Remittance Cards Will Top 1 Million in 2006, New Report Says

The number of Visa- and MasterCard-branded money-transfer cards issued in the U.S. will reach 1.1 million in 2006, up from 400,000 this year and just 145,000 in 2004, according to a new research study on the remittance market. The jump in the number of the prepaid cards follows the increasing volume of dollars sent abroad, with remittances going out of the country set to reach $75 billion next year, up from $65 billion in 2005, according to the report, entitled “Consumer Money Transfers,” and issued by Aite Group LLC, Boston. Cards will account for 1.9% of that volume in 2006, compared to 0.7% this year. The top three issuers of remittance cards are Bank of America, with more than 100,000, and U.S. Bank and Citigroup, each with fewer than 5,000, says the report. But with migrant worker populations growing and demand for remittance services to home markets increasing, the business case for cards as an alternative to conventional money-transfer services, such as Western Union or MoneyGram, will get stronger. Still, concludes Gwenn Bezard, an analyst at Aite and author of the report, “cards though growing rapidly will have no material impact on money transmitters like Western Union and MoneyGram in the next [two to three] years.” Western Union, he figures, has increased its market share of global remittances to 13% from 8% five years ago, while MoneyGram claims a 3% share. Though the report concludes it will be at least three to four years before the major money-transfer networks begin to feel pressure from cards and other electronic remittance alternatives, it concludes banks will feel more immediate pressure to compete with BofA's SafeSend card product, the most successful so far. BofA issues the card as a loss-leader to gain market share in the Hispanic market from competing banks, the report says, a strategy that has led to 60% to 70% of cardholders opening a BofA checking account. Mexico ranks second in the world in annual dollar volume of remittances received, at $13.4 billion, according to the report, trailing only China, at $18 billion.