Remittances: A Gateway to Inclusion Elizabeth McQuerry Federal Reserve Financial Services

1. Remittances: A Gateway to Inclusion Elizabeth McQuerry Federal Reserve Financial Services The Directo a México logo and “Directo a México” are service marks of the Federal Reserve Banks in the United States and service marks of the Banco de México in Mexico

2. Origin • Banco de México and the U.S. Federal Reserve collaboration to create an efficient funds transfer mechanism for personal and business payments between our countries with regulated, financial institutions at both ends.

3. Directo a México Features • Account to account transfers • Low-cost: $0.67 cross-border surcharge to financial institution • Next business day delivery • Foreign exchange (FIX less .21%) for every payment – regardless of value • Personal and business payments

4. The Whole Package • Immigrant financial needs: 1) check cashing; 2) money transfers; and, 3) savings accounts • Building blocks of customer acquisition, retention, and cross-selling “By focusing on providing bilingual, bicultural, affordable financial services to its members, LCCU has become the fourth largest community development credit union in the United States in six short years.” Vicky Garcia, Director of Operations, Latino Community Credit Union (LCCU), Raleigh-Durham, NC

5. Remitters as Customers • Average value of Directo a México transfer over last two years = $1,184 • 2-3 times above money transfer average of $350-$400 • Remitters who use banks tend to be better off financially and have need for more sophisticated products “We were well aware that the process of transferring money presented the Hispanic population with real challenges. Directo a México provided us with a valuable marketing tool when working with our Hispanic customers.” Billie Wade, President & CEO, Citizens Union Bank, Shelbyville, KY

6. Product Matters • Directo a México saves originator on fees and adds value for receiver • Originating fees usually $2.50-$5.00 • Around $5 US more received on a $350 transfer “By bringing remittance customers into the banking system, Directo a México is helping families to create wealth, as well as creating formal banking relationships on both sides of the border.” Luis Pastor, CEO, Latino Community Credit Union (LCCU), Raleigh-Durham, NC

7. Pipelines are only the beginning … • Essentially changing consumer behavior in two countries. • Directo a México brand name, marketing kit, collaboration to support increased financial education • directoamexico.com • Financial institutions adapting to serve unbanked and migrant consumer financial service needs.

8. … behavior is changing. Financial Institution Usage of Directo a México

9. Commercial Volume

10. Final Thoughts • Money transfers are one product in a larger customer relationship • Successful financial institutions have a real commitment to this customer relationship • Innovation is also needed to meet challenge of unbanked and underserved populations • Collaboration with Institute for Mexicans Abroad (IME) to increase financial education • Bansefi & L@Red de la Gente support Directo a México in their products and activities