How banks can develop a rewarding relationship with immigrants

di Anna Omarini
Università L. Bocconi - Milano
Dipartimento Finanza
Professore SDA Boccconi School of Management
(tratto da EFMA Magazine, Issue 201, May/June, 2006)

The percentage of immigrants in the total population of many European countries is rising,
to the point where the question of immigration has recently been put back on the EU’s
political agenda. But until now a substantial section of the banking market has shown
considerable strategic uncertainty with regard to this question.
*********

In fact, 2005 saw the publication of a Green Paper regarding the EU’s approach to the
handling of economic migration. There is a need for member countries to come up with the
right answers to this question, so as to guarantee proper juridical status to those
immigrants, as well as a series of rights that facilitate their integration into society. The
question hinges on the limitation of the financial exclusion of immigrants, that is: “the
inability to access necessary financial services in an appropriate form. Exclusion can come
about as a result of problems with access, conditions, prices, marketing or self-exclusion in
response to negative experiences or perceptions”.

The question of financial exclusion can be significantly damaging, both in social and
economic terms, if it is not checked and resolved. The degree to which immigrants use,
and have access to banks, provides an effective indicator of their socio-economic
integration. Hence the need to understand the orientation of banks and the financial
system in general. within a European framework that is clearly going to become
increasingly multiethnic and multicultural.

But we can see that up until now the banking market has shown considerable strategic
uncertainty with regard to this question. It often justifies this by pointing to the objective
difficulty encountered when trying to evaluate the economic potential of immigrants. On
the other hand, immigrants would say that the most important factor in their rapport with
banks is represented by their socioeconomic status, in that banks require potential
customers to prove they have a guaranteed income.

Immigrants and the ambivalence of the banking system

Immigrants’ daily lives consist in a continual oscillation between the affirmation of their own
roots and the importance of their belonging on the one hand, and the denial or overcoming
of this situation through the exploration of other options, of other forms of identification and
of other meanings to be ascribed to their roots.
The consequence of this in terms of research and of the ways in which the question of
immigrants and the banking system ought to be handled, is that there is a need for greater
knowledge of the various communities present within individual local areas. It would also
be a good idea to try and identify these factors, and the dialectical relationship between
them, which social players perceive as important criteria for the inclusion or exclusion of
any given group.

The result of this is of substantial importance given that each action aimed at this market
has to be capable of evaluating these specific elements, as this may be a decisive factor in
the improved management of any form of interaction: examples thereof may include signs
in the languages of the immigrant communities, [ the furnishing of the bank ??], the
presence of staff from those communities… It should also be said that immigrants tend to
have a medium-high level of education, and are thus generally well informed about the
context in which they live and work. Thus, the communication of the meaning of things to
immigrants is not as important as the communication of the diverse functioning of the
same things. [ ??? ]
Hence the need to cultivate interest (critical or otherwise) towards the identity of such
prospective customers; there is a need for a degree of awareness of, and sensitivity
towards, cultures of interest. Immigrants could constitute (as they have already begun to)
potentially interesting customers both in terms of their domestic needs, given that they are
generally young, in work, good savers and upwardly mobile. The management of financial
flows towards their countries of origin, of their trans-national investments, and of the funds
they may seek for their business undertakings in Italy is also a question to consider.

Thus despite recognition of their conceptual importance, cultural factors are often largely
ignored when those banks interested in this segment of the market draw up policy.
The important variable is therefore the cultural importance taken on by the paradigmatic
dimension in explaining differences in consumption and brand preferences. The inherent
values of each culture constitute the main variable underlying consumer behaviour, and
they also illustrate certain characteristic traits that distinguish some groups from others.
However, we still need to “measure” the degree of permeability of such cultural values; this
will depend on how these values are transferred at both the intra-generational and
intergenerational levels: In other words, we need to understand whether a bank’s
immigrant clientele are first or second generation immigrants, because this information
enables us to observe diverse processes of assimilation and adaptation to local consumer
habits. Nevertheless, it should be pointed out that “a complicating factor is that age is not
always a good predictor of whether an individual is of first, second or later generations in
some ethnic groups since young people are still immigrating to a certain country. In the
USA, marketers have already recognised that the young profile of minority groups is
having an important impact on consumer behaviour. For example, research on ATM usage
indicates that ethnic minorities have a higher percentage of card ownership, are more
likely to use cards to withdraw cash, and are more likely to purchase goods and services
with cards than the white population”.

