February 2007 

2230 South Michigan Avenue, Suite 200, Chicago, IL 60616 

312-881-5856 (Phone) 312-881-5801 (Fax) www.cfsinnovation.com 

Authors 

Manuel Orozco, 

Inter-American Dialogue 

Katy Jacob, 

Research Specialist 

Federal Reserve Bank 

of Chicago* 

Jennifer Tescher, 

The Center for Financial 

Services Innovation 

*At the time of this writing Jacob was Research Director for CFSI 

Card-Based Remittances: 

A Closer Look at Supply and Demand 
3

TABLE OF CONTENTS 

Executive Summary 1 

Introduction 3 

Study Methodology 4 

The Remittance Marketplace 4 

Card-based Remittance Transfers: Practices and Issues 7 

Remitters and the Demand for Card-based Transfers 15 

Discussion and Recommendations 23 

References 26
1

Executive Summary 

The phenomenon of international remittances is rapidly transforming the financial landscape. As 

millions of workers from around the globe seek employment in other countries, payments to 

their families back home are creating dynamic flows of money. It’s estimated that global 

remittance volume reached more than US$232 billion in 2005, with an additional unquantifiable 

amount transmitted through informal channels that could increase total volume by 50%.1

 The 

relationship between Latin America and the U.S. constitutes the highest volume remittance 

market in the world. Over the last two years, the percentage of Latin American immigrants 

sending remittances has increased from 61% to 73%, and the average remittance has 

increased from $240 to $300.2 

The robust and increasing demand for person-to-person cross-border remittance services 

coincides with the increasing dominance of electronic transactions and the rise of prepaid cards. 

These two activities, though independent of one another, share important characteristics and 

opportunities. Remitters are more likely to have limited financial access because of their 

immigrant status. Prepaid cards are increasingly seen as a tool to provide the un- and 

underbanked with broader access, and many providers are marketing their products specifically 

to immigrants. 

This report presents the results of an analysis of the supply and demand for card-based 

transfers among migrants. We analyze a nationwide study of Latin American and Caribbean 

migrant remittance senders and their access and use of card products of all kinds. Coupled 

with extensive interviews with card-based remittance providers, this analysis allows us to 

investigate the relationship between the supply for card-based remittances and remittance 

senders’ demands for financial products. 

Prepaid cards also are emerging as a promising product to serve underbanked consumers 

because of their convenience, accessibility and liquidity. Firms offering card-based remittances 

fall along a spectrum from card companies that are adding remittances as a new card feature to 

remittance companies that are adding prepaid cards as a new method for customers to access 

their cash. In the middle are a handful of companies whose only or primary product is a cardbased remittance. A variety of models have developed for integrating cards into remittances: 

card-to-cash, dual card, and recipient-only card. 

In each case there are opportunities and challenges as companies gain expertise in one area 

and experiment with the other product (a prepaid card, or a remittance option) as a way to sell 

their core product. There are also significant differences in the infrastructure and operations of 

these companies, which result in differences in how the firms structure their card-based 

remittance products. A significant challenge in offering card–based remittances using any of 

these approaches is that issuing a card to a recipient outside of the U.S. raises regulatory and 

operational issues that present new challenges for the issuing entity, regardless of whether it is 

 

1 Global Economic Prospects, 2006: Economic Implications of Remittances and Migration. The International Bank of 

Reconstruction and Development, The World Bank, Washington, DC, 2006. 

2

 Multilateral Investment Fund. (2006, October) Public Opinion Research Study of Latin American Remittance 

Senders in the United States. Retrieved February 27, 2007 from

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=820729. 
2

a remittance or prepaid card company. The card also needs to be reliably delivered. Another 

major challenge is that users in many receiving countries are not familiar with card-based 

platforms or are unable to utilize this model due to the lack of a payments network that accepts 

cards. 

The variation in card features such as fee structures, reloadability, and dual-user capability 

affects the usability of remittance cards and will likely determine how the cards converge into 

the market. How the cards are reloaded and how the funds are transferred affects both the 

usefulness of the product to consumers and the fees charged. For some of the products, 

reloading and transferring funds are one transaction and hence, subject to one fee. Another 

important distinction is whether the second card used by the recipient is free. In some cases, 

the sender bears all costs, though usually the recipient pays an ATM fee to withdraw the funds. 

In others, the recipient pays fees to have a second card or account. 

On the demand side, migrant consumers have not embraced card products. With the exception 

of phone and transit cards, fewer than 60% of migrants use any type of card product. On 

average, fewer than 7% of remitters said they used a remittance card to send money home. 

Usage levels were similar for prepaid debit cards and reloadable cards. However, there are 

pockets of success. Prepaid telephone cards have shown the greatest success in reaching 

Latino migrants of all cultures and demographics, ranging from 74% to 96.5% penetration. Key 

differences in the results can be seen based on country of origin and where migrants settle. 

Age, gender, income and education are all relevant determinants in the level of card use. Also, 

having a bank account makes the use of any type of card product more likely, even nonfinancial cards such as affinity and retailer discount cards, although statistically speaking, bank 

account ownership is not a significant factor in card use. It is an important factor in determining 

who chooses to use card-based transfers. A statistical analysis of the key determinants 

suggests that remitters choosing to use card-based transfers tend to be males with moderate 

levels of income who send more money and tend to do so more frequently, who are citizens 

with relatively lower levels of educational attainment, and who have a bank account. 

The paper concludes that significant gaps exist between the demand side and supply side of 

card-based remittance solutions and that there is potential to capitalize on a product set that 

offers value for underbanked remitters given the right product design. Instead of simply putting 

card products to market, companies that carefully consider the entire financial picture of 

remittance senders can begin to develop the marketing, distribution, consumer education and 

pricing models needed to allow card-based transfers to compete with traditional money transfer 

companies and other newer innovations, such as mobile and Internet remittances. 
3

Introduction3

The phenomenon of international remittances is rapidly transforming the financial landscape. As 

millions of workers from around the globe seek employment in other countries, payments to 

their families back home are creating dynamic flows of money. It’s estimated that global 

remittance volume reached more than US$232 billion in 2005, with an additional unquantifiable 

amount transmitted through informal channels that could increase total volume by 50%.4

 In fact, 

remittances are recognized as the second largest external flow of funds to emerging markets 

after foreign direct investment. 

This report presents the results of an analysis of the supply and demand for card-based 

transfers among migrants. We analyze a nationwide study of migrant remittance senders and 

their access and use of card products of all kinds. Coupled with extensive interviews with cardbased remittance providers, this analysis allows us to investigate the relationship between the 

supply for card-based remittances and remittance senders’ demands for financial products. 

A key rationale informing this project lies in two converging trends: the emergence of electronic 

prepaid products and the robust demand for person-to-person cross-border remittance services. 

