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For two decades, Noé Sánchez sent money from California to his father in Mexico City through storefront outlets of traditional remittance firms such as Western Union.
Now he grabs his smartphone and uses Remitly, one of several new competing mobile apps promoting cheap and quick international transfers. Sánchez quickly got over his initial unease of sending money through an unfamiliar company.
"If it goes badly, I'll cancel it and try another," said Sánchez, a 44-year-old Mexican technical support professional in Oakland.
Founded in 2011 and backed by Amazon.com Inc Chief Executive Jeff Bezos's venture capital arm, Remitly is among a vanguard of financial technology, or fintech, companies targeting what they view as an underserved immigrant market - traditionally disregarded as high-risk and low-margin.
The upstart firms - along with expanding digital and mobile options from Western Union Co and MoneyGram International Inc - are helping immigrants deepen their roots in the United States at a time when incendiary anti-immigration rhetoric dominates national politics.
Presumptive Republican presidential nominee Donald Trump recently attacked remittances from illegal immigrants as a form of "welfare" for Mexicans. Trump threatened to impound such money transfers unless Mexico agreed to pay up to US$10 billion for his proposed wall on the southern U.S. border.
Many emerging companies in the fast-growing fintech sector, by contrast, view financial services for immigrants as an untapped source of revenue. They include remittance apps, such as Remitly, TransferWise and Xoom - an early player bought last year by PayPal Holdings Inc for US$890 million - along with companies such as Lendup and Oportun, which lend to high-risk borrowers.
"We're part of a community of companies that is helping (immigrant) customers understand the landscape of financial services" in the U.S., said Raúl Vázquez, chief executive of Oportun.
GLOBAL CASH FLOW
It remains unclear whether Trump's campaign attacks represent a real threat to the remittance industry. He proposes regulating remittance firms through U.S. anti-terrorism laws that now apply to banks and other financial institutions.
The plan has been criticized in part because of the difficulty in differentiating between the transfers of legal and illegal immigrants.
"Good luck with that," U.S. President Barack Obama quipped, reacting to Trump's proposal at a recent news conference.
Trump's campaign did not respond to request for comment from Reuters.
Many financial technology companies expect a continuing boom in cross-border transfers and other financial services for U.S. immigrants. According to the World Bank, remittances to Mexico totaled nearly US$25 billion in 2015, their highest level since 2008. Globally, nearly US$600 billion is transferred each year.
The World Bank reported that 700 million people opened bank accounts globally between 2011 and 2014 - making them more likely to use financial technology - and about 2 billion more people remained unbanked, representing huge growth potential.
Immigrant communities increasingly access financial services through phones. Thirteen percent of Latinos in the U.S. are dependent on smartphones as their only source of internet access, compared to just 4 percent of white people, according to a 2015 Pew study.
Those trends play into the strategy of remittance apps like Remitly and Xoom. Many other financial tech firms are private and not required to share financial results, but some claim fast growth in customers or revenue when releasing selective data.
Remitly said it transferred five times the amount of money in the first quarter of 2016 as it did in the same period a year earlier. The company said it recently surpassed US$1 billion in annual transfers.
Western Union, a US$9.36-billion public company, acknowledged new threats in its 2015 annual report.
"We are seeing increased competition from, and increased market acceptance of, electronic, mobile, and Internet-based money transfer services," the company told investors.
In a statement to Reuters, the company said the transfer industry is teeming with new players and that competition had contributed to falling prices. Western Union's digital money transfer sales reached about US$300 million in 2015, and the company expects online and mobile transfers to be a "major driver of overall remittance market growth," it said.
Arjan Schutte, the CEO of fintech investor Core Innovation Capital, said he'd seen more than 100 different business plans for companies wanting to disrupt Western Union or Moneygram, but that's "not nearly enough relative to the market opportunity."
ECONOMIES OF SCALE
Smaller financial technology companies can be flexible in crafting creative solutions to serve customers on the margins, said Lisa McFarland, an executive vice president at Ingo Money, which charges between 1 and 4 percent to deposit paychecks through a mobile app.
McFarland previously worked at Visa Inc setting up prepaid products for the immigrant market. She said more established financial companies have long struggled to serve lower-income markets because of high development costs and low profit margins.
"The problems have to be solved, in many cases, in unique ways," she said. "That's what opens the door to technology players."
Oportun and Lendup, for instance, use their own underwriting formulas rather than traditional credit scores to underwrite risky borrowers, and they offer declining interest rates over time for those who pay reliably.
The alternative online lending sector as a whole has faced new scrutiny in recent months in the wake of scandals at industry leader Lending Club.
But Lendup says its customer base of half a million borrowers is growing at 15 percent per month. The company says it can charge less than traditional payday lenders because of its underwriting software and because it saves money by not opening physical branches.
"If the work is lower margin, technology has a real opportunity to allow you to reach that profitability," said Leslie Payne, who runs public affairs at Lendup. "Once you reach scale, the economics can work out."
