Deep Dive: Remittances (ft. Majority)
💸 Latin America and the $800B Remesas Market
You're a young Colombian who's just secured a job in the San Fernando Valley of Los Angeles as part of a construction team. With the money you earn, you figure, not only can you pay rent and buy groceries—but also send home a portion of your paycheck each month to help provide for your family back in Barranquilla.
Congratulations: you're now contributing to the ~$800B remittance industry.
Remittances form a significant economic force in the world today, from the Caucasus and South Asia to the Caribbean. In fact, these financial flows constitute the most important single sector of economic activity for Central American countries such as Honduras and El Salvador. As the number of migrants increases each year, so does the amount of remittances being sent, creating a capital flow with a profound impact on local communities—in the case of Haiti, more than double the value of all exports.
The World Bank estimates that Latin America and the Caribbean received $144B in remittances last year, more than double the amount from a decade ago. If this impressive figure represented a country, it would be the 7th-largest economy in the region—$16B more than the combined GDP of Costa Rica and Panama.
Unlike Costa Rica or Panama, though, which have presidents, constitutions, and elected local leaders, remittances represent free-flowing, often unregulated money currents. These financial flows have exploded since 1990 on the backs of migrant workers and asylum seekers, with some surprising variations depending on the country. Some countries, like Mexico and Guatemala, rank among the world's top remittance destinations, the former landing in second place with a mind-numbing $61B received last year—half of the region's total.
While that's astounding on its own, the region has more surprises up its sleeve. As the only Latin American country to border the US, Mexico understandably saw its remittance inflows grow by roughly 20x in the decades following its 1994 ratification of the North American Free Trade Agreement (NAFTA). However, in comparison, the Northern Triangle countries have seen a far more significant jump in money coming in—to say nothing of complete wildcards such as Bolivia, in which relative numbers have soared by 300x their 1990 figures.
True to the capitalist manifesto, businesses have noticed this enormous cash flow, with an entire industry emerging to facilitate money transfers in exchange for a piece of the pie in recent decades. And in recent years, technology has come to play a crucial role, as workers and diaspora members armed with nothing but smartphones and coffee-shop Wi-Fi networks can ensure the financial security of their loved ones back home.
Based out of Latin America's unofficial US capital of Miami, MAJORITY is attempting to become a key player in this industry by offering other essential services on top of simple remittance payments.
"We've long understood the crucial role remittances play in the economies of Latin American and Caribbean nations and for the families who have loved ones living abroad. Our mission is to facilitate these transactions while providing additional services for immigrants."
—Juan Pablo D'Alessandro, Head of New Markets
The fintech, founded in 2019, seeks to become a one-stop mobile banking solution for US-based migrants, offering them services that they're unlikely to get from your typical Western Union or MoneyGram branch:
An FDIC-insured account (and connected Visa card), even for those missing a Social Security number
Affordable remittances to make sure more money reaches home
Unlimited free international calling to select countries, including Mexico & Colombia
Mobile top-ups to help migrants with families overseas stay connected
MAJORITY offers all these features while providing an intuitive and user-friendly interface—an increasingly competitive edge in the digital era where many companies are eager to be immigrants' first choice.
Migration can be complicated enough before even considering how to send money overseas. To see how different companies compare in terms of cost-effectiveness across key countries, let's dive into the numbers.
For unbanked and underbanked people with little access to traditional financial institutions, it can seem like there are no reasonable solutions for sending money back home. This can be doubly the case for those who lack a Social Security number or live in remote areas with minimal banking options. Meanwhile, some companies claim to be cheap but charge exorbitant fees for each transfer, nibbling away an additional $4-15 for each transaction.
“We aim to streamline and simplify transactions, keeping them affordable and accessible for every immigrant in the US, thereby contributing to the economic growth of their home countries and their families' financial stability.”
—Juan Pablo D'Alessandro, Head of New Markets
D’Alessandro and the MAJORITY team correctly understand that when migrants send money home to families or loved ones, each lost centimo is simply too expensive. That’s why they constantly strive to be the cheapest option on the market, in part through competitive exchange rates and minimal transaction fees. In fact, for users sending remittances home to countries like Mexico or Colombia, MAJORITY offers affordable sending. When you factor in some of the strongest FX rates to be seen throughout the industry, you see why so many migrants work with them.
