Immigrant Money Attracts Banks, March 13, 2007, Mary Ann Milbourn -- The Orange County Register, Calif.
The announcement came out with little fanfare: Citibank would offer secured Citi MasterCards to people who didn't have a Social Security number.
"The credit card will make it easier for those who have not previously been eligible for credit, including new immigrants in the Hispanic and Chinese communities," the news release said.
It's similar to a Bank of America pilot credit card program disclosed by the Wall Street Journal last month that touched off a storm of debate about providing services to undocumented immigrants. But the Citibank program began in March 2004 -- three years ago.
Other big-name institutions like Wells Fargo Bank and the First American Corp., the Santa Ana title insurance and business information company, also have created programs to make it easier for immigrants, legal and illegal, to get financial services. These programs all are within the law and sometimes even have the blessing of the government.
While acknowledging the moral and legal debate surrounding immigration, these companies contend those are issues better addressed in other quarters. Their job, they say, is to grow their business and increase their investors' returns.
Increasingly, the way to do that is to market to Hispanics and Asians because, as latter-day bank robber Willy Sutton put it, that's where the money is.
Wells Fargo Bank was one of the first to see business opportunities in ethnic communities. Several years ago, it undertook a major initiative aimed at Hispanics and Asians. It has opened new branches in ethnic communities, established international money-transfer services, started consumer education programs and offered mortgages to immigrants who may not have traditional credit histories. It is also considering offering secured credit cards.
Spokeswoman Julie Green Rommel says the bank sees the program as part of a tradition dating to the mid-1800s when it was first to offer services to Mexicans in the then-fledgling state of California. It sees banking as a good way to bring immigrants into the mainstream economy.
"It's not only the right thing to do, it's good for business," she says.
In 2005, First American launched an alternative credit score that helps mortgage lenders assess the credit risk of loan applicants with little or no credit history. The targeted credit group includes immigrants who may not have Social Security numbers but who can still legally own property in the United States.
As with Citibank, BofA and Wells Fargo, the product was created in response to expected demand. Studies have shown that 60 percent of first-time homebuyers will be Hispanic by 2010.
"The private sector is doing what it should do by tailoring goods and services to the market as the market evolves," says Mark F. Catone, senior vice president of First American Corp.'s Credit Information segment, which created the company's alternative credit score.
While the companies think they are justified in offering these products to immigrants, it's a decision that does not sit well with opponents of illegal immigration. Those opponents argue that businesses shouldn't be making it easier for people who are here illegally to stay here.
"Technically, it's aiding and abetting (illegal immigrants), which is a felony," says Barbara Coe, chairwoman of the Huntington Beach-based California Coalition for Immigration Reform. "Morally, it's quite shocking to learn organizations that Americans have made very, very wealthy will negate their responsibility to law-abiding Americans."
Recent growth in ethnic communities has made them increasingly difficult for businesses to ignore.
Harry P. Pachon, director of the Tomas Rivera Policy Institute at USC, says that in the Hispanic community, "it's a perfect storm of demographics." In 1990, Hispanics made up 9 percent of the U.S. population and accounted for 5 percent of buying power, according to a 2006 study by the University of Georgia's Selig Center for Economic Growth.
By 2011, the study estimates, Hispanics will make up 16.3 percent of the U.S. population and will account for 9.5 percent of U.S. buying power, a total of $1.2 trillion.
Buying power for Orange County was not available, but based on population
growth, there's big money to be made.
According to the census, Hispanics here have grown from 23.4 percent of the population in 1990 to a projected 35.2 percent in 2005.
Pachon notes that the Hispanic population is also 10 years younger than the non-Hispanic population.
"The peak buying years are 40 to 55, and (businesses) are looking at exponential growth of these markets," Pachon says.
Still, financial institutions are just beginning to tap the financial potential in ethnic communities.
Scott Kutner, the Santa Ana Community Development Agency's district manager, said a 2005 Social Compact study of two neighborhoods in the city showed nearly three-quarters of the residents had no relationship with a financial institution.
Despite the public outcry, experts believe it will be impossible for business to stop an expansion into the Hispanic and Asian markets.
Colleen Haggerty, a BofA spokeswoman, notes that 60 percent of the population growth in the next three to five years in the area it serves will be Hispanic.
"It's a business growth opportunity for all the financial institutions," she says.
And in this day of globalization, if American companies don't do it, others will. There's just too much money to be made.
As the Tomas Rivera Policy Institute's Pachon puts it: "Aliens are aliens, but consumers are consumers."
Source: Copyright (c) 2007, The Orange County Register, Calif. Distributed by McClatchy-Tribune Business News.