Money transfer services play critical role for Sonoma County immigrants

Along a stretch of Sebastopol Road in west Santa Rosa, there are at least seven businesses that serve as crucial hubs for financial transactions in the neighborhood.

None of them is a bank. Instead, they range from grocery markets to a jewelry store, spread out along the strip of restaurants, stores and other businesses that serve Latino residents in the Roseland area.

They provide a crucial service by allowing customers to send money back home, primarily to Mexico, in a business model that has changed little through the decades.

The sector, however, faces tremendous changes as immigrants re-evaluate the way they handle money and new technologies threaten to make such storefront visits a thing of the past.

Every day, customers take American dollars to these stores and send them to family members in other countries using Western Union, MoneyGram and other international networks that facilitate such transactions, known as remittances. The recipient receives the money in their own national currency, often at a location in their neighborhood.

Gervacio Peña, president of the Graton Day Labor Center, uses such services to send money to his family in the state of Oaxaca in Mexico. It goes for various purposes: providing a supplement to his parents; help upgrading his house there; or help paying for books and clothing for his cousin’s children.

“Families always depend on us,” Peña said. “Down there, the money is like double the amount (in value).”

The role that remittances play in both the U.S. and Mexican economies is tremendous. In 2015, U.S. residents sent $56.3 billion to family and friends in foreign countries, according to the World Bank. Close to half - $24.3 billion - went to Mexico.

In California, remittance firms sent $11.9 billion out of the state during the first nine months of 2016, with $6.2 billion going to Mexico, according to the state Department of Business Oversight. The Philippines, India and Guatemala were other major recipients.

“The impact varies (among countries),” said Manuel Orozco, director of migration, remittances and development at Inter-American Dialogue, a Washington think tank. “But it is quite significant.”

The money goes to some of the most struggling communities in Mexico, said Gemi José González López, consul general of the Mexican consulate in San Francisco.

“That money is not going to big cities. It’s going to very rural places,” López said.

The Mexican government is concerned about any changes in U.S. policy on remittances. Money transfers jumped after the November election amid speculation that the incoming Trump administration could tax such services to help pay for its proposed border wall.

“The position of Mexican government is that this is a very sensitive issue for us,” López said. “The money goes to some of the poorest places in Mexico.”

Efforts by some conservatives to change U.S. policy on remittances have not fared well in Congress. In 2015, former Sen. David Vitter, R-Louisiana, never got traction with his bill that would have required senders in the United States to prove their legal status and imposed fines for violations.

Orozco said any changes would be significant for the approximately 43 million immigrants in the United States, a quarter of them undocumented. More than two-thirds of immigrants are employed in sectors as agriculture, hospitality, domestic work or other service industries such as construction, Orozco said. They earn around $25,000 annually, on average, he said. Those who send money back home transfer about 15 percent of their pay, he added.

The track record for remittances in regards to consumer protection has been much better than other products offered by non-bank financial providers.

California has been at the forefront, starting in the 1980s with rules that mandated disclosure of fees and exchange rates; provided customers with the right to a receipt with their name and the beneficiary; and gave users the right to get their money back if it is not forwarded within 10 days, said Tom Dresslar, spokesman for the state Department of Business Oversight.

“We have an extremely low rate of consumer complaints,” Dresslar said. “We believe it’s working pretty well in California.”

In fact, the Golden State served as a template for the federal Consumer Financial Protection Bureau when it issued rules in 2013 that provided greater transparency to the transactions and required providers to investigate disputes with customers and correct certain errors. Prior to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, there were few national rules for remittances. Last month, the bureau announced it was seeking public feedback on the effectiveness of the 2013 rule.

In Sonoma County, many of these money-transfer services are clustered in immigrant neighborhoods such as Roseland.

Gilberto Campos, who purchased the Super Latino Market on Sebastopol Road in 2001 with his wife, Raquel, has offered money transfer services from the beginning.

“We have people coming in just to send remittances. Some others stop by to do that and also get meat or pastry,” Campos said. “People use our service because they get more money in Mexico (than) if they send it through a bank.”

Idolina Álvarez, co-owner of Joyería María on Sebastopol Road, has had her jewelery business for 25 years. She started selling at a flea market in Sebastopol and later set up a store in Roseland.

“People get a discount on their jewelry when they come to us to send money or to cash their checks. They can also get rewards through our raffles and win televisions, blenders, in general, home stuff,” Alvarez said.

Customers frequent these businesses because they charge less to transfer money and offer more locations for recipients to retrieve the cash. For example, it costs $10 to send money abroad at Super Latino Market, compared to $55 at the Exchange Bank branch in Roseland.

“It’s easier for them to go to Western Union and send the money because it’s faster,” said Carmen Garcia, the branch manager for Exchange Bank in Roseland.

Garcia concedes that she can’t compete with the stores on price or flexibility. But she makes a pitch that having a bank account allows customers to save money on check cashing and other financial services.

Many of the people who use remittance services do not have a bank account. Exchange Bank and other local institutions are attempting to reach these potential customers who could benefit from their services, whether saving money on check-cashing fees or creating a savings account for the future.

Garcia has found that if she can reach one family member to get an account, word of mouth will help bring others into her branch, where all of her employees speak Spanish.

“They bring their cousins and their parents, and they bring more people to us because they feel comfortable,” Garcia said.

Awareness about safeguarding money has grown recently as the Trump administration has expanded the categories of people that are eligible for deportation, which has had a chilling effect in immigrant communities. Many undocumented residents are making contingency plans in case they are picked up by U.S. Immigration and Customs Enforcement and are eventually deported. That includes what to do with their money.

“In the last weeks, what we have seen is these openings in bank accounts have been increasing,” said López of the Mexican consulate. To open an account, immigrants only need an Individual Taxpayer Identification Number as well as another form of identification, such as a foreign passport or a consular-issued ID.

Campos of Super Latino Market said he also has seen an uptick in business.

“We’ve had more business since the Trump administration started, even though the peso is weaker compared to the value of a dollar. People are sending money back to Mexico, mostly in case they are deported,” he said.

Garcia said she has noticed lately that some in the Latino community are delaying plans to purchase homes. “They are saving and saving for their down payment, but they want to make sure they are going to be here,” she said.

While the debate over Trump’s actions continues, the money service providers are facing increased competition from digital remittance platforms, which users can access online or via smartphone apps, removing the need to bring cash to a money transfer store or bank. These platforms could possibly disrupt the remittance marketplace, similar to what Uber and Lyft did to the taxi business.

Both MoneyGram and Western Union have such services, competing against upstarts such as Xoom, which was acquired by PayPal in 2015 as the San Jose company looked to break into that market.

“The business model is moving toward electronic deposit,” said Orozco.

Xoom touts its cheaper transfer costs at $4.99 per transaction, when linked to a bank account. It also notes transactions can be done at any time, rather than only during store business hours, said Julian King, head of business development for Xoom.

“We believe 100 percent of the market remittances will move to a digital platform,” King said. More than half of the market for remittances in some markets, including India and the Philippines, is now conducted digitally, he said. Latin America is catching up.

“Mexican immigrants tend to be high adopters of smartphones,” King said.

Campos of Super Latino Market, however, has not been persuaded that his business is under threat. Such apps require users to register, linking to their bank account or debit card.

“Apps don’t take our business away. People don’t trust them, because they have to use a card to send money through the internet. Here, we only take cash. And our clients like that. We don’t need to take their card information,” he said.

Álvarez agreed. “We haven’t seen a change because of new apps to send money. We have our same clients,” she said.

La Prensa Sonoma Editor Ricardo Ibarra contributed to this report. You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com.