These two activities, though independent of one another, share important characteristics and 

opportunities. Remitters are more likely to have limited financial access because of their 

immigrant status. Based on the 2000 Survey of Income Program Participation (SIPP), 20.9 

million families, or 17% of households, do not have bank accounts. Among immigrants, 32% are 

unbanked, including 53% of the immigrant Mexican population. These consumers have well 

defined financial needs including cash transfers, payroll deposits, check cashing, bill payment, 

and basic retail and grocery purchases. Prepaid cards lend themselves to these kinds of 

transactions and are flexible payment instruments that on balance are easier to use than 

traditional bank accounts. 

This report examines the extent to which prepaid card-based remittances are emerging as 

another solution for international money transfers. The report begins with an overview of the 

size and economic potential of the remittance market. Then we proceed with a discussion of the 

consumers behind these financial flows. Basic questions such as who sends and receives 

remittances, how much is remitted, and what are the mechanisms used to send remittances are 

explored. Next we provide an overview of the prepaid market, delineating the various business 

models used and fee structures charged to send remittances. Then we analyze a nationwide 

survey of migrant remittance senders and their access and use of financial banking and 

nonbanking instruments, including some of the ways they use card products in general. Next we 

discuss the question of whether there exists a correspondence between the supply for cardbased remittances and remittance senders’ demands and expectations for financial products. 

Then we outline the opportunities and challenges for providers and potential providers. Finally, 

we provide insight into the potential for using card-based remittances as a tool to give 

consumers access to other financial products and services that may have been previously 

unavailable to them. 

 

3

 This report was produced in part with the support of the Annie E. Casey Foundation. The authors respectfully 

acknowledge the assistance of Rachel Schneider and Rebecca Rouse in the creation of this report. 

4 Global Economic Prospects, 2006: Economic Implications of Remittances and Migration. The International Bank of 

Reconstruction and Development, The World Bank, Washington, DC, 2006. 
4

Study Methodology 

This report is based on analytical and empirical analyses including company interviews, 

published research and a nationwide U.S. survey of migrant remittance senders. In order to 

explore the possible dynamics related to offering remittances using card products, CFSI and the 

Inter-American Dialogue conducted detailed interviews with 15 companies on how their cardbased remittance programs (current and planned) are structured and how they evaluate 

success. These interviews highlight opportunities and challenges related to offering remittances 

using various prepaid card structures. 

In addition, a random survey of 2,000 migrant remittance senders was conducted to identify the 

demand side for card-based payments, including remittance transfers. The random sample was 

drawn from five cities (Chicago, Los Angeles, Miami, New York City and Washington, DC), with 

outreach conducted at typical outlets visited by migrants to send money. 

Table 1: Survey Participants’ Country of Origin and U.S. Residence 

PLACE OF RESIDENCE 

Country of Origin 

NYC LA Chicago DC Miami Total 

Mexico 100 300 200 - - 600 

Dominican Republic 300 - - - - 300 

Jamaica 200 - - - 100 300 

El Salvador 100 100 - 200 - 400 

Guatemala - 100 - - - 100 

Bolivia - - - 200 - 200 

Nicaragua - - - - 100 100 

Total 700 500 200 400 200 2000 

The Remittance Marketplace 

While remittances are used by migrants around the world, for the purposes of this study we 

focused on the Latin American and Caribbean populations in the U.S. because of the availability 

of demographic data. The countries of Latin America and the Caribbean (LAC) contribute one 

half the U.S. foreign-born population. We estimate that the number of migrants from Latin 

America5 sending remittances is between 14 and 16 million people, using census data, Central 

Bank data from Latin American countries, as well as survey data and Money Transfer Operators 

(MTO) data. The relationship between Latin America and the U.S. constitutes the highest 

volume remittance market in the world. The total income of these migrants in the U.S. is 

estimated to be over $500 billion, with almost $62 billion sent to Latin America in 2006.6 

 

5

 For purposes of this paper, when referring to Latin America, the countries of the Caribbean are included, unless 

specified otherwise. 

6

 Data collected by the author 
5

Chart 1: Remittance Volume to Latin American and Caribbean Countries Relative to Other Funds Flow

Source: Data collected by the author 

Over the last two years, the percentages of Latin American immigrants sending remittances has 

increased from 61% to 73%, and the average remittance has increased from $240 to $300.7

 

Demographic Characteristics 

Table 2 illustrates some demographic characteristics of the remitters surveyed by income, age, 

gender, education and U.S. citizenship. Our research shows that Caribbean migrants in the 

U.S., for example, show higher levels of educational attainment than Central Americans and 

Mexicans. Similarly, they exhibit a higher likelihood to hold citizenship status. Except for 

Nicaraguans, most immigrants are relatively younger – under 40 years of age. With the 

exception of Guatemala, the male to female ratio distribution is relatively even, with more 

women from El Salvador residing in the U.S. than Salvadoran men. 

 

7

 Multilateral Investment Fund. (2006, October) Public Opinion Research Study of Latin American Remittance 

Senders in the United States. Retrieved February 27, 2007 from

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=820729. 
6

Table 2: Demographics of remittance senders: Age, gender, income, education and citizenship. 

Mexico Dominican 

Republic 

Jamaica El 

Salvador 

Guatemala Bolivia Nicaragua 

Over 40 years of 

age 

18% 15% 17% 15% 26% 24% 51% 

Female 40% 55% 43% 64% 33% 52% 41% 

Some college or 

college degree 

14% 60% 75% 19% 12% 42% 35% 

Income > $35,000 3% 3% 4% 3% 3% 18% 8% 

U.S. Citizenship 13% 43% 56% 17% 12% 16% 14% 

Source: Survey conducted by the authors, managed by Protectora Holdings, March-July 2006 

Internet Use 

For many migrants, the Internet is an important proxy for their relationship to the financial world 

and the world at large. The survey results show that on average, 40% of migrants use the 

Internet, but that only 24% of Mexicans, who represent half of the Hispanic population in the 

U.S., use the Internet. Dominicans and Jamaicans are among those with the highest regular 

use of the Internet. 

Table 3: Internet use among migrants 

Mexico Dominican 

Republic 

Jamaica El 

Salvador 

Guatemala Bolivia Nicaragua 

Use Internet 24% 63% 76% 31% 23% 36% 24% 

Daily 45% 40% 44% 30% 57% 36% 41% 

Monday - Friday 17% 18% 27% 20% 9% 14% 15% 

Weekends 12% 19% 19% 25% 9% 10% 15% 

Rarely 26% 23% 9% 25% 26% 40% 29% 

Source: Survey conducted by the authors, managed by Protectora Holdings, March-July 2006 

Transnational Engagement 

In addition to remittances, migrants maintain a broad range of economic relationships with their 

home country that translates into a deeper transnational engagement.8 These economic 

activities reflect individual and group exercises of a migrant’s transnational identity through 

symbolic and material commitments to their homeland. The tables below estimate the number 

of transnational activities that Salvadorans and Ghanaians, established for more than 30 years 

in the U.S., have maintained with their homeland. 

 

8

 Orozco, M. Diasporas, Development and Transnational Integration: Ghanaians in the U.S. , U.K. and Germany.

