Hispanic Heritage Month: Shaping the future of remittances together

Joshua Contreras

27.09.24

3 minute read

The United States has long been a nation of immigrants, shaped by the courageous people who left their homes, lives, and loved ones in search of refuge and opportunity. Immigrants have been the foundation of the United States’ growth and development.

During National Hispanic Heritage Month, we honor and celebrate the contributions of Hispanic and Latin American communities, whose aspirations and achievements continue to shape our nation. Their hard work, dedication, and perseverance fuel not only the U.S. economy but also that of their countries of origin.

Remittances: A Lifeline and a Legacy

Remittances tell a powerful story of sacrifice and hope. These transfers of money, sent by people living and working in the U.S. to their families in their home countries, are a vital part of many people’s lives. For decades, remittances have been a pathway to upward mobility, helping families access better education, healthcare, and opportunities for future growth.

In 2023 alone, remittances to Latin America and the Caribbean reached $155 billion. Mexico, the second-largest recipient of remittances worldwide, after India, received over $66 billion. Despite this crucial financial support, the cost of sending remittances remains high, with fees averaging 6.35% per transaction. This is more than double the United Nations' target to reduce remittance costs to below 3% by 2030.

Why price transparency matters

Transparent pricing is critical to ensuring that Hispanic and Latin American communities can send money home without being unfairly burdened by excessive fees. Today, the remittance market faces significant challenges due to inconsistent pricing practices and hidden fees, which make meaningful price comparisons difficult. Many people remain unaware of the true costs associated with sending, spending, or receiving money internationally. This is largely due to international money transfer providers misleading consumers by advertising low or no fees while hiding additional fees within inflated exchange rates.

In the past three years, Americans have lost $15.4 billion to hidden exchange rate mark-ups, with half of these losses concentrated in just four states: California, Texas, Florida, and New York—states with large Hispanic and Latino populations. In 2023, Californians alone lost $1.1 billion due to these markups, more than any other state.

A UnidosUS survey found that 67% of Latinos either didn’t know remittance providers could add fees through exchange rate mark-ups or weren’t sure. This lack of awareness makes it difficult for people to understand the true cost of transferring money internationally, leaving them vulnerable to hidden fees. These practices not only prevent competition but also keep prices artificially high.

Eliminating hidden fees in remittances

The U.S. is taking important steps to address these issues. In March 2024, the Consumer Financial Protection Bureau (CFPB) issued a warning to remittance providers and banks, stating that marketing “no fee” or “free” transfers while hiding fees in exchange rates may violate federal law. Policymakers, including Senator Elizabeth Warren, have long advocated for greater transparency in remittance pricing. Last year, the Congressional Hispanic Caucus urged the CFPB to take further action to eliminate hidden remittance fees, urging the need for transparency.

A coalition of consumer and immigration advocacy groups has also been working toward greater transparency in remittances. In 2021, these groups sent a letter to the CFPB calling for action to address hidden fees. In 2023, they reiterated the need for continued efforts, recommending the adoption of Best Practice Guidance. More recently, they urged the CFPB to take decisive action to eliminate hidden fees entirely, rather than just regulating deceptive marketing practices. The Financial Technology Association (FTA) has also voiced support for increased transparency in exchange rate mark-ups.

Why price transparency matters more than ever

During Hispanic Heritage Month—an annual celebration that honors the history, culture, contributions, and achievements of Hispanic and Latino communities in the United States—it is more important than ever to emphasize the critical role remittances play in supporting families across borders and to advocate for transparent pricing for these financial transactions. At Wise, our global LatinX Wisers Network —a voluntary, employee-led group—is a space where Hispanic and Latin American Wisers and allies foster community, culture, and diversity. Embracing this year's theme, "Pioneers of Change: Shaping the Future Together," we recognize that by raising awareness and advocating for price transparency, we can ensure that remittance senders are not unfairly burdened by hidden fees. By doing so, we empower communities to shape a more equitable future, helping remittances go further to benefit families both in the U.S. and abroad.

Sources

Sources verified on 27 September 2024

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