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  • Five Keys to a Great Remittance Program

    Posted by on September 23, 2014

    Remittance stand in the Dominican Republic, captured by Coopera's Anna Pena on a World Council of Credit Unions-sponsored trip to the region.

    With intense growth of the Hispanic market across the country, more U.S. credit unions are looking to add money transfer programs, known as remittances, for Hispanic immigrants with family in Latin America.

    And now may be an ideal time to play in the market.

    U.S. remittances to developing countries reached $404 billion in 2013 and are predicted to grow to $516 billion by 2016, according to the World Bank. At the same time, an increasing number of providers have dropped their remittance programs, leaving a competitive opening for credit unions.

    The shuttering of many long-time remittance providers is due to an unprecedented compliance burden. This has also led to the development of an industry that is, as this PaymentsSource article puts it, “ripe for startups.” There are now even international start-ups looking at the U.S. with aspirations of market dominance.

    As the remittance industry shape-shifts to meet increased scrutiny from regulators, some credit unions are looking to find new partners who can help them compete in this important space.

    Credit unions should view remittances services as a value-added tool designed to increase the depth of the membership experience. Coopera’s research (performed in conjunction with the World Council of Credit Unions) found that remittance services, when combined with an intentional Hispanic growth strategy, can earn a credit union much higher volumes as compared to those credit unions without a strategic approach.

    If your credit union is looking to develop or make changes to its remittance offering, here are a few things to keep in mind:

    Understand the geographies you must serve – Not all remittance providers serve the same locales. Before creating a partnership, understand your Hispanic members’ countries of origin and the available locations within a typical recipient’s country.

    Survey the competition – Examine your local market to understand how you can provide the most competitive offering. What other local organizations are providing remittance services? What are they charging? What are their hours of operation, etc.?

    Investigate the alternatives – When issued to a Hispanic cardholder in the U.S. alongside a secondary card for a family member in Latin America, a reloadable prepaid card like the Coopera Card is an affordable and accessible option for sending money outside the country. What’s more, reloadable prepaid cards do not require compliance with the CFPB’s remittance transfer disclosure requirements.

    Know your compliance burden – While the cost of compliance will mostly fall on the shoulders of third-party service providers, credit unions will be held ultimately responsible for providing the appropriate disclosures.

    Develop a member experience strategy – How will the credit union transition first-time remittance users to more products? Incentives like offering the fourth or fifth remittance free can keep remitters coming back to your shop for more remittances, but how will you engage them with other products and servicesfor the long-term?

    Especially given recent industry upheaval, remittances are a much-needed service for Hispanic immigrants with family members residing in Latin America. In fact, Coopera has made remittances a best-practice solution for credit unions looking to invest in the largest, fastest-growing, youngest and most underserved segment of the U.S. population. While there are certainly barriers to entry, keeping the above pointers in mind can help you break through those obstacles to deliver a needed solution to your Hispanic members and prospective members.

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