October, 2005. 
7

Table 4: Transnational activities for Salvadorans established in U.S. more than 30 years* 

(%) Number Annual expense US 

dollars 

Volume US dollars 

120 minutes of telephone calls per month 41% 340,300 $288 $98,006,400 

Remit more than $300 per month 32% 265,600 $4,200 $1,115,520,000 

Annual purchase of home country goods 66% 547,800 $200 $109,560,000 

Travel once a year 24% 199,200 $700 $139,440,000 

(and spend over $1,000) 61% 506,300 $1,000 $506,300,000 

Have a mortgage loan in home country 13% 107,900 $7,000 $755,300,000 

Own a small business in home country 3% 24,900 $7,500 $186,750,000 

Help family members with mortgage 13% 107,900 $2,000 $215,800,000 

Belong to a Hometown Association 

(HTA) 

5 41,500 $200 $1,500,000 

Number of Salvadorans remitting from the U.S. is 830,000. Source: Orozco, July 2005. 

Table 5: Transnational activities for Ghanaians established in U.S. more than 30 years* 

(%) Number Annual expense US 

dollars 

Volume US dollars 

120 minutes of telephone calls per month 50% 100,000 $432 $43,200,000 

Remit more than $300 per month 60% 120,000 $4,800 $576,000,000 

Annual purchase of home country goods 80% 160,000 $200 $32,000,000 

Travel once a year 50% 100,000 $1,200 $120,000,000 

(and spend over $1,000) 80% 160,000 $1,000 $160,000,000 

Have a mortgage loan in home country 20% 40,000 $7,500 $300,000,000 

Belong to a Hometown Association 

(HTA) 

20% 40,000 $200 $8,000,000 

* Number of Ghanaians remitting from the U.S. is 200,000. Source: Orozco, October 2005. 

Card-based Remittance Transfers: Practices and Issues 

This section looks at the supply side of card-based transfers based on analysis and interviews 

with more than a dozen companies in this business. We look at the prepaid card industry in its 

broadest context, then explore prevailing business models in card based transfers, product 

features and marketing issues, along with challenges identified in this segment of the remittance 

transfer industry. 
8

Prepaid Cards as Nascent Financial Services 

The prepaid card market includes a variety of products, ranging from traditional gift cards 

(closed-loop) used to make small dollar transactions with specific retailers to the more recently 

established reloadable branded general spending and payroll cards (open-loop) which have 

substantial versatility and may hold a considerable amount of a consumer’s income.9

The prepaid card market, while nascent in this country, is growing at a rapid pace. It is 

estimated that $14.1 billion were loaded onto more than 45 million open solution networkbranded prepaid card accounts in 2005.10 Within this broad open solution category is the 

money and financial service segment. In 2005, this segment accounted for $710 million, an 

increase of 16.4% from the previous year.11 This upward trend in electronic payments away 

from checks and cash was confirmed in late 2004, when the Federal Reserve System 

announced that electronic transactions had surpassed checks as consumer’s preferred noncash 

payment method. 

Prepaid cards also are emerging as a promising product to serve underbanked consumers. An 

attractive financial tool, they offer low barriers to entry, generally lacking the credit requirements

that effectively bar millions of individuals from opening traditional bank accounts. They are 

convenient, easily purchased and reloaded at a growing number of retail channels. They 

appeal to consumers’ need for liquidity, with funds available quickly and potentially at a lower 

cost than other alternatives for unbanked consumers. Because many migrants are 

underbanked, prepaid products are a potentially promising financial vehicle for these 

consumers. 

As the industry focuses on innovation related to features, reloadability, and distribution 

networks, several companies have begun to add remittance features to their prepaid cards in 

order to enable their customers to send money to friends and family overseas. This allows U.S. 

cardholders to transfer funds to authorized persons in other countries, either by creating a subaccount which a cardholder in another country can access or by issuing a second card on the 

full account. There are also innovations with respect to prepaid cards that are not connected to 

a U.S. based prepaid card or account, but that are marketed, purchased and reloaded in the 

U.S. 

The assumptions about prepaid cards are tested in this paper against the extent of the supply 

for card-based transfers and the demand for it among remittance senders. Consumers in the 

remittance marketplace are individuals with predominantly lower education and income levels, 

with a seeming preference for cash to cash transactions, both domestic and international. 

Therefore, the use of these instruments presents challenges and opportunities. 

 

9

 For a detailed discussion about closed-loop and open-loop prepaid cards, see Cheney and Rhine, 2006b.

10 Davis, Donald, “Mercator: Open-Loop Cards Show Robust Growth,” Prepaid Trends, Volume I, Issue 16, 

September 27, 2006. 

11 Sloane, Tim, “3rd Annual Open Prepaid Market Survey: Spend, Growth & Opportunities.” Mercator Advisory Group, 

August 2006. 
9

Business Models 

Firms offering card-based remittances fall along a spectrum from card companies that are 

adding remittances as a new card feature to remittance companies that are adding prepaid 

cards as a new method for customers to access their cash. In the middle are a handful of 

companies whose only or primary product is a card-based remittance. 

In each case there are opportunities and challenges as companies gain expertise in one area 

and experiment with the other product (a prepaid card, or a remittance option) as a way to sell 

their core product. There are also significant differences in the infrastructure and operations of 

these companies, which result in differences in how the firms structure their card-based 

remittance products. 

The essential feature that defines card-based remittances is the use of a card on the sending 

end, the receiving end, or both, of a funds transfer from an individual to friends or family in 

another country. There is significant variation in how the sender initiates the transaction. For 

some card-based remittance companies, the sender must have a credit or debit card already, 

which he or she uses to purchase and reload a prepaid card for use by the recipient of the 

funds. Similar products allow the sender to use cash to purchase and reload a prepaid card for 

the recipient to use. 

Other companies in this segment issue a prepaid debit card to the sending cardholder, which is 

then used to remit funds. Several of the entrants into this market are payroll card issuers, who 

are adding the ability to transfer funds as an additional method of using the funds that have 

been loaded onto the payroll card by an employer. 

A variety of models have developed for how the recipient can access funds that have been sent 

to them. 

Card-to-cash model: In this model, the recipient does not have a card of his or her own, but 

has the ability to retrieve the transferred funds directly in cash. Many of the companies 

interviewed believe that this is the preferred model for consumers as it most closely replicates 

how remittance transfers generally work today. Familiar and convenient, it requires the least 

education to acquire new customers. 

It is also a natural option for remittances to countries in which card use is less ubiquitous, or to 

rural areas that do not have many ATMs. However, this is a difficult business model to create 

from scratch, as it requires building a disbursement network in the receiving countries. As a 

result, the remittance companies who are adding prepaid cards are best positioned to offer this 

option. It is also a part of the market in which there is very little vertical integration. Instead,

companies evaluating or offering this option are more likely to establish a set of partnerships 

with banks and other entities in the recipient country to form a distribution network. This is 

particularly true for the prepaid card companies who are adding a remittance feature. 
10

Dual-card model: This model issues two cards with access to the same account. Offering two 

cards on the same account is administratively simple, and in some cases is happening 

organically as consumers figure out how to make this happen even if it is not explicitly an 

offering of the card issuer. Several of the prepaid card companies interviewed indicated that 

their customers have been using their accounts in this way, with one having tracked this type of 

activity in over 100 countries. The disadvantage to this approach is that the recipient is able to 

withdraw the full amount of funds in the account. A variation of this model uses a sub-account, 

where two cards are issued, but the primary cardholder can transfer specified amounts of funds 

to the sub-account that is accessible to the recipient cardholder. 

