El Otro Lado 4: The US-Mexico Cross Border Opportunity

“When Mexican treasury officials released the numbers on how much money passed through the US to Mexico in the form of remittance in 2004, companies began to pay attention to the cross-border opportunity. The $16.6 Billion figure was enough to draw people’s attention, second to Mexico’s oil income and accounting for 2% of Mexico’s GDP. But what was even more astounding was the 33% increase compared with the previous year. The question several companies have asked us is obvious: how can we get a piece of that income? The leading companies in financial services have quickly understood that money transfers will become commoditized as price competition increases, and as senders learn that they can simply send an ATM card to receivers in Mexico. Some banks, led by Bank of America, have tried to entice customers by offering free remittance if they open a checking or savings account with the rational that they will be able to cross-sell higher margin products later. Still, for the most part, financial service firms are finding it difficult to cross-sell. In fact, wire transfers make up 70% of the mechanism for sending money. Other financial service companies, such as HSBC, are starting pilots with Mexican mortgage providers to offer peso denominated mortgages for homes in Mexico. Looking at the numbers alone, companies tend to assume that there must be a large opportunity if they move fast. But when pilots take along time to show results, or when revenue expectations are not met, companies are stifled about how to address the cross border opportunity. The question changes into a more interesting one: What is the next generation of offerings for cross-border offerings that offer a significant opportunity for companies?…”

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