Money bunnies

One of the stupidest pieces of evidence cited in anonymous briefings by the regional police in their attempts–based as far as I am aware purely on inter-corps rivalries–to pin Islamic terrorism charges on the 10 Pakistanis detained here on the 15th is that the gentlemen in question used Western Union to send and receive money.

As any emigrant to or from countries without functioning financial systems knows, Western Union has traditionally been the only company that provided a secure, affordable and legitimate means of transferring money worldwide. However, as global labour flows and prosperity increase, so do the sums repatriated, and this is leading to an increasingly competitive market.

Dianne Solís published a very interesting article in the Dallas Morning News in August (free reg) on how a combination of legal challenges and competition is bringing down the price of US-Mexican cross-border transfers, worth $16 billion annually, 10% of the global market:

To find the best service, The Dallas Morning News, Al Día and Belo Broadcasting sampled seven routes, from big banks to a bus company to the kingpin of global money transfers, Western Union. Banks proved to be the slowest, at least in initial transfers, and the low-cost operator turned out to be Uncle Sam, with wire transfers by the U.S. Postal Service.

Besides speed and cost, transfer companies try to distinguish themselves with extra services, such as a phone call home and different pickup options. But for most consumers, it comes down to cost, which is determined by two factors – fees and the exchange rate used.

For example, the Postal Service quoted an exchange rate of 11.33 pesos to $1 on the day it was surveyed. The bank exchange rate was only slightly higher, at 11.49. Other providers took larger spreads.

Ms Solís goes on to detail all providers’ performance with a $300 remittance, but it was the local bus company that caught my eye:

One of the most rudimentary services, a bus, can be quite cheap if sending small amounts of money to Mexico. Tornado Bus Lines of Dallas even ensures delivery in dollars, via electronic transfers. Some bus companies have been known to move caches of cash, but pistoleros, or gunmen, have targeted the buses for robbery once they cross the border.

Tornado’s operation is free of frills. Piles of luggage nearly hide the service counter. Bus fumes and fresh taquitos scent the air. An attendant takes out an old notebook to find delivery points in Mexico City. Then she instant-messages her Mexican colleague that in two hours $100 will be ready for pickup.

The service fee: 7 percent of the dollar amount. If only $100 is sent, the service beats the flat-fee services. But send $200 or more and the advantage is lost.

Many immigrants from class-conscious Mexico prefer the low-frill services of Tornado and the safety of dollar-to-dollar exchanges, says Alejandro Martínez, manager at Tornado Money Transfer. “A lot of people think that the banks [in Mexico] are elitist. … They don’t like a peasant coming in from the field or from taking care of livestock into a bank where people are from a different kind,” Mr. Martínez says.

Tiny Tornado absorbs any currency problems from changing dollars into pesos over the wire and back into dollars again. “With our service, the client has the freedom to collect his dollars and change them anywhere he wants,” Mr. Martínez says.

Physical cash transfers are history, and the central European water smuggling industry is no more, but Friday I hope to pick up El Pernales, the kitten who I hope will massacre the roaches while not necessarily using them to feed the poor.

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