Remittances sent by the Mexicans living abroad are a bloodline of the economy, accounting for 4.0% of the country's Gross Domestic Product (GDP) in 2020. Remittances have lifted many households from poverty and many families are dependent on them for basic sustenance.
For several years in a row, Mexico has been one of the largest recipients of remittances. In 2020, Mexico received $43 billion in remittances, the third largest remittance recipient in the world only after India and China as per the World Bank data.
It is estimated that over 95% of the total remittances to Mexico are from the United States of America (U.S.A). This is understandable as Mexicans are the largest group of immigrants in the United States (U.S.) making up 24% of the 45 million foreign-born residents.
Evidently, the USD-MXN money transfer corridor is one of the most active corridors and largest by volume of remittances. This corridor is of prime importance in the global remittance market.
There are multiple ways to send money to families and loved ones in Mexico from the U.S. such as:
The key is to find the most convenient and inexpensive way to send more pesos back home.
The best and cheapest way to send money to Mexico is online. In addition to the convenience of sending money from anywhere, online money transfer providers offer much higher exchange rates and lower fees.
Higher exchange rates mean your loved ones receive more money and low fees mean reduced expenses which is a win-win situation. The good news is that there are several money transfer companies in the market today.
The actual cost of money transfer will vary depending on the following:
To find the cheapest way to send money to Mexico from the U.S., compare the top money transfer companies on CompareRemit and choose the one that meets your transfer requirements as shown below.
While the remittance inflow was down in many countries due to the pandemic, Mexico is one of the few countries that received a higher amount of remittances during the crisis. The pandemic wiped off 8.5% of the Mexican GDP but the remittances lessened the blow.
In March 2020, it reached an all-time monthly high of $4.02 billion as Mexicans living in the U.S. dug deeper to send more money to families back home during the pandemic-induced economic crisis.
The increase in remittances is due to multiple factors and one of the dominant explanations is the fluctuation in MXN to USD exchange rate. As shown in the graph, the increase in remittance volume could have been triggered by the big drop in the value of the Mexican peso against the US dollar. A weaker peso to dollar is a strong incentive to remit more money - you get more pesos for the same dollar amount.
Compared to other countries, remittances to Mexico have been more resilient because Mexicans who have resident status or legal work permits have had greater access to social security. The US stimulus checks also boosted the money sent home.
Remittance flows are expected to remain high in 2021 due to the $1.9 trillion U.S. fiscal stimulus and robust economic growth in the U.S.
Compared to March 2020, the number of employed Mexican workers has risen by 275,000 according to the Centre for Latin American Monetary Studies. Job prospects for the immigrants have improved in the U.S. as the U.S. COVID vaccination campaign is in full swing.
For January and February 2021, the total remittance received was $6.47 billion, up from $5.35 billion received for the same period last year as per the central bank data. The largest remittance received in a single month was in March with $4.25 billion followed by April with $4.048 billion.
Crypto platforms like Bitso are being quickly adopted by Mexicans working in the U.S. to send home remittances. Bitso, the largest cryptocurrency platform in Latin America and the first crypto unicorn (valued at $2.2. billion), processed around $1.2 billion in remittances which amounted to 2.5-3% of the remittances volume between the U.S. and Mexico in 2020.
The majority of the crypto transfer in the USD-MXN corridor was powered by Ripple's On-Demand Liquidity (ODL) platform in partnership with Bitso. Ripple is a blockchain-based digital payment network located in San Francisco.
More than 10% of the total cash flow in the US-Mexico corridor is through Ripple's cryptocurrency called XRP.
ODL enables Ripple users to instantly deliver cross-border payments in XRP that can be converted into international currencies in a few seconds, without the need to pre-fund accounts for international payments.
Sending money through crypto platforms can be advantageous in terms of cost and speed.
The average fee for money transfer companies such as Western Union can be 10.9% per transaction whereas Bitso charges as low as $1 per $1000 sent. Also, crypto transfers take place in minutes when direct deposits through banks can take up to 5 days to process.
Crypto Remittance may be the future because more than half of the households in Mexico lack bank accounts, but 88% have access to a smartphone which is what one only needs for crypto-trading.
Mexicans are the largest group of immigrants in the U.S. This comes as no surprise as the two neighboring countries share a 2,000-mile border which has 48 border crossings with 330 ports of entry.
The U.S. will continue to be a major player in Mexico's remittance market. Generous wage, stimulus check, a competitive MXN/USD exchange rate, improved labor market in the U.S., advancement of money transfer technology including blockchain, and adoption of digital payment solutions by Mexican workers will keep remittances flowing from the U.S. to Mexico.