Banks cash in as immigrants wire home
Competition heats up for newcomers' transfer fees as foreign remittances increase despite recession
Mar 21, 2009 04:30 AM
Their determination has been a boon for Canada's banks. Banks, which charge foreign exchange and service fees for such transfers, say remittances are booming despite the slumping economy; some report double-digit growth. According to Statistics Canada, Canada's market for remittances is worth up to an estimated $2 billion a year.
Banks are offering new products to try to poach clients from the mom-and-pop shops, travel agents and global money transfer services that dominate this former niche industry. Many banks now consider remittances an "anchor product."
"The remittance business is going to continue to be a big business for banks in Canada (that) have the capability to do this," said Tracy Redies, executive vice-president of personal financial services and wealth management at HSBC Bank Canada.
I've written about remittances before. You can read it here. Simply put the removal of about (CDN)$2 billion dollars from Canada's economy should be considered a cost. This is money that could have been invested in Canada in the purchase of goods and services which in turn fuels the economy. Instead it is going overseas to be invested in competing economies.
I don't blame them for doing this. It is perfectly understandable. But it is a loss nonetheless and added to the amount of tax dollars spent to fund the services used by immigrants, including health care, the immigration system may be costing Canadians more than it is worth. In other words it is a losing investment.
As for the banks, all they see in immigrants is money and more immigrants means more money. They are one of the few financial beneficiaries of a mass immigration policy where the brunt of the costs are socialized and borne by the average Canadian. This is why the Royal Bank of Canada once stated that Ottawa should increase the immigration intake to 400,000 a year. I doubt the bank's position has changed.