The Consumer Remittance Opportunity

1
The Consumer Remittance Opportunity

• Daniel I. Ayala
• Senior Vice President
• Global Remittance Services
• Wells Fargo Bank, N.A.
• April 25, 2007

2
Immigrant Consumer Opportunity(US Viewpoint)
3
Immigrant Consumer Opportunity
Worldwide flows of worker remittances by region,
2002
Source Inter-American Dialogue, World Bank
4
Immigrant Consumer Opportunity
Top Ten Country Sources of Remittances in 2001
Source Balance of Payments Statistics, IMF 2002
5
Wells Fargo Focus on Immigrant Consumer

• Consumer Remittance Opportunity
• International remittance market is currently
  estimated at 265 Billion
• Mexico remittances market is 22 Billion
• Latin America Caribbean remittance market is
  48 Billion (Orozco)
• 69 of all Latinos living in the US send
  remittances (Bendixen)
• 75 of all Latino remittances come from the
  United States (Orozco)
• 44 of all Latinos lack bank accounts in the US
  (SRC 2002)
• Non-Banks Dominate the US Remittance Market
• Banks share of remittance business is estimated
  at 9 (Nilson) and 16 (Celent)
• More than 50 of total volume is distributed by
  financial institutions offshore (Orozco 2003)

6
Immigrant Consumer Opportunity

• Purchasing Power of Immigrants has Exploded
• Purchasing power for the Asian and Latino segment
  is expected to significantly outpace the general
  population
• Between 1990 and 2010 Asian buying power is
  expected to grow 397 and 412 for Latinos,
  outpacing the countrys average buying power
  growth of 177
• Asians purchasing power is fueled by the
  segments above average population growth, strong
  immigration, young population, high educational
  levels and above average income
• While the Latino segments is being fueled by
  also above average population growth, strong
  immigration flows, better employment and
  entrepreneurship opportunities

Source The Multicultural Economy 2004, Selig
Center for Economic Growth, Q3 2004
7
Immigrant Consumer Opportunity

• Immigrants are a relatively young labor force.
• 45 of the foreign born were 25 to 44 years of
  age while the native population accounted only
  for 25
• Unlike the native U.S. born population the
  foreign born population is much younger
• 80 of the foreign born were 18 to 64 while the
  natives only compromised 60

Source Current Population Survey, March 2003
8
Immigrant Consumer Behavior

• Immigrants Initial attitudes towards financial
  services
• Attitude towards financial services correlates
  with educational level
• High savings rate when compared to the mainstream
• Loyal customers once they adopt and trust a brand
• Banked individuals often use non banks for money
  transfer and check cashing services
• Regularly send money back home
• Rely heavily on recommendations from
  friends/family
• Initially prefer banking in their native language
  with somebody from their community
• Focused on building wealth for their families
  first (not personal retirement)

9
Remittance Market Key Developments
10
In the U.S. the remittance industry is moving
away from being transactional and dominated by
non banks.
2002 - 2006
Pre-2002

• Growth in importance of banks as a formal
  remittance channel
• Banks are strategically leveraging their payments
  expertise and network to provide low priced
  solutions that are relationship driven
• Remittance companies begin to establish alliances
  with select banks in the US.
• Remittance companies are launching loyalty
  programs
• Increased regulatory oversight is pushing less
  efficient remittance companies out of the
  marketplace
• A significant number of remittance companies are
  consolidating (MA)
• Emergence of online players in the remittance
  industry
• Foreign Banks are starting to purchase smaller
  U.S. banks and remittance companies in their
  target US regions to capitalize on the shift to
  banks as a remittance provider.
• Average remittance costs estimated between 4 -
  7 of transaction value

• Remittances originated almost exclusively by non
  banks in the US
• Over 70 of total remittance payout value is
  performed by banks (Mexico)
• Exclusive industry product focus on cash to cash
  remittances
• Remittance companies focused on transaction
  volumes. Limited relationship focus.
• Prevalent high fees and FX spreads receive
  limited attention
• Remittance companies primarily focused their
  competitive efforts on a convenient global
  network distribution
• Average remittance costs estimated between 20 -
  30 of transaction value

11
Wells Fargo Consumer Remittance Product
12
Wells Fargos Consumer Remittance Products

• Wells Fargo Vision
• Satisfy all of our customers financial needs and
  help them succeed financially.
• Stated Corporate Strategy
• Be our customers payments processor. Make sure
  that Wells Fargo adds real value that enables us
  to be the intermediary electronic or paper
  whenever and wherever our customers buy
  services.
• Global Remittance Services Goals
• Support the growth and Retention of ethnic
  households
• Maintain a dominant bank player position in the
  remittance business.

