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Money on the fly

Billions of dollars pour out of Canada every year in in remittance payments to countries around the world. Although credit unions are minor players in this area, recent initiatives indicate this is changing.

Since moving to Toronto 10 years ago, Alice Herrera, an engineering professional and president of the University of the Philippines Alumni Association of Toronto, has been sending money back home to Manila on a monthly basis. The money helps cover her 87-year-old mother’s medical needs and, in the past, her sister’s cancer treatments. “I think it’s part of Filipino culture to send money and help their relatives back home,” Herrera says.

Monetary gifts sent by immigrants like Herrera to individuals in their home countries are officially known as remittances. The Philippines is the third largest remittance-receiving country in the world after India and China and, like many low and middle-income nations, it relies upon funds sent from countries like Canada for economic growth.

To put this into perspective, in 2015 an estimated $30 billion left Canada in remittances, which is roughly five times more than the Canadian government’s international assistance spending budget in that same year. And recent guidance issued by the World Bank suggests remittance volumes are only set to increase over the next few years.

In addition to propping up Global South nations, remittances can also be big business for banks and money transfer companies who have traditionally collected substantial revenue from remittance transaction fees. To date, credit unions have been minor players in the industry but recent initiatives suggest that making remittances easier and cheaper to send is of increasing importance to credit union members.

Remit Now program launched

Like many regular remitters, for years Herrera would withdraw cash every month and then take it to a remittance company to make a transaction. Through a Filipino charity in her community, Herrera later learned about a Philippines-focused remittance program offered by Toronto’s Luminus Financial Services and Credit Union (4,500 members, $136.5 million in assets). Called Remit Now, the program was first launched in 2013 to better serve the credit union’s Filipino members. (They make up four percent of Luminus’s membership.) The unique program, which works on an account-to-cash remittance basis, makes money transfers easier for regular remitters like Herrera. “The Filipino community was one that was interesting to us because it met our brand, it met our brand promise and it was very niche oriented,” says George De La Rosa, CEO of Luminus.

The Filipino community is also interesting because of its size. According to the Canada 2016 Census, the Filipino community is now the fastest-growing immigrant group in the country. Like many newcomers to Canada, one of the challenges Filipinos face is establishing a financial and credit history in Canada. The Remit Now program helps these new members by offering free banking accounts and a $500 line of credit. The credit line allows individuals to send money when they want, eliminating the need to arrange loans. In the past, such as when Typhoon Haiyan hit the region in 2013, the program offered free remittances so members could assist family in the Philippines.

“The way our families operate and the way our friendships move around the world, our members need to be able to move money around globally.” – Tania Goodine 

Now almost five years old, De La Rosa says the program has helped raise the profile and membership of the credit union and has attracted some different business. Still, the early days of the initiative were challenging; Luminus quickly learned that it needed to focus on building deep relationships within the Filipino community. “We saw we needed to have agents: people in the community who promoted the credit union and the remittance program,” De La Rosa says. These individuals were able to educate non-members about the program and remind members — many of whom were in the habit of sending cash through a bricks and mortar location — to use the online banking portal. For Herrera however, the program’s flexibility in allowing her to make secure transactions online on a 24/7 basis was a welcome change. That, coupled with Luminus’s partnership with BDO Unibank (the largest bank in the Philippines) and competitive fees and exchange rates have kept her with the program.

Money transfer product launched

For most credit unions, outsourcing the remittance transfer process to avoid the challenges of developing and marketing an in-house solution is preferable. To that end, in 2016 Central 1 Credit Union launched an international money transfer product in partnership with industry giants Western Union and Canadian company Acxsys Corporation (the architects of Interac). Members of Libro Credit Union (103,000 members, $3.5 billion in assets), First Calgary Financial, a division of Connect First Credit Union (100,000 members, $4.3 billion in assets) and, most recently, Tandia Financial Credit Union (30,000 members, $1 billion in assets), were the first to use Western Union Money Transfer services via Interac e-Transfer through Central 1. Many others are reportedly considering its adoption.