Recipient-only card model: In this model, the sender purchases a prepaid debit card in the 

U.S., which is either sent directly to the recipient or issued in the recipient’s country. The 

sender can then reload funds onto the card. 

A significant challenge in offering card–based remittances using any of these approaches is that 

issuing a card to a recipient outside of the U.S. raises regulatory and operational issues that 

present new challenges for the issuing entity, regardless of whether it is a remittance or prepaid 

card company. Interviewees mentioned concern about not being able to verify the identity of the 

recipient, some in the context that regulatory requirements may become more stringent over 

time. The card also needs to be reliably delivered. Another major challenge is that users in 

many receiving countries are not familiar with card-based platforms or are unable to utilize this 

model due to the lack of a payments network that accepts cards. 

Card Features 

The features of the cards used by the sender and recipient in the remittance transaction vary as 

much or more than the features of prepaid debit cards generally. As with other prepaid cards, 

an important issue for consumers is whether the card is branded with a Visa, MasterCard, 

American Express or Discover logo, which offers extended purchase capability and enables 

consumers to participate more fully in the larger financial mainstream. A few of the products 

that exist today, including those offered by the pure, card-based remittance companies, are 

unbranded, PIN-based cards. However, the majority of cards offered by the companies 

interviewed are branded cards, and it is likely that the larger prepaid card companies that offer 

branded cards today would continue to do so even as they add a remittance feature. This 

should improve consumer acceptance and card usability. 

Loading funds is done through the issuer’s reloading network, which generally includes some 

combination of online, phone and retail locations and allows for reloading through cash payment 

or funds transfer using a bank account, credit card, debit card or sometimes a PayPal account. 

In some cases, reloading is only possible via the Internet using an existing credit or debit card, 

creating a significant challenge to serving underbanked consumers who may not have access to 

computers. The prepaid card companies who are moving into the remittance space seem best 

positioned to offer a broad range of reloading methods. Companies starting with a remittance 

product and adding prepaid cards face operational challenges to replicate or connect to existing 

loading networks. 
11

How the cards are reloaded and how the funds are transferred affects both the usefulness of the 

product to consumers and the fees charged. For some of the products, reloading and 

transferring funds are one transaction and hence, subject to one fee. By definition, dual-cards 

accessing the same account accomplish reloading and transferring simultaneously, as do 

recipient-only cards. For a sub-account product or a product in which the recipient card is 

issued by a local partner, reloading the prepaid card and transferring funds are two distinct 

steps, each with its own constraints and fees. Another important distinction is whether the 

second card used by the recipient is free. In some cases, the sender bears all costs, though 

usually the recipient pays an ATM fee to withdraw the funds. In others, the recipient pays fees 

to have a second card or account. 

As time goes on, it will be worth watching how the variation in features affects consumers, and 

whether the features converge, as well as whether the pure card-based remittance companies 

are able to become significant players in this space. 

Fee Structures 

The combination of new players entering the field coupled with advances in technology that 

streamline operations continues to flatten fees for wire transfer transmissions, in some cases by 

as much as 50%12. However, card-based remittance products continue to demonstrate a wide 

variation in pricing and features, as reported in company interviews: 

Table 6a: Cost to use remittance cards to send $300

Company A B C D E F G 

Advertised price per send $9.99 $9.95 $2.50 $2.00 $14.00 $10.00 $9.95 

Price to purchase card 0 $4.95 $29.95 $14.95 $1.99 0 $14.95 

Shipping fee 0 0 0 0 $9.99 0 $1.00 

Monthly fee 0 0 $2.50 0 $0.99 0 $1.50 

P.O.S. purchase fee 0 0 0 $2.00 0 0 0 

Balance inquiry 0 0 $2.00 0 0 $0.50 0 

Dormant account 0 0 0 $5.95/mo. 0 $2.00/mo. 0 

Total fee for first transfer $9.99 $14.90 $34.95 $16.95 $28.96 $11.00 $27.40 

Rate per $300 sent 0.03 0.045 0.1165 0.0565 0.0965 0.0367 0.091 

Source: Data complied by the authors 

 

12 http://www.imf.org/external/pubs/ft/fandd/2005/12/basics.htm 
12

Table 6b: Sample fee structures by card model 

Model Recipient Only Dual Card Sub-Account with 

Local Partner 

Sample Fees Sender pays shipping 

fee to purchase and 

send card. 

Recipient pays a 

monthly fee and an 

international ATM fee for 

each withdrawal. 

Sender pays transfer

fees to load funds onto 

the card, which are 

competitive with existing 

remittance fees.

Sender pays typical fees 

for prepaid card 

(activation fee, reloading 

fees and either a 

monthly maintenance or 

a transaction fee). 

Recipient gets card free 

but pays international 

ATM fees to withdraw 

funds. 

No transfer fees.

Sender pays typical fees 

for prepaid card 

(activation fee, reloading 

fees and either a 

monthly maintenance or 

a transaction fee). 

Recipient may pay the 

same to local partner, 

but will not pay 

international ATM 

withdrawal fees. 

Funds transfer through 

ACH, so would be fairly 

low fee to the sender. 

In general, funds transfer fees within a prepaid card package appear to be slightly lower than 

the remittance charges prevalent in today’s market. However, the total cost to transfer funds 

may not be lower if the recipient needs to pay an international ATM fee to withdraw the funds in 

addition to a transfer fee, or if the recipient pays a full set of fees for a separate card or account. 

It is difficult to know if the consumer’s total expenditure for financial services will decline using 

prepaid card remittance services since that will depend on how he or she uses and pays for the 

full services of the prepaid card. 

Table 6c: Cost comparison to send $300 

Average Cost to Send $300 

2005 2006 

Prepaid Cards Wire Transfers Prepaid Cards Wire Transfers 

Advertised cost per transfer $7.95 $11.27 $8.30 $11.41 

Actual cost of first transfer $21.35 $14.85 $19.02 $14.05 

Actual cost of subsequent transfers $9.39 $14.85 $9.30 $14.05 

Source: Data compiled by the authors 

Marketing and Customer Relationships 

Rough estimates indicate that the volume of transfers using prepaid remittance cards is 

probably less than 2% of the total of U.S. outbound international funds transfer market. Take-up 

rates for the product have been lower than hoped for at several of the companies interviewed. 

However, a number of companies reported that repeat usage by existing customers is high, with 

customers tending to be fairly loyal and establishing long-term relationships with service 

providers. Customers are sending amounts that are consistent with other remittance vehicles, 
13

often $200 to $400 per month. The primary challenge is acquiring customers. 

