WorldCity Business Magazine

Following the Money

by Mary Dempsey

A Miami-based remittance company is eyeing markets beyond Latin America.

A dozen years ago, Miami was an unlikely spot for a crossborder remittance service focused on Mexico. But that didn’t stop Intermex Wire Transfers from putting its headquarters in South Florida.

Some 80 percent of the company’s customers are U.S. immigrants who want to send money home to their families in Mexico. Although Miami’s Mexican population is growing, it is small compared to cities in California, Texas or even Illinois.

“That’s the thing that’s deceiving. Although we are headquartered in Miami, this city was never really one of our strong markets due to the fact that our focus is on Mexico,” says Intermex President Carlos Rincn.

“We initially used Miami just for our back office operations. But as time went on, Miami has become more diversified and now it is also a market for us.”

When Intermex was founded by Rincn’s brother John, now chairman of the company, there was just a cluster of Mexican immigrants in South Florida, most of them working in the Homestead area. So the company launched its first moneytransfer services in Oregon and Washington, where the Mexican populations were growing but where remittance companies were not strongly entrenched.

Then it moved into Idaho, Utah and Nevada. Today, the electronic money-transfer company handles transactions between 26 U.S. states including Florida and 17 countries in Latin America. In addition to Miami, it has offices in Mexico and Guatemala and uses a network of independent agents in other countries in Latin America.

Intermex makes money from the fees itncharges, typically $10 for an average remittance of $300. In 2005, Intermex handled more than $1 billion in cash transactions, according to Rincn. About 80 percent of that revenue involved money transfers to Mexico.

The Inter-American Development Bank estimates that total remittances to Latin America and the Caribbean in 2005 exceeded $53.6 billion, a jump of 17 percent from 2004. Latin America is believed to be the largest remittance market in the world.

Rincn says the volume of remittances has made the market vibrant and competitive. At the same time, however, stepped-up U.S. banking regulations put in place after the 9/11 terrorist attacks have made the remittance business more complicated.

In some places, banks a necessary cog in the remittance system are dissolving their relationships with money-transfer companies for fear they may inadvertently help move drug or terrorism money. In other places the banks themselves are becoming primary players, cutting out the transfer companies so they can offer direct service in the lucrative market themselves.

“Traditional banks are now trying to become players. But remittances are a very, very large business and the industry continues to be attractive,” Rincn says. “Still, it’s very competitive. Intermex owns only about 4 percent of the market share.”

As the money-transfer landscape changes, consolidations have become commonplace. Last year, for example, First Data, an electronic commerce service, acquired Vigo Remittance Corp., a money-transfer service company.

In 2004, Global Payments, which is one of the world’s largest financial-transaction processors, had acquired a number of European money-transfer companies. A year earlier, Global Payments took control of DolEx, a Texas company that had emerged as one of the largest moneytransfer operations between the United States and Mexico.

Rincn says his company realized it had to realign in order to remain a player. “We reached a point where we’re poised for explosive growth, a point where we can take this company to the next level. But we needed a major cash infusion,” Rincn says.

That infusion came in April when New York investment company Lindsay Goldberg and Bessemer took an 80 percent ownership stake in Intermex. Terms of the deal were not disclosed.

It is only the second time Intermex has gone outside the company for money. In 2003, Banyon Mezzanine Fund in Miami provided a loan of $2.5 million. Although Rincn notes that the company’s “niche is the Latin American corridor,” he says the company is also casting its eye outside the Americas to see where future opportunities may await.