Thea Garon

Seven Strategies to Attract 40+ Million New Customers: How U.S. banks can serve immigrants today and tomorrow

Editor’s note: This post is part of our Domestic Financial Innovation series – click here to read other posts in the series.

As the United States turns its attention to the surge of unaccompanied minors crossing our southern border, immigration seems to be front and center on many people’s minds. Much of the public dialogue revolves around whether we should allow these immigrants – mostly from Central America – to stay in the country. But debating whether or not these particular children should be allowed to stay is irrelevant to the broader reality: Millions of immigrants already live in the U.S., and more will continue to arrive because of the opportunities they perceive to exist here.

So let’s turn our attention to what really matters: whether immigrants who are already here have what they need to succeed in their adopted country.

When it comes to accessing high-quality financial services, the answer is likely no. As new research from the Center for Financial Services Innovation (CFSI) points out, there is a massive opportunity for financial service providers to contribute to the long-term financial health of the immigrants currently living in the United States.

Our nation is a nation of immigrants; over the last decade, new immigrants and births to immigrants (both documented and undocumented) added more than 22 million people to the U.S. population, representing 80 percent of the country’s total population growth. Over the next 20 years, 30 million new immigrants are expected to join the 40 million immigrants currently residing in the United States. Like generations before them, these immigrants will arrive with the goal of building a better life for themselves and for their children.

In order to realize this goal, immigrants will need access to high-quality financial services that allow them to manage their day-to-day financial lives with ease and set them up for long-term financial success. Banks and credit unions have a unique opportunity to offer foundational products, like credit-building loans and basic transactional accounts, to both recent and established immigrants. In the event of comprehensive immigration reform that offers a pathway to citizenship to the approximately 11.7 million undocumented immigrants currently residing in the United States, financial service providers will have an opportunity to provide these consumers with additional services, like legalization and citizenship loans, that will enable them to establish an economic foothold in their adopted country.

Financial service providers that reach these consumers at such a pivotal moment in their financial lives will be able to reap the benefits of loyal, engaged and long-term customers. Providers who serve immigrants with basic financial services now will be better prepared to offer these consumers more sophisticated products as their needs change over time. And since many of the needs of low-income immigrants mirror those of other underserved consumers, institutions that design products and implement strategies to meet the needs of immigrants will be prepared to serve the broader group of approximately 68 million consumers, identified by the FDIC, who currently lack access to high-quality financial services.

The strategies presented in “Investing in the American Dream” and outlined below, offer banks, credit unions and other financial service providers a roadmap to serve immigrants both now and after comprehensive immigration reform is passed:

1. Understand the needs of immigrants within the institution’s footprint: Providers must look beyond obvious demographic characteristics, like country of origin and native language, to other characteristics, like individuals’ level of acculturation and approximate life stage, to more accurately assess the needs of their customers.

2. Ensure that Customer Identification Programs do not exclude undocumented immigrants: The USA PATRIOT of Act of 2001 allows banks and credit unions to serve individuals without a Social Security Number (SSN). Financial institutions should understand which types of identification are acceptable under current law, and should explore best practices to serving consumers without a SSN.

3. Develop products that meet immigrants’ immediate financial needs: Financial institutions should consider offering basic products, like credit-building tools that help recent immigrants build credit histories, and legalization and citizenship loans that help undocumented immigrants apply for citizenship in the event of immigration reform.

4. Offer products that meet consumers’ day-to-day financial needs and set them up for long-term financial success: Financial Institutions should also offer products that allow consumers to manage their day-to-day lives with ease, and that set them up for success over the long run. Providers that serve immigrants with basic transactional accounts, savings accounts and short-term loans, will be well positioned to offer them more sophisticated products, like long-term savings vehicles, small business loans and mortgages, as their needs and financial outlooks evolve.

5. Distribute products through channels that are likely to reach immigrants: Financial institutions should partner with trusted community organizations to market and deliver services in places where immigrants are likely to live, work, shop and worship. Since immigrants, like many consumers, are increasingly using their smart phones for financial purposes, providers should explore mobile financial service delivery as well.

6. Provide high-quality customer service: Since many immigrants learn of financial services from friends and family, financial institutions should ensure that their customer service is top-notch. They should employ bilingual staff as front-line tellers and customer service representatives, and should ensure that all staff are trained to respond to the diverse needs of immigrant consumers.

7. Pursue credit under the Community Reinvestment Act (CRA): Finally, banks should pursue CRA credit by offering lending services, making investments, and maintaining bank branches in low- and moderate-income immigrant neighborhoods.

Providers who have adopted these strategies are successfully serving immigrants today. Sunrise Banks, located in Minneapolis-St. Paul, serves an incredibly diverse customer base that includes Latino, Somali and Hmong (an ethnic group from the mountainous regions of China, Vietnam, Laos and Thailand) consumers. The bank offers products uniquely tailored to its customers’ needs, including Individual Development Accounts for Hmong farmers, and non-interest-bearing checking and savings accounts to accommodate the need for Sharia-compliant products among the Somali population. Similarly, Self-Help Federal Credit Union, which has 26 branches across California and Chicago, offers a variety of products that meet the needs of its large Latino customer base. For instance, Self-Help’s Credit Builder Loan is designed to help recent immigrants establish credit histories, and its Citizenship Loan is designed to offset the costs of applying for naturalization.

While the crisis of undocumented youth at our borders may be resolved in the coming months, the basic fabric of our society will not have changed; the United States is, has always been, and will continue to be, a nation of immigrants. It is incumbent upon financial service providers to realize this, and to design high-quality financial services that contribute to the greater financial health of all who call America home.

To learn more about the strategies listed above and to read about additional providers that are successfully serving immigrants today, please read “Investing in the American Dream” or listen to a recording of a webinar about the report today.

Thea Garon is a research analyst, Insights and Analytics, at the Center for Financial Services Innovation. You can follow CFSI on Twitter at @CFSInnovation.

financial inclusion, lending, migrants, savings