The low take-up rates may reflect the lack of any large-scale marketing of prepaid card-based 

remittances, particularly as some of the biggest U.S. banks have stopped providing remittances 

through card products. The companies offering these products are new and generally small. 

Several interviewees referenced the lack of financial resources to devote to marketing and the 

competing internal demands of pursuing multiple new product ideas simultaneously. Given 

these constraints, companies have relied on creative grass-roots campaigns consisting of word 

of mouth, flyers at musical and cultural events, and marketing at local schools or church groups. 

Many providers focus their marketing efforts on a specific remittance corridor, which allows the 

provider to choose the business model most likely to be successful, whether that means 

developing a card-to-cash disbursement network or partnering with the right local bank. It also 

helps to define marketing efforts, tailoring advertising and other sales efforts to specific ethnic 

groups within the U.S. 

To date, marketing for the prepaid card-based remittance products has been directed at the 

U.S.-based sender. He or she is viewed as the decision-maker in choosing how funds will be 

sent, along with the responsibility to educate the recipient on how to use the prepaid card. It 

seems likely that those entities that pursue a local partner strategy of offering prepaid cardbased remittance will realize some advantages marketing at the recipient end of the transaction 

as well. 

Across all of the business models chosen by companies entering into this marketplace, there is 

a strong interest in developing local partners. A partner in the recipients’ home country can 

potentially provide access to the distribution network that is best equipped to meet the 

expectations and behavior of consumers in that country. For example, in countries in which 

card use at ATMs and point-of-sale are ubiquitous, the local partner could be a large regional 

bank; whereas in countries where cash disbursement is critical, the local partner could be en 

entity that has already developed that functionality. If a local partner issues the card used by 

the recipient, the U.S. issuer can avoid the operational and regulatory hurdles inherent in 

issuing a card to an individual who is out of the country. Local partnerships also offer cobranding opportunities, the possibility of avoiding or lowering some fees, the ability to provide 

greater levels of customer service and education, and the option of marketing additional 

services. 

Opportunities and Challenges 

Overall, the interviews conducted indicate promise in offering card-based remittances as well as 

meaningful operational challenges that need to be overcome in order to capitalize on that 

promise. The most-often cited challenge was the need to create stronger consumer acceptance 

of card-based transactions in the receiving countries. Operational challenges such as creating 

reloading and distribution networks and building the appropriate technology backbone require 

significant management sophistication and investment. And, regulatory concerns need to be 

resolved in order to create a stable environment for innovation. 

All of these challenges are exacerbated for smaller companies that lack scale or resources. 

However, the companies interviewed generally perceived these challenges as surmountable 
14

and worth the investment. Companies tended to see the card-based remittance feature as a 

way to leverage their existing customer base into longer term, more profitable relationships or to 

generate new customers who would be drawn in by this particular feature. Most importantly, the 

potential market for either prepaid cards or for remittance products individually is perceived to 

be so large that learning how to provide services effectively seemed to be viewed as a nut worth 

cracking – even if it is challenging operationally. 

Market size and cross-selling opportunities: Overall market size and the ability to cross-sell 

additional products to the underbanked population were the fundamental opportunities identified 

by the study’s participants. Serving the underbanked – with prepaid cards or remittance 

services – was generally viewed to represent a huge market with unmet demand and the 

potential for many players to be successful. The pure, card-based remittance market did not 

seem to itself be the draw (at least for now), and it remains to be seen if the monoline 

companies will emerge as significant players in this space. Rather, many companies regarded 

the card-based remittance feature as a way to leverage their existing customer base into longer 

term, more profitable relationships, or to generate new customers who would be drawn in by this 

particular feature. At this point, the card-based remittance product is often a cross-sell itself, 

from either remittance companies expanding into cards or card-based companies adding 

remittance services. 

The market for prepaid card-based remittances is both broad and complex, and there are 

opportunities for growth given the right product and marketing mix. As the industry matures and 

customer acceptance grows, providers acknowledged the potential of adding features, such as 

bill payment, overdraft protection, travel services, telecommunications, catalog sales, loyalty 

and reward programs. 

Marketing and Distribution: The operational and marketing challenge inherent in converting 

the recipients of transferred funds to the use of card products were the most-often cited barriers 

to the growth of this product. In some regions, receiving cash is simply more practical than 

using a card, as ATMs or POS terminals are not ubiquitous or are expensive to use. In other 

regions, cultural norms lead to high percentages of unbanked consumers who need to be 

marketed to about the uses and advantages of cards if the cards are to be attractive. Accessing 

the market for card-based remittances successfully therefore seems to require sophistication 

about financial behavior and attitudes in the receiving country as well as effective marketing to 

U.S. consumers. Regional specialization is one strategy that some of the prepaid card-based 

remittance providers are pursuing to address this challenge. 

Most of the companies interviewed also referenced the difficulty of establishing an appropriate 

disbursement network. This issue is strongly related to the need to be responsive to consumer 

expectations, as well as being a critical cost structure and regulatory issues. Vertical integration 

in the prepaid card remittance market is difficult to achieve, and as a result, a significant 

competitive requirement for prepaid card-based remittance companies may be the development 

of appropriate and committed partners – regardless of whether the company seeks to develop 

cash or card-based distribution capabilities. 
15

Regulation: Many respondents cited the time and resources devoted to regulatory issues as a 

barrier to growth, as they need to comply with an array of federal and state rules. In particular, 

requirements for more stringent identification procedures under the USA PATRIOT act 

complicate the provision of cards to non-U.S.-based individuals. In October 2006, the 

Department of Justice published a report that identified prepaid stored value cards as a 

mechanism for circumventing the $10,000 threshold and circumstances that trigger special 

reporting requirements.13 The Financial Crimes Enforcement Network (FinCEN) announced that 

it would issue new regulations designed to clarify the roles and obligations of issuers of prepaid 

cards. Additionally, uncertainty as to how rules regarding FDIC insurance and consumer 

disclosures will be applied to prepaid cards makes it challenging for providers to weigh 

compliance costs versus regulatory risk. 

Scale: All of these challenges are exacerbated for smaller companies that lack scale or 

resources. Consumers have high expectations with respect to how the service of transferring 

money abroad is performed. The money needs to be available nearly immediately and there is 

little tolerance for errors. In addition, investments in distribution, technology and regulatory 

expertise are primarily fixed costs that demand leverage across a wider customer base – at 

least within the context of serving particular regions. As a result, larger companies with 

established operating histories and brand recognition have some advantages. 

While the challenges may be substantial, study participants exhibited a general sense of 

optimism and an expectation of opportunity for those companies with the right product and the 

right strategy. In several cases, what was viewed as a barrier by one company was viewed as 

an opportunity by another. For example, companies confident that they had positioned 

themselves effectively with respect to regulatory requirements were optimistic that this would be 

a competitive strength that would facilitate their continued success. Most importantly, the 

potential market for either prepaid cards or for remittance products is perceived to be so large 

that learning how to provide services effectively is viewed as a nut worth cracking. 