13
Wells Fargos Consumer Remittance Products

• The Wells Fargo International Remittance Service
  is a zero-balance overnight sweep account that
  allows the remitter to send funds to family and
  friends.
• Beneficiary claims funds from one of the RNM
  locations by accessing their account in the store
  by check, through an ATM, or Online
• No checking or savings accounts required. No
  initial deposit required
• No account opening, monthly or annual account
  maintenance fees
• No monthly remittance limits beyond daily limit
• Transfers can be initiated at a branch, ATM,
  telephone or online

14
Customer Benefits

• Affordable
• Customer can transfer up to 1,000 or 3,000 for
  5-8 per transfer, depending upon the country
• Transfer fee discounted or waived when customer
  opens select WF packs
• Convenient
• Remitter can make a deposit 24 hours a day, 7
  days a week.
• Make deposit at any Wells Fargo store, via phone,
  online or at the ATMs.
• Enjoy 24-hour Wells Fargo account access
  including Online Banking, Wells Fargo ATMs and
  Phone Bank.
• Reliable
• Safe alternative to mailing a cashiers check or
  money order.
• Funds in the remittance account are FDIC-insured
  until transferred to the Remittance Network
  Member bank.
• Wells Fargo has more than 150 years of experience
  and commitment to customer satisfaction.

15
Key Results

• High product cross sell
• High average remittance value
• Increased household acquisition
• Loyalty effect - Referral retention
• Long term relationships
• Expansion into other products

16
Consumer Remittance Products Key challenges
opportunities
17
Remittances Key challenges faced by banks

• Limited consumer awareness on banks focus on
  remittances
• Mass market self-programmed to use non-bank
  channels for cash based remittances
• Lack of a common US bank consumer remittance
  product offer
• Distribution network for banks in the US is
  primarily limited to bank branches
• Non-banks have larger and more convenient
  (language, location and operating times) networks
• Remittance recipient in Latin America and Asia is
  often an unbanked consumer
• Some banks in the noted regions are not able to
  offer a to Cash alternatives

18
Remittance MarketConsumer Remittance Methods
Card To Card
Account to Card
Account to Account
Account to Cash
Cash to Cash
19
Remittances Key bank environment issues

• Bank branches must be focused and aligned
  (product awareness)
• Cultural references, language capability, product
  knowledge, understanding of remittances vs.
  wires, appropriate sales incentives
• Other key bank channels must be integrated to the
  product to effectively serve the segment
• ATM, Internet, phone bank
• Enterprise wide product focus
• Other key product groups must be integrated,
  focused and fully engaged in customer segment
  cross-sell and segment specific product
  development/product packaging
• Financial Education

20
Remittances Key considerations in a remittance
product solution

• Effectively target the key remittance
  corridors/ethnic consumer segments
• Understand remittance sending and receiving
  segments
• Deploy appropriate product solution alternatives
• Account based, cash based, card based
• Ensure product quality
• Quality and reputation of remittance network
  partners
• Effective Problem resolution and fraud
  monitoring/management
• Treat remittances like any other product line
• Invest in product development and ongoing product
  enhancements

21
Remittances Organizational commitment

• Bank should be a diversity-focused company
• Household acquisition focus vs. pure product play
• Customer retention vs. pure client acquisition
  play
• Long term commitment with a long payback horizon
• Expect significant investment in resources and
  technology
• Secure constant and consistent marketing
  resources
• Top down level long term commitment from
  compliance, public relations, marketing, and
  retail branch distribution
• Expect slow and gradually increasing positive
  results at a constant pace
• Engage the regulators and document unanswered
  questions or concerns

22
Thank You

• Daniel I. Ayala
• Wells Fargo
• Senior Vice President
• Global Remittance Services
• daniel.ayala_at_wellsfargo.com
• [phone]