San Francisco-based bank Wells Fargo & Co. plans to introduce a wire transfer service this month that will let people in the United States transfer up to $1,000 to their relatives in Mexico.
The bank hopes to capture a share of the $8 billion market now dominated by Western Union and Moneygram. Wells Fargo plans to make its service attractive by charging a flat fee of $10 for money transfers to Mexico. Western Union and Moneygram charge $15 to transfer up to $300 and $50 for transfers of $1,000.
The Wells Fargo service is a joint venture with Grupo Financiero Bancomer SA, Mexico's second-largest bank. The money transfer service will eventually link Wells Fargo's 3,000 U.S. branches to Grupo Financiero's 2,000 branches in Mexico. Another partner in the plan is Mexican appliance retailer Tiendas Singer, which will cash Wells Fargo money orders at its 200 stores throughout the country. People sending or receiving cash through the service will not be required to have a bank account with Wells Fargo.
No one at Wells Fargo was available to comment.
Wells Fargo already has a similar program, called Intercuenta, that allows customers with accounts at the bank to send money to people in Mexico using a U.S. ATM or through its Internet service. In Mexico, the receiving parties can withdraw the cash from their bank's ATM.
The bank uses its Intercuenta service to market other bank services such as savings accounts and credit cards to new customers. It hopes to be able to cross-sell customers of its new Mexican money transfer service as well. It also hopes to entice many Hispanics without bank accounts to become Wells Fargo customers.
Analysts think that Wells Fargo, with its strong branch presence along the U.S.-Mexico border, is well positioned to attract nonaffiliated Hispanics. However, they also note that the bank will have to do a lot of advertising and marketing to Hispanics to draw business away from Western Union and Moneygram.
They said that Western Union, a unit of First Data Corp., has about 50,000 locations in the United States and 4,800 in Mexico. Still, the U.S.-Mexico border accounts for only 7 percent of Western Union's revenue.
“Western Union's core customer base in the U.S.-Mexico corridor is the underbanked population,” said David Togut, an analyst at Morgan Stanley. “This is a new target market for Wells Fargo and one that the bank may have to court through aggressive spending on advertising and branding.”
