The U.S-Mexico Remittance Corridor: Lessons on Shifting From Informal To Formal Transfer Systems

This paper examines the experience of the U.S.-Mexico remittances corridor over the last eight years and seeks to derive specific lessons for other remittance corridors shifting form informal to formal systems. 

Worker remittances have shifted from informal to formal channels. The paper identifies areas within the corridor that could be further developed to continue the momentum and further enhance its development potential.

The remittance experience broken down into 3 stages and he objectives, obstacles, incentives and changes occurring at each of these stages in the U.S.-Mexico corridor:

• The First Mile - decisions are in the hands of the remittance sender;
• The Intermediary Stage - comprises the systems that facilitate the cross-border transfer of funds;
• The Last Mile - the funds reach the hands of the remittance recipient.

The paper seeks to draw lessons for other countries that are interested in formalizing remittance flows. The paper concludes that a number of measures could be taken to further reduce the cost and to enhance the potential contribution of worker remittances for development. It suggests policy recommendations that aim to encourage the shift from informal systems to formal ones, while also establishing international standards for integrity and transparency in the market.