Best Practices of Financial Service Institutions
The review of successful models nationwide and across industry sectors has led to the identification of many best practices in the improvement of immigrants’ access to financial services. These best practices can be replicated, modified, and enhanced dependent on the context of the situation in which they are used. The rationale underlying their application – that immigrants want and will use mainstream financial services if given the right institutional framework – makes it important to highlight their influence on improving access. Three main categories of best practices were noted in the survey of available research and case studies – education, logistics, and programmatic.
- Education. Effective outreach serves as the lynchpin for every successful integration model found in the survey of available research. The demand for access to financial education exists, as evinced by Appleseed’s (2009) survey in Louisiana wherein 85% of Hispanics surveyed expressed an interest in attending financial literacy classes. Appleseed’s (2008) work in Chicago shows that financial literacy programs can in turn lead to increased usage of banks’ services. Class attendees who attended educational workshops on financial literacy were more apt to then use traditional financial services offered by mainstream banking institutions. Table 1 contains information from participants in Appleseed’s (2008) Chicago research that is representative of the types of topics that Latinos would like to learn more about.
Educational programs can overcome barriers related to fear and trust by informing immigrant consumers of the advantages of formal banking services and dispelling myths and fears related to sharing of personal information (Appleseed, 2008). In Austin, for example, banks have used police crime statistics showing that Hispanics are disproportionately targeted for personal robberies because of their preference to store cash in their homes to encourage more Hispanics to bank with mainstream institutions (FRB, 2007).
- Logistics. Mainstream banks’ internal policies on the establishment of new accounts poses an obstacle to access that can be resolved for the benefit of all. Although many larger banks do have corporate guidelines in place that accept Matricula Consular cards as primary forms of identification, many smaller banks do not explicitly accept these cards and employees in banks of all sizes are unfamiliar with the acceptance of Matricula Consular for the purposes of opening new banking accounts (FRB, 2007). Increased acceptance of alternate forms of identification that are still compliant with federal regulations would remove one of the primary barriers to access encountered by immigrants (FRB, 2007). Appleseed’s (2008; 2009) work with Hispanic populations in Chicago and Louisiana illustrate another internal change within banking institutions that can exert positive influence on banking rates among immigrants. Developing alternate methods of assessing credit worthiness is critical, as many immigrants either lack any credit history or have low credit scores (Appleseed, 2008).
Financial access can also be increased by reaching out to immigrant communities in meaningful and symbolic ways. Speaking the language of the immigrant and making sure that bank employees and representatives can communicate with non-native English speakers can address language barriers to financial access (Appleseed, 2009). Partnerships with local organizations can facilitate increased interaction by mediating cultural divides through third party facilitators (Appleseed, 2009). Boat People SOS and Citibank, for example, have achieved success in reaching out to recent Vietnamese migrants by forging a partnership focused on achieving self-sufficiency for new residents (Newberger et al., 2006). Smaller financial institutions can also benefit from partnering with one another. The International Remittance Network, which is a broad coalition of small credit unions that offer complimentary services to their collective members, exemplifies this type of inter-agency partnership (Samuels, 2003). Foreign financial institutions are especially well equipped to bridge the gap between demand and supply for financial services; their familiarity with the norms of immigrant’s native countries endows them with a valuable knowledge of their the behaviors, motivations, and wants of immigrants in the US (FRB, 2007).
To eliminate physical barriers to access related to distance, banking institutions need to abandon their reliance on standalone brick and mortar establishments as the only means of providing services to immigrant communities. Research by the FDIC (2008) on the needs of the unbanked and underbanked indicates that these populations access financial products in atypical locations. Payday lenders and check cashing centers have capitalized on this behavior and operate out locations that are already frequented by the unbanked such as supermarkets, laundromats, and even restaurants. Traditional banking establishments and other less predatory alternative financial institutions would benefit from expanding their physical reach where feasible (FDIC, 2008).
Case studies contained in Appleseed’s (2008) research in Louisiana show that smaller banks in the area are copying payday lenders and check cashing centers by opening small scale outposts in markets, community centers, and even public schools. The programs highlighted by the ICIRR (2012) provide an innovative approach to overcoming physical barriers; by partnering with community based nonprofit organizations to refer and filter new clients from immigrant communities, local banks and credit unions have been successful in assisting the unbanked immigrants with their financial needs. Many corporate banks, such as Wells Fargo and Bank of America have recognized the potential to expand services through pairing financial services that immigrants already use, such as money transfers and remittances, with more mainstream checking and saving options (Inter-American Development Bank & Multilateral Investment Fund, 2003)
- Programmatic. IDAs hold much promise to increase access to financial services for disadvantaged communities at home and abroad, yet the industry as a whole has been slow to incorporate IDAs into their broad umbrella of services. Those that do exist have a hard time overcoming low levels of awareness related to their benefits and domestically, these IDA programs often end up having to return unused matching funds due to low consumer participation (Social Enterprise Associates, 2009). Models like the Opportunity Fund, however, show that those individuals that do participate in IDA programs experience high rates of goal achievement (Opportunity Fund, 2011). The federal government’s Earned Income Tax Credits (EITCs) program, provides low-income families with federal tax rebates, but also suffers from low participation rates (Social Enterprise Associates, 2009). EITCs represent another programmatic tool that can increase personal wealth and institutional familiarity if low-income and underserved populations are informed of their existence.
Digital innovations provide a new arena of programmatic tools that can facilitate the expansion of access. Recent technological advancements demonstrate the potential for digital processes to positively influence access to services. Xoom, a financial services platform developed by a technology firm in San Francisco, provides a low-cost method for smaller banking institutions to implement remittance services (Newberger, 2006). Banks can license the software platform from Xoom for a fee and receive access to a turnkey digital system of remittances (Newberger, 2006).
About this project
The Tomás Rivera Policy Institute, a university research center with the mission to address the challenges and opportunities of demographic diversity in the 21st century global city, has produced these featured digital publications using the USC Media Curator, an online publishing platform designed to bring together innovative research from across the University of Southern California and beyond. This project curates research relevant for immigrant service providers on the topics of Access & Use of Technology, Access & Use of Financial Services, Notario Fraud, and Driver's Licenses for the unauthorized.