International Money Transfers Back in the News

Stephen DeAngelis

July 23, 2007

Last October I wrote a post about businesses that were offering international money transfer services through the use of cell phones [Western Union Beware]. The reason the service was popular, I noted, was that money transferred using a traditional money transfer organization like Western Union or a bank was both slow and expensive. At least one bank, Wells Fargo, has taken notice and has responded by offering new and cheaper ways to transfer money according to an Associated Press report published in the Washington Post [“Wells Fargo Unveils Money Transfer Program,” 17 July 2007]. As I have frequently noted, globalization depends on the relatively free flow of people, resources, and capital. For many developing countries, an important percentage of that capital flow comes from money transferred home by expatriates working abroad. The billions of dollars transferred also represent a significant business opportunity for money transfer enterprises. Wells Fargo is changing how it operates before it loses its share of the business. According to the article:

“Wells Fargo & Co. is introducing a new money transfer program designed to make it easier for customers to send money to family members living in Mexico, India and other foreign countries. The service, Wells Fargo ExpressSend, which begins operation [17 July], will provide people sending the money with more information on fees while making it easier for recipients to get the money that’s transmitted.”

Transfer fees have been a sore point for many people trying to send money home. In my earlier post, I noted that it could cost as much as $22 in fees to transfer $26 from London to Manila and could take up to three days.

“Wells Fargo customers will be able to send the money account to account, account to cash, cash to cash and cash to account, the San Francisco-based bank said in a statement. The money can be picked up at the branches of specified overseas banks and at their automated teller machines, it said. … Customers who use the service will receive detailed information on how and where the money is being sent, the fee, the foreign exchange rate and the so-called foreign exchange margin. The margin is the estimated revenue the bank earns on the conversion. The program was applauded by Appleseed, a nonprofit legal advocacy group that operates offices in the United States and Mexico. The group has been urging more transparency in remittance transactions. … Wells Fargo is one of four financial institutions participating in a pilot program sponsored by Appleseed to improve transaction cost disclosure. Wells Fargo said transaction fees will be discounted or even waived for customers sending money from eligible Wells Fargo checking and savings accounts. Money should arrive in Mexico, El Salvador and Guatemala on the same day it is sent, and on the next business day in China, India, Vietnam and the Philippines, the bank said.”

Companies are starting to understand that money can be made by serving and working with some of the world’s poorest people who occupy the bottom of the economic pyramid [see my recent post Small Loans Attract Big Players]. When conducted ethically, such business transactions benefit both the company and the customer. According to some studies, fair and egalitarian commercial relationships can be used as effective instruments to move local and sustainable development forward (the so-called Fair Trade theory). However, this new type of relationship requires good faith efforts on all sides in order to overcome the tension between market logic (i.e., make the biggest profit you can) and the expectation of dole, which accompanies many aid programs.

Others offer an alternative to Fair Trade theory which they call the Bottom of the Pyramid theory that involves corporate practices deliberately aimed at the poorest consumers with the full intent of making a profit. I see these as complementary rather than competing economic theories. When this good faith is established, it is possible to reduce poverty, generate income and distribute wealth [to read more about the debate between Fair Trade and Bottom of the Pyramid theory see “Whose Fortune is at the Bottom of the Pyramid?” by Natalie Unterstell and Mário Aquino Alves]. One part of both schemes is connectivity — that is, connecting once isolated producers and/or consumers with the global economy. That is one of the areas that Enterra Solutions is exploring in geographical locations I have labeled the Edges of Globalization. Connecting producers and consumers, like Wells Fargo’s money transfer services, can help foster globalization by increasing the flow of resources and capital. Both the Fair Trade and Bottom of the Pyramid theories are based on the idea that only win-win scenarios offer hope of creating sustainable development.