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The winning card

Remittances and a cross-border network of businesses, nonprofits, credit unions, microfinance institutions and other financial players are connected through a debit and stored-value card platform that has one very simple result: everybody wins. The business model, combining efficient use of technology with cheaper remittances transactions and better business for financial institutions, was presented at IDB headquarters by UCLA professor and successful entrepreneur Raúl Hinojosa.

After exploring the special needs of migrants, Hinojosa learned that new developments in Internet technologies enabled him to develop an innovative financial service to satisfy the demand of migrant workers wanting to send money home. And he founded his company, No Borders, in 2003. 

No Borders initially offered money transfers and long distance telephone services to Mexican immigrants in the United States and their families back home. He made a good choice in becoming a player in the biggest remittances market in Latin America: money sent by migrant workers in the U.S. to their families in Mexico reached 1$6.6 billion dollars in 2004.

Hinojosa told the story of his company --he heads No Borders-- during an international forum on remittancess organized by the IDB's Multilateral Investment Fund, explaining how the model has lowered costs of remittance transactions while generating new sources of revenue for the company's partners and increasing his own profitability.

How does it work? Simple. At the core of the No Borders business there is a group of debit and stored-value cards issued through a network of affiliated partners of No Borders to individual cardholders in the United States and Latin America. Immigrant workers in the U.S. sending money home with the No Borders card are granted, at zero charge, one remittance transaction per month for up to $350 if they, and their beneficiaries back home, join credit unions in the No Borders network. The transaction costs are covered by a fee charged to financial institutions who want to join the network.

"The zero cost remittance means additional funds for customers who then can afford to pay for other services offered by participating partners,” Hinojosa points out. The financial institutions pay for the remittances transaction and make No Borders sustainable, in exchange for more business out of increasing clients with disposable income. The model is economically viable for all participants.

The cards can be reloaded and used for cash withdrawals and purchases at any authorized No Borders location, and can also be used as a payroll card for receiving payroll direct deposits. Funds from the cards can be transferred in real time to bank-issued debit cards, which can be then used for ATM withdrawals, purchases and other transactions.

The No Borders model also benefits cardholders in other ways, such as providing discount cards on health care, insurance, travel, and other products. In this way, affiliated financial partners benefit by increasing their share in the growing U.S. Hispanic market. 

Remittances represent only a fraction of cross-border populations' household expenditures, Hinojosa added. “The company intends to accelerate its penetration into this growing market by reducing their costs for remittance transactions and offering them other financial and commercial services and products.” The card platform and its attached database system could facilitate a virtually unlimited array of products and services offering convenience, savings and empowerment to migrant populations.

No Borders is currently operating pilot programs with cross-border populations from Mexico, El Salvador and Ecuador, but expects to quickly expand to other Latin American and Caribbean countries, going after the Asian and East African markets further down the road.

Hinojosa stressed the importance of linking economic opportunities with migrant diasporas. The issue of migration and remittances, he said, is even more important than the North America Free Trade Agreement (NAFTA). He established No Borders with the conviction that providing services to migrant communities is good business.

Hinojosa saw the opportunity by combining an emerging technology with an avid underserved market. The fact that No Borders is profitable, he commented, shows the “unnecessarily high transaction costs imposed on communities that are least able to afford them.”