Directo a México Provides Memphis Banks and Latinos Easy Funds-Transfer Option

Latino populations continue to grow nationally, creating opportunities for banks to offer customized services. The largest cities boast heavier markets, but significant increases can be seen in cities such as Memphis, Tenn., where an estimated 100,000 Latinos reside, work and routinely send money home to families in Mexico. Often, they use pricey wire transfers. With these systems, security can be questionable and access to funds can be slow.

An alternative is Directo a México, a partnership between the Federal Reserve and Banco de México, that provides a fast, affordable and secure international payment transfer system using the Federal Reserve Automated Clearinghouse (FedACH), the same system used to process domestic credit and debit transfers electronically.

Directo a México was explained during an Aug. 23 meeting in Memphis for bankers and organizations serving Latino residents.
 
According to Elizebeth McQuerry, assistant vice president, Federal Reserve Retail Payments Office, Directo a México offers many benefits to banks and immigrants. Among them are:

• Low-cost account-to-account transfers across borders at an average of $5 or less per item compared to an average of $10 per item using wire transfers - The 50 percent or more savings to customers makes banks competitive. (Banks pay only 67 cents per item.)
• Fast access to funds - Using the existing FedACH payment channel allows access on the next business day.
• Secure transactions - Electronic transfers are made directly into accounts identified through the Beneficiary Account Registration web site to link remitter accounts to receiver accounts in Mexico. This reduces security risks and recipients can access funds in an account, at a bank branch or at any ATM using a debit card.
• Orientation to bank services for un-banked immigrants - Directo a México can be offered in a bundle package to encourage the opening of a bank account, which orients customers to other services and helps them build credit.
• Additional savings – There are low exchange rates for changing transferred funds into pesos and, unlike wire transfers, no fees to receive payments in Mexico.

Before starting Directo a México, McQuerry advised banks to consider ceilings for payments, as well as compliance issues such as account opening requirements. Banks further learned that regulators look favorably toward Directo a México use for Community Reinvestment Act credit because it provides low-cost remittances to the un-banked and can aid the building of credit.

The meeting ended with a panel discussion on the Memphis Latino population and its specific needs for remittance payment services and other banking options.