Current Landscape of Financial Services Available to Immigrants
For immigrants to the United States, access to the services provided by mainstream financial institutions is linked closely to the achievement of economic prosperity (Federal Reserve Bank of Chicago, 2007). This linkage is present in all immigrant groups, irrespective of country of origin, and plays a large role in the overall ability of immigrants to integrate into American society. Usage of formal financial banking institutions is one factor among many that can serve as an indicator of an individual’s fiscal health. Recent data on consumer participation in the financial sector, however indicates that a wide segment of the country’s population do not use formal banking institutions to conduct financial transactions. The behaviors of these unbanked and underbanked individuals are representative of many recent immigrant groups and merit further attention.
Unbanked, Underbanked, & Transactional Data. The Federal Deposit Insurance Commission (FDIC) (2008) defines unbanked as “individuals or families who do not have an account with a depository institution (a commercial bank, savings institution or credit union) or a transaction account with a money market mutual fund or brokerage” (p. 20) and underbanked as “individuals or families who have a deposit account but also rely on alternative non-bank financial service providers (such as check cashing firms or payday lenders) for transaction or credit services firm” (p. 20). A recent survey by the FDIC (2012)found that over 45% of foreign-born non-citizens are unbanked or underbanked, while over 48% of Hispanics lacked full access to financial services. For the purpose of comparison, Table 1 provides information on rates of unbanked and underbanked for other ethnicities and key demographic cohorts.
Although the FDIC data categorizes all foreign-born individuals into the same classification regardless of ethnicity, it is important to note that there is a high degree of variation in transaction account ownership rates among different immigrant groups dependent on country of origin, especially between Latinos and Asians (Joassart-Marcelli & Stephens, 2010). For all households, regardless of status, Rhine and Greene (2006) found that the number of white households that have a transaction account was double the number of Mexican households (94.9% for the former compared to 47% for the latter). Percentages of transaction account ownership for other groups were located within the range of these two extremes – 63% for other Hispanic ethnicities, 80% for those of Asian descent, and 83% for those with European origins (Rhine & Greene, 2006). For households headed by non-natives, the pattern remains consistent. Table 2 indicates that Mexican immigrant households remain significantly underbanked compared to other ethnic groups, and that Caucasian immigrant households participate in financial services activity in rates similar to their native counterparts (Newberger, Paulson, & Smith, 2006).
Within the broad definition of financial services, long-term investment accounts serve as an important barometer not only of participation, but also wealth accumulation. Research conducted by the Financial Literacy Center (2012) demonstrate the importance of access to a variety of financial services beyond basic checking and saving account in the building of sustainable fiscal wealth. On this front too, however, immigrants lag behind native counterparts in all measurable indicators. The value of assets in immigrants’ interest bearing accounts is worth only 60% of natives’ accounts; for individual retirement accounts (IRAs), the value is worth 59% of natives’; and for stock and mutual fund accounts, the value is only 74% of those of natives (Osili & Paulson, 2007).
A review of a sample of the existing financial access programs reveals that smaller-sized banks and credit unions are more active in seeking out new consumers in immigrant communities than their larger corporate peers. Smaller sized financial institutions are more adept at customizing their outreach efforts to target overlooked consumer groups and have greater flexibility in adjusting their internal banking policies, as demonstrated by the case studies presented within this paper (Federal Reserve Bank, 2007). While there are good examples of inclusive efforts by corporate financial institutions, such as Wells Fargo and Banco Popular, these companies are the exception rather than the norm. The following four case studies provide useful information on the design, implementation, and execution of outreach efforts to immigrant communities.
- ASI Federal Credit Union, New Orleans, Louisiana. ASI embarked on an extensive outreach effort to gain new Hispanic customers in the New Orleans metropolitan area, an untapped market with an estimated value of over $750 million (ASI, 2009). Realizing that success required a comprehensive effort covering expansion on all fronts, ASI committed its organizational resources to improving market penetration in the Hispanic community. It built a branch of its credit union whose primary mission was to serve Hispanic customers, the first of its kind in Louisiana (Appleseed, 2009). Some of the unique services found in the new branch that are not available in other branches include a fully bilingual staff, materials and documents that are available in both Spanish and English, the availability of savings accounts from which credit union members can obtain money from via the usage of ATMs, and the issuance of second ATM cards that can be sent to relatives overseas (Appleseed, 2009). In partnership with a local nonprofit organization, ASI also offers its Latino customers financial literacy instruction and assistance in completing and filing documents needed to obtain a Tax Identification Number (TIN) (ASI, 2009).
- Citizenship Tandas, San Francisco, California. Mission Asset Fund operates Citizenship Tandas, a program that offers savings accounts with 25% matching funds for individuals who want to open an account to save for the fees associated with naturalization (Citizenship Tandas, n.d.). Through Citizenship Tandas, individuals working towards naturalization can extend the value of their savings and overcome financial barriers to citizenship. In conjunction with its savings accounts, Citizenship Tandas secures all loans and reports payment and account activity to credit agencies to build credit scores of participants (Citizenship Tandas, n.d.).
- Banco Popular, Nationwide. Banco Popular operates in many markets with large Latino populations and a majority of its branches accordingly are located in large urban centers in California, Texas, Florida, New York, and Illinois (Inter-American Development Bank & Multilateral Investment Fund, 2003). Due to its image as a bank with a Hispanic heritage, it has encountered less resistance to its outreach efforts than other financial institution but still utilizes Spanish media, bilingual materials, and bilingual staff to increase its presence in the Latino immigrant sector (Inter-American Development Bank & Multilateral Investment Fund, 2003). Banco Popular has developed savings and checking account options, such as Accesso Popular, that are specifically aimed at Latino customers and provide low-cost banking services for individuals unfamiliar with formal financial institutions (Inter-American Development Bank & Multilateral Investment Fund, 2003).
- Wells Fargo, Nationwide. With over $1.4 trillion in assets and over 9,000 branches, Wells Fargo ranks first in the market value of its stock among other similar US firms (Wells Fargo, 2012). Wells Fargo has also maintained a reputation for being a leader among the larger corporate banks in reaching out to underserved communities, and within the last decade it has developed a complete package of service targeting the financial needs of the Latino immigrant community. It was one of the first banks to open branches within supermarkets in an effort to bridge the physical gap between immigrants and financial institutions (Inter-American Development Bank & Multilateral Investment Fund, 2003). It has used traditional media outlets for advertisements, such as television and radio, but has developed ads in Spanish that are tailored specifically for immigrant consumers. Perhaps the most successful tools in Wells Fargo’s outreach to immigrant communities has been the InterCuenta Express and Dinero al Instante programs; in partnership with BBVA Bancomer, a Mexican bank, consumers are able to transfer or receive money held by Wells Fargo account holders in either the US or Mexico for a low flat fee (Inter-American Development Bank & Multilateral Investment Fund, 2003).
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.