Michele Wucker
04/01/2004
Businesses’ main immigration priority in the past has been to guarantee a steady supply of workers to ensure jobs were filled and wages did not rise too quickly. President George W. Bush’s “guest worker” proposal in January, which would match illegal aliens with employers and grant them three-year work visas, pursues this traditional goal. Yet its focus on guest workers fails to acknowledge a powerful new business opportunity, recognized first by the financial services industry, to legalize immigrants and help them integrate into American society.
The main driver of this new way of thinking is the combined economic power of the Hispanic (as the government likes to call it) or Latino (as you are more likely to hear it called on the street) population. Together, America’s 39 million Latinos have a combined purchasing power of nearly $600 billion. This number is growing rapidly; Latino incomes are rising at 18 percent per annum, or double the national rate. By 2007, U.S. Hispanic purchasing power is expected to reach $1.3 trillion annually.
Statistics also explode the stereotype of immigrants as solely low-to-middle income. Between 1991 and 2000, the number of Hispanic households earning six figures grew by 126 percent, far outpacing the 77 percent in the general population. Hispanic Business magazine estimates that the wealthiest 75 Hispanics represent a combined net worth of $11.4 billion. This market has caught the eye of brokers such as Merrill Lynch and Charles Schwab, as well as traditional banks, which are eager to secure these individuals as clients.
An Underserved Market
Two out of five Latinos in the United States are
foreign born; an estimated 6 million to 8 million are undocumented. That is part
of the reason that only 45 percent of U.S Hispanics have checking accounts,
compared with 80 percent of the general population, according to a recent Celent Communications study. Only 50 percent have credit cards, compared with 70
percent of the general population.
For some time, financial services in the
Latino community focused on the money-transfer market for the remittances that
nearly half of adult immigrants send home to their families—last year, roughly
$30 billion, according to a recent Pew Hispanic Center study. Seven out of 10 of
these transactions still occur through wire-transfer companies such as MoneyGram
and Western Union.
Now, however, banks are fighting to increase their share
of this market. Two large U.S. banks have invested in Mexican counterparts to
broaden their networks: Citibank, which recently launched Access bi-national
bank accounts, and Bank of America, with its SafeSend remittance service. Wells
Fargo, Emigrant Savings Bank, GE Financial Services and US Bancorp all offer
special ATM cards. To attract lower-income immigrant customers, institutions
that include Fleet and Bank of America have begun offering low-fee and
low-minimum balance accounts that they hope will deliver a combination of volume
and long-term relationship business. Long-term business strategies like these
depend on the group being here to stay, not merely marking time.
Banks began
allowing customers to open accounts with nontraditional identification a few
years ago. Most controversial was the matricula consular—an ID issued by Mexican
consulates and overhauled in response to U.S. security concerns after the 9/11
terrorist attacks. Many banks also accept the Individual Taxpayer Identification
Number, which the IRS created in 1996 to enable undocumented immigrants to pay
taxes.
When anti-immigration activists tried to pressure Congress to ban
these IDs in 2003, banks across the country testified that it was in the
country’s interest to give immigrants access to the banking system. The U.S.
Treasury agreed and issued new rules affirming the banks’ position. Indeed,
various government agencies, including many regional Federal Reserve Banks, the
Federal Deposit Insurance Corp. and the Social Security Administration are
actively seeking ways to help new immigrants integrate into mainstream financial
services.
While the financial services industry has an obvious interest in
securing immigrants’ status in the United States as a way of capturing their
business, the power of the economic force of this group makes a compelling case
for its support by all of our businesses. Financial services is the first step;
by giving immigrants access to credit and bank accounts, this country will clear
the way for all businesses to tap this community as clients, customers and
partners. It is becoming clear that money is power for America’s Latino
community—and the financial services industry and Washington are beginning to
listen.
 | Michele Wucker is a senior fellow at the World Policy Institute and author of Why the Cocks Fight: Dominicans, Haitians, and the Struggle for Hispaniola. |