“The way our families operate and the way our friendships move around the world, our members need to be able to move money around globally,” says Tania Goodine, executive vice-president, engagement at Libro, based in London, Ont. One of the first champions of the product, Goodine says the credit union has seen use of this service growing month by month.

Partnering with an established brand like Western Union makes a lot of sense for credit unions, says Scott Robertson, product manager for payment applications at Central 1. “It’s the speed, the ability to send money that’s available for pick up within 30 minutes and the strong brand recognition,” Robertson says. “In some of the destination corridors or countries, recipients feel more comfortable there than dealing with their own financial institutions.”

A true pioneer in the money transfer industry, Western Union has evolved from its “pony express” days and now has a global network of 550,000 agent locations where cash can be sent and collected, including local grocery stores, gas stations, pharmacies and other retail outlets, in more than 200 countries.

In addition to the appeal of working with an established industry leader with a widespread geographic network, the team at Central 1 also highlights the ease of use for its account to cash product. Unlike wire transfers, users do not need exact details of recipients’ financial institution, rather, a recipient name and destination country will do. Further, there is no need to set up new accounts, user IDs or passwords to use the service; credit union members using Western Union Money Transfers via Interac e-Transfer can get started immediately from the convenience of their online banking site.

Service fees for Western Union Money Transfers via Interac e-Transfer are competitive with the fees charged by Canadian banks who offer similar services: the charge is $9 plus one percent of the princi- ple for transfers below $1,000. (According to the World Bank, fees for transferring funds through international banks and money transfer companies typically average 7.2 percent, depending on the amount sent and destination.)

Partnering with Western Union also removes one of the biggest administrative challenges remittance providers encounter: agent oversight and compliance with anti-money laundering and anti-terrorism financing screening. Western Union has well-established systems in these areas, reportedly investing US $220 million annually on compliance. This eases the burden for credit unions.

Perhaps unsurprisingly, the remittance industry has also been targeted in recent years by Facebook, Snapchat, PayPal-owned Venmo and newer players like WorldRemit, TransferWise and Azimo, among others. Many of these companies seek to disrupt the industry on the whole by offering peer-to-peer transfers at a fraction of the price charged by traditional remittance providers. Although market share for online remittances is just six percent, analysts say the industry is growing extremely fast. With a number of companies working in the space, Robertson and his team at Central 1 say they are evaluating which offer is the best fit for their clientele.

Looking for credit union partners

For more than a year, startups like Toronto-based Paycase have been working to build bitcoin alternatives to traditional money-transfer methods. Paycase offers a mobile remittance platform leveraging bitcoin and blockchain technology, allowing it to facilitate the sending of money around the world in mere seconds and for fees 70 to 80 percent lower than typical rates. The flat fee portion of typical remittance charges makes them prohibitively expensive for users sending small amounts of money.

This is where Paycase sees its opportunity. “Small-value remittances are an untapped area in remittances,” says Joseph Weinberg, CEO and co-founder of Paycase. “Allowing very fast, cheap micro-transactions to happen, you start to fundamentally change the way that the entire developing world gets out of poverty faster,” Weinberg says.

Since it launched a year and a half ago, Paycase has been providing remittance transfers on an invite-only basis to Filipino communities across the country and the platform will soon be available to the general public. Weinberg says his company will be looking to partner with credit unions, among other financial institutions.

With a growing number of interesting (and somewhat divergent) options, Canadian credit unions considering how best to provide remittance services should consider three factors, suggests Derek Cameron in Credit Unions and Remittances: An Environmental Scan, a 2016 Filene Research Institute report. The first is to understand how, when and why senders want to send transfers; the second is to choose the right partners for transferring and distributing funds and the last is to work to build trust among senders.

Interestingly, the report concludes that despite an increasing number of FinTech companies’ offers of low-cost solutions for money transfers, consumers continue to show a clear preference for face-to-face transactions over the use of websites and mobile phones. In this light, credit unions’ member-service focus, community involvement and openness to innovation gives them a notable advantage — at least for now. ◊