Remitters and the Demand for Card-based Transfers 

Now, we turn to the demand side of the equation. There is an assumption that the Latino and 

immigrant market is significantly large and that, since this market is largely unbanked, they will 

be strong candidates for the use of prepaid products. But there is little empirical understanding 

of the size and position of this market segment. Using a survey conducted among foreign-born 

Latino and Caribbean remitters in the U.S., this section analyzes this cohort as well its 

remittance transfer patterns vis a vis the remittance intermediation industry. We also analyze 

the extent to which this group uses prepaid cards as payment tools in addition to concretely 

looking into the determining factors that inform a remittance sender to use card-based transfer 

mechanisms instead of typical electronic wire money transfers. We determine their access and 

use of mainstream financial services, along with various descriptive demographic 

characteristics. We then explore the extent of their use of fifteen different types of card 

products, including ID, credit, debit, prepaid, affinity and loyalty cards. We examine how this 

 

13 Prepaid Stored Value Cards: A Potential Alternative to Traditional Money Laundering, U.S. Department of Justice, 

October 31, 2006; nbpca.com/docs/NMLAFC_Jan2007.pdf
16

group regarded cards as payment instruments. We then look into the determining factors that 

inform whether a remittance sender is likely to use card-based transfer mechanisms instead of 

typical electronic wire money transfers. 

We find that only 2% of Mexican immigrants use remittance transfer cards, and 13% of 

Salvadorans using these instruments. But we also find different determinants for the use of 

prepaid cards and remittance transfer cards. 

Remitter card use and banking access 

Nearly half of migrants lack effective access to financial institutions, and research has shown 

that half of Latinos who send remittances, particularly Mexicans, do not have bank accounts.14

 

Although providing banking financial access to immigrants is a critical task, some institutions 

have argued that instead of offering traditional banking services, alternative products may be 

more suitable. For example, many companies in the prepaid card business have sought to offer 

remittance transfers to immigrants as part of their bundle of products. These companies argue 

that prepaid cards are a solution for those without bank accounts. Others have argued that 

offering Internet payment services can make transfers more efficient. 

One assumption at the foundation of this argument is that access to bank accounts is perhaps 

more difficult than access to a prepaid card 15,and migrants may find it much easier to 

manipulate value on a card than to request bank services at a financial institution. In surveying 

remitters for this paper, we find that the factors associated with banking access are related to 

both endogenous and exogenous causes, some of which deal with the banking industry, and 

others that specifically relate to the social conditions of Latinos. Income, age, education, and 

citizenship are often typical determinants of lack of financial access.16 

 

14 Orozo, M., and Fedewa R. “Leveraging Efforts on Remittances and Financial Intermediation.” Washington DC: 

Inter-American Development Bank, 2006. 

15 Jacob, Katy, Stored Value Cards: A Scan of Current Trends and Future Opportunities, July 2004 and 

Jacob, Katy, Su, Sabrina, Rhine, Sherrie, Tescher, Jennifer, Stored Value Cards: Challenges and Opportunities for 

Reaching Emerging Markets, April 2005 

16 From a statistical standpoint, we find that some determinants of owning a bank account are those reflecting 

socioeconomic status and inclusion in the United States, and that the extent of one’s commitment back home does 

not have a statistical relationship. Like income and age, citizenship is positively statistically significant. However, 

education, though statistically significant, has a negative relationship. We also find that women are more likely to own 

a bank account than men. 
17

Table 7: Descriptive statistics among remittance senders who have bank accounts 

Mexico Dominican 

Republic 

Jamaica El Salvador Guatemala Bolivia Nicaragua 

High school education 

or more 

79% 95% 99% 69% 75% 93% 91% 

Female 45% 82% 79% 57% 27% 77% 46% 

Male 36% 67% 88% 60% 36% 34% 58% 

Income > $30,000 14% 6% 8% 12% 17% 34% 23% 

Older than 35 41% 40% 41% 34% 66% 47% 81% 

Sends more than $300 

per month 

36% 8% 2% 32% 31% 17% 13% 

U.S. citizenship 31% 54% 66% 29% 36% 20% 24% 

Source: Survey of migrant remitters, February-April 2006. 

This is even more pronounced among Mexican immigrants, two thirds of whom do not have 

accounts. When asked why, nearly a third say they don’t have an account because of their 

legal status. 

Table 8: Percentage of people who say they don’t have bank accounts because of legal status 

Mexico Dominican 

Republic 

Jamaica El Salvador Guatemala Bolivia Nicaragua 

57% 16% 13% 74% 61% 80% 51% 

Source: Survey of migrant remitters, February-July 2006. 

Overall, migrant consumers have not embraced card products. With the exception of phone 

and transit cards, fewer than 60% of migrants use any type of card product. On average, fewer 

than 7% of remitters said they used a remittance card to send money home. Usage levels were 

similar for prepaid debit cards and reloadable cards. However, there are pockets of success. 

Table 9 confirms that prepaid telephone cards have shown the greatest success in reaching 

Latino migrants of all cultures and demographics, ranging from 74% to 96.5% penetration. 

Central Americans and Mexicans are distinct consumer groups from Caribbean migrants, 

whether they be Jamaicans or Dominicans. The differences are found both in their 

demographics and in that they are more likely to use card products. Jamaican migrants in 

particular demonstrate much higher use of card products in virtually all categories. Three 

quarters of Jamaicans have an ID card, 39% have a payroll card, and 69% have credit and debit 

cards. 
18

Table 9: Type of card used by migrants (%)17

Card Type Mexico Dominican 

Republic 

Jamaica El 

Salvador 

Guatemala Bolivia Nicaragua Avg. 

Money and Financial Services Cards 

Benefits 2.5% 17% 30.5% 8.3% 4% 0 1% 8.7% 

Credit & Debit 36.6% 56.5% 69.1% 40.3% 39.4% 57.1% 29.6% 49.1% 

Debit 49.6% 25.1% 17.3% 53.7% 54.6% 29.3% 57.4% 38.2% 

Credit 13.8% 18.4% 13.7% 6.1% 6.1% 13.6% 13% 12.8% 

Gift 13.3% 26.7% 28% 11.3% 16% 7% 5% 15.6% 

Payroll 0.3% 17.3% 39.0% 6.8% 0 1.0% 0 8.5% 

Prepaid Debit 2.7% 7.7% 19.5% 5.5% 1.0% 0.5% 1.0% 5.4% 

Reloadable 1.5% 11.3% 15.5% 5.3% 4.0% 14.5% 6.0% 7.1% 

Remittance 1.8% 5.0% 6.5% 12.8% 1.0% 8.0% 13.0% 6.3% 

Non-Financial Cards 

ID 42.3% 68.7% 76% 45% 22% 59% 86% 53.6% 

Affinity 0 5.7% 9.5% 4.3% 0 0 0 2.8% 

Discount 46.5% 67% 70% 60.8% 50% 74.5% 59% 59% 

Laundry 6.5% 6.7% 24.0% 9.0% 12.0% 4.0% 5.0% 8.8% 

Phone 78% 85.3% 79% 82.8% 74% 96.5% 92% 82.7% 

Public transit 33.3% 65% 79.5% 25.8% 24% 8.5% 97% 63.1% 

Table 10 illustrates the differences in card use across cities, largely due to migration patterns. 

