The Fastest Way To Make Money

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Brand awareness remains crucial in the money-transfer market, where transactions are up in part because of increased migration but also because more of the cash sent by the workers of the world is starting to travel through formal channels. Even gargantuan Western Union gets only a 12% slice of the total remittance market because so many people still send money by mailing a check or getting someone to hand-deliver the money. Every month in Los Angeles, German, 33, sends $100 to his sister in Nicaragua via Western Union or, whenever possible, by a courier who charges a couple of dollars less. "Two dollars is not a big difference here, but it's a big difference in Nicaragua," he says.

Many migrant workers also use black-market currency traders. Known as hawala in the Middle East, hundi in India and fei chien ("flying money") in China, these unlicensed remittance networks were targeted by the U.S. after 9/11, because some had been used by al-Qaeda and other terrorist networks. The following month the U.S.A. Patriot Act made participating in these networks a felony, and the law has been used more than 20 times against alleged violators.

Pakistan has taken a different approach to encourage the use of formal banking channels. The government set up an incentive program that gives overseas Pakistanis who send home more than $10,000 a year higher duty-free allowances and access to VIP airport-customs counters. The program also establishes remittance-based admissions quotas at the country's public universities. Official remittances to Pakistan, which has some 1,300 Western Union outlets, are expected to reach $4 billion this year, nearly triple the amount logged three years ago.

Meanwhile, governments in Latin America are working to get remitters out of Western Union and into less expensive banks. People from this region, responsible for 60% of worldwide growth in money transfers since 1999, sent home $32 billion last year. They also shelled out $4 billion in remittance fees, or about 12.5% of the money they sent — nearly 50% more than what Turks pay to wire funds from Germany or Filipinos pay to send money from the Persian Gulf. Latin American migrant workers pay more because they tend to steer clear of banks in their home countries as well as abroad. In Mexico, for example, only 1 in 5 citizens has a bank account. Unstable local currencies don't help matters, nor does the memory of mid-century bracero contracts, which temporarily withheld 10% of the wages of Mexican guest workers in the U.S. That money was never deposited as promised into Mexican savings accounts.

"About 70% of our members have never opened a bank account, not here or in their country of origin," says Luis Pastor, CEO of the Latino Community Credit Union, based in Durham, N.C. "From the moment a person enters our offices, we are with him at least 45 minutes, explaining what a bank account is, what a credit union is, what services we offer." Mostly, however, it is the word-of-mouth testimonials that help newcomers get over their distrust of financial institutions and stop worrying that the credit union will report them to immigration officials. The credit union, which charges $10 to wire as much as $1,000 to some 2,500 locations, remitted $1 million last year through IRnet, a four-year-old proprietary money-transfer network owned by the World Council of Credit Unions.

Until the late '90s, U.S. banks largely ignored Latino migrant workers, in part because many were in the country illegally and lacked the identification necessary to open an account. Enter a tamper-proof version of the matricula card, issued by Mexican consulates in U.S. cities to verify Mexicans' identities without divulging their immigration status. This ID card has prompted Bank of America, Citigroup and Wells Fargo to each partner with a big Mexican bank and launch binational ATM-based money transfers. Today money transfers are still mostly face-to-face transactions involving tellers, but that will change with the expansion of ATM networks. "ATMs are a bigger threat to money transfers than a lot of people believe," says UBS senior analyst Adam Frisch. "But we're not there yet. Remember, for a long, long time people didn't use ATMs because they wanted to wait in line to see a teller put a stamp on the receipt. But that was obviously overcome." In an acknowledgment that the switch to bank accounts could be slow, Wells Fargo has started offering to wire cash as Western Union does — for customers who don't have accounts. Citi has dropped its fee from $10 to $5 for transfers of as much as $3,500. And in June U.S. Bancorp teamed with a rural consortium to reach the millions of Mexicans who live in areas not served by large banks.