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The real reasons US banks are getting out of the remittances business – Quartz

More and more US banks are getting out of the money- transfer business, Dealbook notes (paywall). A series of money-laundering scandals, punished by eye- popping fines, has made them cautious: Bank of America, HSBC, Citigroup and JP Morgan have pulled out altogether, while BBVA is reportedly looking to

sell off a business unit that handles wire transfers in Latin America. And the fear is that rules intended to stop terrorists and drug traffickers are disproportionately hurting the families--and home countries--of migrants in the US who send money back home.

But the risk of accidentally doing business with a drug cartel is only half the reason the banks are getting out of this game. The other half is competition from new companies.  The World Bank's most recent report (pdf) shows that the average cost of sending money from the United States in the second quarter of 2014 was 5.78% of the sum sent--down from an average of 7.21% just five years ago. That puts the squeeze on margins just as banks are trying to consolidate into the most profitable activities.

The report also includes this chart, showing what tools migrants around the world could use to send money back to their families in that period. Only 26% had access to a bank (the "account-to-account" and "account-to-cash" segments in the chart). The analysts write that cheaper alternatives to banks, in particular online services, have grown from previous samples:

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