People in the New York-New Jersey area are more likely to use cards of all kinds than in other 

cities, followed by Miami, with Los Angeles and Chicago having the lowest number of users. 

Washington DC displays the largest number of people using card-based remittances, likely 

because DC has large enclaves of Salvadorans and Bolivians, who are more likely to use cardbased transfers. 

 

17 The survey instrument did not explicitly define the various card types. Rather, it measured usage based on the 

respondent’s understanding of the products in his or her wallet. Thus, there may be some overlap between some 

categories, such as “reloadable” and “prepaid debit.” 
19

Table 10: Use of card-based products by metropolitan area 

Card Type New York/ 

New Jersey 

Los 

Angeles 

Chicago Washington

 DC 

Miami Avg. 

Money and Financial Services Cards 

Benefits 21% 3% 1% 0 1% 5.2% 

Credit & Debit 61% 32% 48% 43% 30% 42.8% 

Debit 23% 59% 38% 48% 57% 45% 

Credit 16% 9% 14% 9% 13% 12.2% 

Gift 25% 17% 7% 5% 5% 11.8% 

Payroll 22% 0 1% 1% 0 4.8% 

Prepaid Debit 12% 2% 6% 0 1% 4.2% 

Reloadable 12% 3% 2% 7% 6% 6% 

Remittance 4% 1% 4% 16% 13% 7.6% 

Non-Financial Cards 

ID 69% 27% 55% 51% 86% 57.6% 

Affinity 8% 0 0 0 0 1.6% 

Discount 66% 54% 33% 66% 59% 55.6% 

Laundry 13% 12% 3% 3% 5% 14.4% 

Phone 84.9% 80.6% 63.0% 89.3% 85.0% 82.5% 

Public transit 75% 20% 28% 5% 3% 26.2% 

According to the survey results, immigrants still prefer to use traditional cash to cash remittance 

transactions and, to some extent, cash to account transfers—an important finding considering 

the different business models outlined earlier in this paper. Some banks in Latin America report 

that an increasing number of transfers to their institutions are being transferred into accounts. 

BBVA/Bancomer in Mexico says that 12% of its clients receive their money into an account. 

Banco Salvadoreno in El Salvador stresses that nearly half of transfers from its U.S. branches 

go into the clients’ accounts. Banco Cuscatlan, also in El Salvador, reports that 15% of its 

remittance transactions are done through cards. 

Table 11 shows those companies that remitters reported using for card-based transfers. The 

results suggest that the companies used for card transfers have significant market share and 

enjoy the trust of consumers. This is particularly true in El Salvador and the Dominican 

Republic. 
20

Table 11: Companies that issue remittance transfer cards, by remitter country of origin 

Mexico Dominican 

Republic Jamaica El Salvador Bolivia Nicaragua 

Banco Agricola 76.5% 

Bancomericio 19.6% 

Bolivar Express 6.7% 

Cash Zone 7.7% 

Cashpin 10% 80% 

Credit union 6.7% 

Dolex 70% 61.5% 

Fin Center 6.7% 

MoneyGram 6.7% 15.4% 

Telegiros Virginia 80% 

Western Union 20% 13.3% 92.3% 3.9% 23.1% 

We find that, more than income or education, having a bank account increases the use of any 

type of card product, even non-financial cards such as affinity and retailer discount cards. 

Revisiting the data in Tables 9 and 10, we can speculate that owning a bank account may be 

the result of several converging factors, such as the possession of an ID card, or employment 

that offers a payroll or benefit card. It may be a function of geography, where card use can gain 

traction within particular niche cultural groups. In Table 12 we look more specifically at card 

ownership by banked status. 
21

Table 12: Card ownership by banked and unbanked consumers 

Card Type Bank Account No Bank Account 

Benefits 12.7% 3.1% 

Credit & Debit 49.5% 0 

Debit 38.1% 44%18

Credit 55.6% 11.7% 

Gift 21.9% 6.9% 

Payroll 14.6% 0 

Prepaid Debit 8.6% 1% 

Reloadable 12% 0.3% 

Remittance 7.9% 4.1% 

ID 71.1% 36.8% 

Affinity 4.7% 4.1% 

Discount 75.1% 36.8% 

Laundry 8.8% 8.9% 

Phone 84.8% 80.9% 

Public transit 39.1% 33.9% 

Cards and card-based remittances: Determinants of usage 

Here we look at some statistical determinants for both card products generally and card-based 

remittances specifically to identify the more salient factors influencing the use of these 

instruments. We hypothesize that lower income people are more likely to take advantage of 

cards, yet leave open other variables for interpretation. 

The table below shows an OLS regression model using an aggregate ordinal value for use of 

any card product among those listed in the survey. The independent variables deal with 

income, citizenship, ownership of a bank account, undocumented legal status, age, education, 

and amount remitted. The results show that, except for age and owning a bank account, all 

other variables are statistically significant. Thus, we can infer that males, less educated and 

naturalized but lower income, are more likely to take advantage of these card products. This is 

 

18 Most unbanked respondents interpreted “debit” to mean a prepaid card. When asked which company provided the 

card, they generally named prepaid card companies. 
22

essentially a description of a typical working class migrant. This result opens the question about 

how to further financial inclusion among low income and education cohorts through banking or 

prepaid card products. 

Table 13: Correlates of card products 

 Unstandardized 

Coefficients 

t 

 B 

(Constant) 5.464 8.876 *** 

Age 3.379E-03 .593 

Gender .172 1.741 * 

Education -.178 -3.007 *** 

US Citizenship .281 2.833 *** 

Average 

remittance 

-8.238E-04 -3.987 *** 

Own bank account 1.709E-02 .032 

Income -.185 -6.330 *** 

Adjusted R2: 0.08. Dependent Variable: prepaid cards, F=13.2. Significance: *** at 1% level; ** 5%; * 10%

When looking at card-based remittance transfers we find relatively similar results. Except for 

age, all other variables are statistically significant. This means that those remitters choosing 

card-based transfers are males with moderate levels of income who send more money and tend 

to do so more frequently, who are citizens with relatively lower levels of educational attainment. 

A key difference is that bank account ownership is not a significant factor among card use 

generally, but it is an important factor among card-based remittance users. 

Table 14: Correlates of card-based remittance transfers 

B S.E. Wald Df Sig. Exp(B) 

Income .201 .068 8.849 1 .003 1.223 

Citizenship -1.310 .329 15.981 1 .000 .270 

Age -.010 .013 .563 1 .453 .990 

Gender .460 .223 4.253 1 .039 1.584 

Education -.187 .130 2.084 1 .1 .829 

Amount remitted .001 .000 9.238 1 .002 1.001 

Sending Frequency .032 .010 10.734 1 .001 1.033 

Bank account .673 .257 6.857 1 .009 1.960 

Constant -4.292 .825 6.857 1 .000 .014 

The results highlight the important issue that card-based transfers are more likely to be used by 

those who are better established and better off than the unbanked, but are not necessarily 

naturalized citizens or highly educated. Again, the policy and business challenge is to identify 

mechanisms that will provide consumers with opportunities to take advantage of the benefits 

that prepaid cards can offer to these consumers. 
23

In summary, there exist distinct differences in use of different financial products. Use of card 

products in general seems to be a function of income, gender and age, while users of cardbased transfers tends to be even better off financially and more connected to their home 

country. 

