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A burgeoning partnership between Phoenix's La Campesina radio station and a new business relocating to the Valley is expected to shake up a growing money transfer market that currently sends about $6 billion a year south across the Mexican border.
The deal, still being finalized between the United Farm Workers of America, which owns La Campesina, and American Money Transfer Inc., could fuel competition through reduced transaction fees while generating dollars for the union's network of services that help newly arriving Mexican workers seeking jobs and stability.
At the heart of the deal is the radio station, which will use on-air advertisements and promotional events to tout the new service not only to the union's local membership, currently about 2,500 workers, but also to all Phoenix-area Hispanic businesses and residents who rely on the radio station for information and support. La Campesina is considered to be the most popular Spanish-language station in the Valley.
The station will try to lure customers away from larger money transfer companies such as Western Union and MoneyGram Payment Systems Inc., by promoting the reputation and service of American Money Transfer, currently relocating its headquarters from California to Phoenix.
"Our goal is to basically get all our companies [advertisers] who are doing money transfers to switch," says Tony Tercero, La Campesina's general sales manager.
Each customer gained means more money for the union, which Tercero says will use the dollars to bolster social programs provided through its National Farm Workers Service Center. Those programs include information and assistance with legal referrals, affordable housing and medical care.
The amount of money that La Campesina stands to earn has yet to be determined, but officials say it could yield upward of $150,000 during the partnership's first year.
In addition to ad revenue, estimated at $12,000 to $15,000 annually, the union will receive a commission each time a customer uses American Money Transfer. That commission could be as much as 40 to 50 percent of the fee, according to Pete Guerrero, the company's executive vice president.
The union also will get an annual donation based on the amount of business generated in Phoenix. That donation is estimated to be about $120,000 to $150,000.
The money is to go into a foundation being established for the farmworkers' union to dole out to the various services provided at the service center on West Thomas Road next to the radio station.
If the partnership flourishes, an expansion plan is already being discussed to pair American Money Transfer with the union's other radio stations in Yuma and Parker, as well as stations in California and Washington.
Such an expansion would create more dollars, allowing the union to possibly expand its nine-station radio empire into other states where American Money Transfer is already based, thereby creating a venue to provide social programs in areas where workers might otherwise not get help.
"We're looking to open up more stations," Tercero says. "The idea is to create a service center next to each radio station."
International money transfers is a flourishing business with hundreds of companies offering wire transactions. In Phoenix, there are at least 12 businesses currently providing such services.
The rapid rise in the number of competitors has significantly changed the market, according to the Inter-American Dialogue, a think tank in Washington, D.C., that monitors international affairs.
Prices have dropped as a result of the increased business and new services are now being offered in addition to money transfers. Such services include the sale of long-distance phone cards, allowing workers to maintain contact with family members, and businesses that direct-deliver items purchased in the U.S., such as appliances and furniture, to families in Mexico.
The reduced fees are especially important to migrant workers who depend on each dollar and cannot afford to lose money once it is converted to pesos. Companies such as American Money Transfer, which deals primarily with private businesses and not Mexican banks, often can attract business by boasting a better exchange rate than a financial institution.
Currently, one peso is equal to about 11 cents in the U.S.
MoneyGram, according to Parker, is like many other money transfer companies. Each is trying to find a new and innovative way to draw business from Western Union, which is considered to be the leader in the field, as far as market share of customers is concerned.
"I think all of us are looking at being more competitive," Parker says. "Innovation's good. You're looking for a new way to help the consumer and that's good for the consumer."
MoneyGram's niche is that it offers a flat $15 fee to transfer any amount of money to Mexico. American Money Transfer charges $8 to wire amounts up to $500. But the fee increases as the amount being transferred goes up -- $16 for transfers between $501 and $800; $24 for transfers up to $1,100.
Western Union, according to its toll-free phone number, charges $15 for transfers up to $50, and $75 for transfers between $850 and $1,000. Western Union officials could not be reached for comment.