The Wires Are Humming With Cash

As Mexicans send $6 billion home, companies fight for a share

Mara Luisa Gonzlez, a 35-year-old mother of three, stopped by the Elektra appliance and electronics store in Mexico City's working-class suburb of Ciudad Nezahualcyotl the other day. But she wasn't there to buy a new TV. Instead, she walked over to a counter and picked up what she needs to live--the $700 in savings her husband had wired home from his job in New York. "He really limits what he spends there to be able to send the money," Gonzlez says.

Family stories like these are forming the basis of a booming industry. Millions of Mexicans working across America send an estimated $6 billion home to their families each year. Much of that still goes by mail or is delivered in person during return visits. But electronic transfers now account for some $2.4 billion of the flow--and Mother's Day, the busiest day of the year, is nearing.

PITCHED BATTLE. Industry executives figure electronic transfers are growing at least 30% a year. That's prompting new competitors to rush into the market, until recently dominated by Mexico's state-owned telegraph office and First Data Corp.'s Western Union Financial Services Inc. unit, which still claims 60% of the business. MoneyGram Payment Systems Inc., which First Data spun off in 1996, and Mexico's largest bank, Banco Nacional de Mexico, now handle 2.3 million transfers a year averaging $250 apiece. The U.S. Postal Service and Bancomer, Mexico's No.2 bank, last year began test-marketing a joint service in California and Texas. Other Mexican banks, including Bancrecer and Banca Serfn, are opening money-transfer offices in Los Angeles and Chicago. Western Union itself on Apr. 11 signed a 10-year deal with Los Angeles-based Orlandi Valuta Inc. to provide electronic money transfers through Orlandi Valuta's 2,000 agencies in California, Texas, Illinois, Florida, and Mexico. Western Union also won an option to buy Orlandi.

The scramble has touched off a marketing battle pitched to some of the poorest residents on both sides of the border, with Banamex and MoneyGram advertising heavily on U.S. Spanish-language television. MoneyGram also throws in a free three-minute phone call to Mexico with each transaction. Still, fast service doesn't come cheap. To send $300, Western Union charges $27, or $15 for frequent customers. But competition, along with more efficient processing, are helping drive prices lower. "Three years ago, you couldn't offer instant service for $15," says Western Union Vice-President Elias Mercado.

The free-for-all dates back to 1994, when Western Union formed a joint venture with Grupo Elektra. The deal came with free TV advertising, thanks to the purchase of two state television networks by Elektra Chairman Ricardo Salinas Pliego. Elektra sold its stake to Western Union last year. But it remains a Western Union agent. The Mexican telegraph office, meanwhile, has seen its market share drop from 100% in 1990 to less than 45% today. But it's still the only player in 1,000 small towns.

Families in other Hispanic countries relay transfers from the U.S., too. But Mexico dominates the flow. Transfers increased sharply in 1995, as Mexico suffered its worst economic crisis in 60 years. Now, the U.S. crackdown on illegal immigration may provide a new boost. Mexicans used to traveling across the border illegally, carrying cash to relatives at home, will stay in the States longer and send the money instead. The companies that move their cash will be only too happy to help them.