Discussion and Recommendations 

As prepaid card companies and remittance companies begin to converge to offer card-based 

remittance products, there are important business lessons to be learned from market leaders 

and early adopters. Most migrants are living in a vulnerable financial condition, partly informed 

by low incomes, education, and legal status. Moreover, we have found that those with bank 

accounts are heavier users of card-based products of all kinds and are more likely to use cardbased transfers. These factors might explain the relatively low participation levels seen by cardbased remittance providers. Given these findings, what can providers do to increase uptake of 

these products? 

Segment and target appropriate markets 

Segmenting the market will help determine the appropriate financial products in terms broader 

than bank account ownership. Prepaid phone card providers have had significant success 

across a range of Latino and Caribbean populations, with 74% to almost 97% of those surveyed 

using these cards. Part of this success can be attributed to the degree of convenience that 

phone cards impart on consumers, but a close look at various prepaid phone card marketing 

campaigns reveals an industry that works hard to tailor messages to a complex mix of people 

with different languages and cultures. Financial service providers should look to pinpoint the 

segments most likely to succeed with card-based transfers, taking into consideration factors 

such as nationality, length of time in the U.S. and home country. Segmentation may include the 

extent of financial penetration in the home country with considerations about its prevailing 

financial infrastructure. There are numerous niche markets with receptive consumers that are 

currently underserved. For example, our survey research shows that Caribbean migrants might 

be particularly well suited for card-based solutions. Yet most marketing efforts have targeted 

migrants from Mexico. 

Lower the barriers to entry 

Our survey did not distinguish between whether consumers acquired a card product and then 

opened a bank account, or opened a bank account and acquired a card product. What is 

evident is that these consumers had found a way to attain the identification required to open a 

bank account. Providers of prepaid cards and card-based transfers should look for ways to 

open channels of access while continuing to fulfill regulatory requirements, such as considering 

foreign government identification cards, such as the Mexican matricula consular. 
24

Develop simple pricing structures 

The costs involved in conducting business transactions with cards are not as simple as paying 

one fee and an exchange rate commission. Instead, there is a roster of costs that include fees 

per withdrawal, monthly fees, the cost to issue cards or additional cards, and exchange rates, 

among others. The complexity of fee structures may make customers uneasy, particularly if 

they consider using the card for several activities. The cost of transmitting money for the 

provider is not a function of the amount remitted, so it is possible to develop low fixed fees that 

would still be profitable for providers 

Develop effective distribution channels 

Companies need to take into consideration how distribution channels are set up here and 

abroad, and how card-dependent solutions fit into those channels. For remitters who are more 

likely to be unbanked – or for receivers who are unbanked – cash-to-card or card-to-cash 

options might be a better fit than pure card-based models. It is evident that dual-card programs 

may face the biggest challenge, and card products that incorporate cash on one side likely will 

grow at a faster pace. However, all prepaid card-based remittance models are in need of 

effective distribution networks on both sides of the border. This dimension is most critical for 

small, monoline prepaid card distributors looking to enter the remittance field. Reversing the 

typical strategy for finding appropriate demographic clusters in the U.S., they might consider 

finding discrete geographic groups within the receiving country that have a ready partner to 

distribute remittances. Then by following the migration pattern from these locations to the U.S., 

they can develop a more effective product catering to the needs of users on both sides of the 

equation. 

Build scalable models 

As company interviews show, scale is necessary to make card-based remittance programs 

successful, and yet most companies offering these services are relatively small, especially in 

comparison to the dominant money transfer companies. In order to reach scale, companies will 

need to leverage partnership models and opportunities. Those with the most effective 

marketing, distribution and customer partnerships are most likely be to able to build sufficient 

scale. 

Educate the target market 

To help consumers understand prepaid cards and use them successfully, companies might 

develop joint partnerships with grassroots organizations and government institutions to provide 

financial education. Grassroots groups have the network access, while banks and government 

institutions have the training skills to educate groups, and money transfer operators could use 

their venue for practical on-the-spot outreach. 
25

Consider mobile banking channels 

Prepaid cards are not the only new option in the remittance market. One creative consideration 

to alternative banking is mobile commerce. More than 80% of remittance senders who use any 

type of stored value card also use prepaid phone cards that are loaded onto cell phones. The 

market for prepaid cards includes not only underbanked consumers, but also the teens and 

young adults who are large users of similar products such as prepaid wireless phones. The 

Yankee Group reports that as many as 65% of prepaid debit card users are under 35 years old. 

Cellular telephony could be a critical instrument to promote financial intermediation by loading 

money onto cell phones. Experiences in Asia and Africa suggest that mobile banking is an 

effective choice for low-income groups. Given the increasing penetration of alternative financial 

payment mechanisms, introducing mobile banking could be an effective tool to reach people at 

the “bottom of the pyramid.” 

In conclusion, though significant gaps exist between the demand side and supply side of cardbased remittance solutions, there is potential to capitalize on a product set that offers value for 

underbanked remitters given the right product design. Rather than simply putting card products 

to market, companies that carefully consider the entire financial picture of remittance senders 

can begin to develop the marketing, distribution, consumer education and pricing models 

needed to allow card-based transfers to compete with traditional money transfer companies and 

other options, such as mobile and Internet remittances. As the prepaid card industry matures 

alongside the remittance industry, we find important synergies and areas of convergence in 

spite of operational challenges. 
26

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September). Getting to Know Underbanked Consumers: A Financial Services Analysis. 

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September). A Financial Services Survey of Low- and Moderate-Income Households. 

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For Further information contact 

The Center for Financial Services Innovation 

2230 S. Michigan Avenue, Suite 200 

Chicago, IL 60616 

312 881-5856 

312 881-5801 

info@cfsinnovation.com

www.cfsinnovation.com

The Center for Financial Services Innovation, a non-profit affiliate of 

ShoreBank Corporation, facilitates financial services industry efforts to 

serve underbanked consumers across the economic, geographic and 

cultural spectrum. It provides funding and resources, enables 

partnerships, and identifies, develops and distributes authoritative 

information on how to respond to the needs of the underbanked 

profitability and responsibly. CFSI works with banks, credit unions, 

technology vendors, alternative service providers, consumer 

advocates and policy makers to forge pioneering relationships, 

products and strategies that will transform industry practice and the 

lives of underbanked consumers. For more on CFSI, go to 

www.cfsinnovation.com. 

ShoreBank is America’s first and leading community development and 

environmental banking corporation. For more on ShoreBank, go to 

www.shorebankcorp.com.