Some factors encouraging the financial inclusion of immigrants

The phenomenon of financial inclusion can be seen both as the result of bank policies
designed to achieve this objective, or as the result - as has been the case in Italy - of the
economic inclusion of immigrants resulting from their own behaviour as they pursue a
greater degree of involvement in the country’s economic system. In particular, we can
single out four categories of positive factors that can lead in this direction:

1.  The consolidation of a foreign presence in Italy, and the local economic integration
   of the immigrant population in the formal economic circuits of the national economy;
2. The utilisation of banks by companies for the payment of salaries, together with the
   use of banking services by companies founded in Italy by foreigners;
3. The widening and diversification of the bank supply;
4. The adoption of practices of civic and social responsibility in the form of the “warm
   welcome” offered by certain Italian banks.

Banks and immigrants

Several studies have analysed the question of the financial inclusion of immigrants. They
have shown that this form of inclusion is closely correlated to the increase in the number of
years an immigrant spends in the country. For example, Figure below shows the case of
the USA which is characterised by a significant immigrant presence, mainly of Hispanic
and Asiatic origin .
Hispanic immigrants possessing a current bank account classified according to their period of
residence in the USA
30% 32%
72%
82%
Less than 1 year 1-5 years 5-10 years More than 10
years
Source: Federal Reserve Garden City Survey, 2005 in ROBBINS E. – CONTRERAS P., 2006, Strategies for Banking the Unbanked:
How Banks are Overcoming Entrance Barriers, in Financial Industries Perspective, Federal Reserve Bank of Kansas City, January.
Below are some other figures showing the entity of the rise in the degree of financial
inclusion as the years go by.
Characteristics of the financial inclusion of Hispanic immigrants in the USA in terms of length of
residence
30% 25%
72%
58%
30%25%
50% 58%
30%
21%22%
34%
0%
11%
17%
42%
Saving account Checking account ATM/Carte di debito Carte di credito
Less than 1 year Between 1-5 years Between 5-10 years More than 10 years
Source: Federal Reserve Garden City Survey, 2005 in ROBBINS E. – CONTRERAS P., 2006, Strategies for Banking the Unbanked:
How Banks are Overcoming Entrance Barriers, in Financial Industries Perspective, Federal Reserve Bank of Kansas City, January.

The Italian case

There are some 2.8 million immigrants in Italy at present, and their numbers and weight
tend to rise at the national level. Their rate of utilisation of banking services can only be
measured with some effort as a result of certain objective difficulties. Nevertheless,
according to recent estimates by ABI-CeSpi (2005) this figure stands at around the 60%
mark. Other studies give the figure as higher, especially those studies carried out in certain
areas of northern Italy only. If we now go on to measure the interaction between
immigrants and banks, the results of a recent study conducted by Newfin (Bocconi
University, Milan – www.newfin.unibocconi.it) together with Sint (www.sint.it), in which 150
immigrants were interviewed (most of whom possessed a current account), revealed that
92% were satisfied with their relationship with the bank, whereas only 4% declared they
were dissatisfied with the existing relationship. The reasons for this generalised
satisfaction: they appear to centre on the ability of counter staff to listen to customers and
to provide advice, followed by the availability of good banking products.
Why are you satisfied with the service provided by your bank?
Source: Newfin/SINT Study, 2006
Another result that emerged from the study concerned the potential for developing one’s
relationship with the bank. The interviewees were asked: “What would you suggest Italian
banks do in order to better satisfy your requirements?” The replies tended to focus on the
need to reduce costs, followed by the suggested provision of special counters for non-
Italian speakers.
What would you suggest Italian banks do in order to better satisfy your requirements?
23%
5%
15%
22%
49%
Non risponde
Altro
Fare prodotti adatti agli stranieri
Fare degli sportelli dedicati a persone che
parlano una lingua straniera
Ridurre i costi
[Reduce costs
Provide special counters for customers speaking a foreign language
Provide products suited to foreign customers
11%
4%
34%
31%
19%
5%
No reply
Others
They gave me good advice
I found some good products
They w ere very courteous
Low cost