out of the U.S. is approximately $240.

How much is typically transmitted?


What is the cost of sending a wire transfer?

Wire Amount (Ceiling)

MSB Licensee #1

Rate

MSB Licensee #2

Rate

MSB Licensee #3

Rate

$50.00 $15.00 $9.99 $15.00

$100.00 $15.00 $9.99 $15.00

$200.00 $22.00 $9.99 $15.00

$300.00 $29.00 $9.99 $15.00

$400.00 $34.00 $9.99 $15.00

$500.00 $43.00 $9.99 $15.00

$750.00 $56.00 $9.99 $15.00

$1,000.00 $68.00 $9.99 $15.00

$2,000.00 $114.00 $40.00 $30.00

$5,000.00 $215.00 $100.00 not provided

$9,000.00 $375.00 $180.00 not provided

Fees are not regulated in the U.S. and typically not published on company websites. However, companies do compete for business.

The Federal Reserve Bank reports that the Fed will charge $0.67 per transfer to send funds by bank or credit union ACH in the Directo a Mexico program.

Source: Information provided by three current MSBs licensed by the Texas Department of Banking.


1. Texas Business Review, “Banking Across Borders: The Future of U.S.-Mexico Remittance Corridor,” by Vivek Taparia, Investment Banking Analyst. February 2005 Edition, McCombs School of Business, The University of Texas at Austin. http://bbr.icc.utexas.edu/Publications/feb_05.pdf

2. The Inter-American Development Bank, “Sending Money Home: Remittances to Latin America from the US, 2004.” January 24, 2005. http://www.iadb.org//mif/v2/files/map2004survey.pdf

3. Retail Payments Office of the Federal Reserve Banks, “Directo a Mexico – Frequently Asked Questions.” http://www.frbservices.org/Retail/pdf/DirectoMexicoFAQ.pdf

4. Inter-American Development Bank, Multilateral Investment Fund, “Remittances 2005: Promoting Financial Democracy.” March 2006. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=697487

5. Bendixen & Associates, “State by State Survey of Remittance Senders: U.S. to Latin America, April 2004. Data is based upon a survey of 3,802 interviews conducted in 37 states and the District of Columbia. http://www.bendixenandassociates.com/Presentations%20and%20Reports%20-%20website/IDB%20National%20Survey%20of%20Remittance%20Senders%202004.pdf

Data Sources

Note: We contacted Texas Appleseed (a nonprofit organization that monitors immigrant issues) inquiring about transmission voumes in Texas. We were informed that they have no data other than that reported in the above industry sources.

Documents

Senate Finance Committee