As part of our own research for this story, we did some independent testing by verifying the cost to send money internationally through different avenues. And the results look pretty great: at the time of Latinometrics testing, MAJORITY was the cheapest option to send money across all markets that we tested.
MAJORITY is run by an international team of people, many of whom are migrant professionals who take pride in their impact on the US immigrant community. The team uses cutting-edge technology to develop an intuitive, user-friendly interface that makes money transfers to families back home simple, reliable, and cost-effective. And their openness to working with even underbanked migrants, including those lacking a Social Security number, has had a noticeable impact when it comes to connecting customers with their home countries. No wonder the application has over 100K downloads on the Google Play Store and an average rating of 4.9 stars on the Apple Store (with over 15K reviews!).
Now, with the numbers looking so good, we wanted to dig a bit deeper. After all, remittances are about more than just money going from one bank account to another. Every immigrant has a story to tell, so we decided to reach out to some MAJORITY users ourselves to hear about how the app has helped bring them closer to their loved ones back home. Latinometrics spoke in late August with two different users based in the United States; for the sake of transparency, both conversations have been translated and edited for clarity.
For Luz, convenience is everything. A Colombian who’s lived in the Fort Lauderdale area for over 30 years, she began using MAJORITY just over a year ago after being introduced to it at a company party by a friend. A piece of her paycheck automatically disburses to her account now, which she uses to pay bills and order things in stores. She particularly appreciates the low cost and difficulty involved with sending money to her Bancolombia savings account.
“I have sent a lot of money to Colombia using the app, and it arrives very quickly, like in 30 minutes. I find it fantastic, a great option for people here in the United States.”
—Luz, MAJORITY customer
While much of her sending habits involve topping up her own account for use when she visits Colombia, Luz has appreciated the ease with which she can stay connected with fellow family members using the app overseas. She especially celebrated the ease with which users can send money directly to other users instantly, something she regularly does with her father living in Colombia.
Luz also highlighted the accessibility with which she could use her MAJORITY account to pay bills and send money abroad. She was particularly a fan of the cash back possibilities from spending in local stores.
“I’m actually going to close my regular bank account. I mean, I’ve never gotten gotten cash back on my debit card.”
Halfway across the country, 53-year old Juan is similarly enthusiastic. The Guadalajara native, currently living in Boseman, Montana, began using MAJORITY after a particularly nasty workplace injury in which he fell three stories without a harness. After getting out of the hospital, Juan searched for a banking solution which would allow him to make his payments online on days where he wouldn’t be able to leave the house. However, he kept running into bureaucratic hurdles involving supplementary paperwork or hassles.
“I must have tried more than 10 [debit] cards and one day I went to the Play Store and I found MAJORITY … And I said, well, one more, what difference does it make, right? And then I tried the application and it was a different story.”
—Juan, MAJORITY customer
On account of his injury and subsequent job insecurity, Juan was in need of a banking solution which offered flexibility. Previous bad experiences with scammers utilizing traditional financial institutions such as Wells Fargo had left him disillusioned with banking in the United States
“There are people who, instead of helping you, want to mess with you. So I tried and tried and tried until I found MAJORITY. With this I do my top-ups, my transfers, and I don't need to go out when I don’t feel well. I am very grateful and happy.”
Above all, for Juan the important thing was never letting his work situation or health problems affect the amount of money he was sending to his mother, a 91-year old woman still living in Mexico.
“She’s actually forgotten about the accident because of her Alzheimer’s. I don’t want to say anything because it’ll just hurt her, but I always need to have money because I share a lot with her and if the money is lacking, she will think something is wrong. I can’t quite tell her the truth, but at least I know she’s taken care of. Some other companies I’ve tried, they’re just looking at the numbers, not helping people. Yes it’s a business, but it's also a way to support people. If the bank only looks at numbers, they are going to get stuck in the business. Growth only happens when more people get involved and bring in their own people. I know I will never get a card elsewhere again. Why waste my time?”
As people like Luz and Juan showcase, the remittance industry is about more than just money going from one country to another. It’s also about the stories of millions of immigrants and families for which these financial flows represent a livelihood and a way of taking care of loved ones from afar. With companies like MAJORITY playing their own important role, these stories can continue being told, and people can continue to be connected with those who matter most.
Be careful with geolocation and undocumented migrants… this is a dangerous unknown will this company share locations of undocumented I’m living in the US? It’s very possible.