Western Confusion

Migrant workers pay a hefty price to wire money home

| August 17, 2006

Each year, migrant workers send billions of dollars back home to support their families and build up their communities. Getting that money there is big business -- the international remittance money transfer trade is estimated at $250 billion -- and storefront chains tap the flow by charging exorbitant fees to guarantee immigrants that their earnings will make it home safely. That's why consular IDs were introduced four years ago, starting in San Francisco. The identification cards are recognized by mainstream banking services so that migrant workers, even those in the United States illegally, can set up bank accounts and use ATM cards to transfer money at low rates (about $2.50).  It would seem that such a system would put the high-charging money wiring outfits out of business. But, reports SF Weekly columnist Matt Smith, the industry's behemoth, Western Union, has managed to stay in the game with an aggressive marketing campaign that includes co-opting foreign consulate's efforts to educate migrants about their options.

As Smith reports, Western Union is sponsoring the San Francisco-based Guatemalan consulate's outreach in towns and cities in the West. The 'mobile consulate' program sets up temporary outposts to proffer typical bureaucratic consular services and to inform immigrants about the low-cost options for sending money home. But, Smith reports, since Western Union foots the bill for travel and expenses, the company gets its own booth to hawk its services. 'With the complicity of foreign consulates,' Smith reports, 'Western Union has managed to position itself as something along the lines of a quasi-governmental service.'

The tack is in line with the company's broader 'helping hands' initiative, which, according to the marketing strategy outline produced by PR firm Bromley/MS&L, is intended to '[create] partnerships with credible third-party sources' so immigrants become 'willing to pay premium prices.' Charging $13 to wire $120 from California to Guatemala (service fees are even higher for longer distances), Western Union is one of the most expensive money transferring services around. Still, immigrants are using it.

A handful of activist groups are trying to change that. The Oakland-based nonprofit Transnational Institute for Grassroots Research & Action hopes to create a global consumers union to serve immigrants' remittance needs in their host and home countries. 'The closer the financial service company is to community projects, the better the likelihood that it will benefit families,' says executive director Francis Calpotura. Another idea, proffered by Lauren Leimbach, executive director of Community Financial Resources, another Oakland nonprofit, is to devise a system whereby immigrants use prepaid debit cards to transfer money back to their families, who would have similar cards.

Both are good ideas, Smith says, but he offers another, perhaps simpler, solution: 'Migrants merely need to hear a loud and clear message that when it comes to financial services, you'd better shop around.' A first step towards that, he says, is getting Western Union out of the consular business. -- Rachel Anderson

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