Racial Equity ∙ Cash Relief
Reforming Remittances to Save Money When Sending Money
Each year, immigrant communities in New York City send approximately $10 billion in remittances to relatives overseas. The cost of sending these remittances is high, with average transfer costs running between $10 and $30 depending on the mechanism. Costs can range much higher depending on how much is being sent, to what country, and whether the senders and recipients are using a digital wallet or cash. As a percentage of the money being sent, the fees can be as high as 10%. In total, immigrants in New York City likely spend more than $500 million per year just to send hard-earned income to family members.
As Mayor, Andrew Yang will take four steps to reduce the costs of remittances for hard working immigrant families in New York City:
- Spark competition in the money services business sector;
- Aggregate demand for remittance services and negotiate with incumbents like Moneygram and Western Union provide bulk discounts;
- Help immigrants open bank accounts at CDFIs and other banks to enable cheaper digital overseas transfers and save money; and
- Work with banks to offer low-cost remittance services as part of community reinvestment act activities.
1. Spark competition in the money services business sector
Today, new financial technology companies are entering the market, offering remittance transfers that are anywhere from 50% to 90% cheaper than the high prices charged by incumbents. Fees are so high in part because the New York State legislature protects the incumbents, like Western Union and Moneygram, by requiring potential competitors to go through an extensive licensing process. For example, in New Jersey, the money service business licensing process typically takes 3 months. In New York, it takes between one year and two years, and New York State requires new competitors to put up significant capital as collateral. New York State lawmakers also work to actively support incumbents by barring money service businesses from locating within three-tenths of a mile of one another.
That’s why Andrew Yang is calling on the state legislature to (a) provide for money service business license reciprocity with neighboring states and (b) reduce regulatory burdens and commit to a more rapid permitting process for money service businesses for the future.
2. Aggregate demand for remittance services and negotiate with incumbents like Moneygram and Western Union provide bulk discounts
Companies like Moneygram and Western Union negotiate with partners and offer bulk discounts to their customers. For example, Uber drivers get a 5% discount on Moneygram’s services. The People’s Bank will negotiate on behalf of New York City residents for bulk discounts.
3. Help immigrants (and other New Yorkers) open bank accounts to enable cheaper digital overseas transfers and save money
As Mayor, Yang will build on the work of New York City’s Office of Financial Empowerment to get more banks to accept ID NYC and ITINs instead of SSNs. The People’s Bank’s Stamp of Approval will require banks to accept ID NYC and ITINs. That will help more immigrants get bank accounts and enter the financial mainstream, which will open up lower cost options for remittances. More broadly, the People’s Bank will work with CDFIs to bring more consumers into the mainstream financial sector, including encouraging recipients of Municipal Basic Income checks to open savings and checking accounts.
4. Work with Banks to Offer Low-Cost Remittance Services as part of Community Reinvestment Act activities
The Federal Office of the Comptroller of the Currency in 2019 highlighted the opportunity for CDFIs to “provid[e] international remittance services [to] improve...individuals’ access to financial services (for example, by offering reasonably priced international remittance services in connection with a low-cost account).” A Yang administration will call on banks to add free or reduced cost remittance services as part of their broader CRA (Community Reinvestment Act) strategies.