Return to Community
By
Thomas P. Johnson Jr.
Immigrant banking offers one way for large institutions to reconnect with communities.
Last year, we observed that banking "largely remains a look-alike industry, with many CEOs still trying to be all things to all customers and all shareholders." In that context, it's heartening to see some major U.S. institutions differentiate themselves by marketing to the nation's immigrant communities. Now it will be up to these companies to demonstrate the full measure of responsiveness needed to succeed in these markets.
Given the distinctive cultural, linguistic and economic aspects of Asian and Hispanic communities, a major commitment is required to serve them well. Along with specialized resources, financial services providers face the challenges of capacity reconfiguration and cultural adaptation. Requirements include bilingual representatives and transaction materials, along with tailored marketing campaigns and products.
It is ironic that this push into ethnic marketing is essentially a return to an old idea: community banking. The mega-banks often strayed from this orientation during the 1990s merger frenzy, which emphasized efficiency through consolidation. Many local customers became alienated as decision-making power gravitated to far-off cities and personal service declined. Not surprisingly, grass-roots institutions picked up market share with a vengeance.
Immigrant banking, with its strong group orientation, offers one way for large institutions to re-connect with communities. This is a market, after all, where people are often better approached not as isolated individuals but as members of a group, through their organizations and cultural events. When Mexican-Americans gather for Cinco de Mayo, for example, part of what they are celebrating is their sense of community. By adapting to this orientation, institutions can serve individuals more meaningfully.
None of this will come easy for large organizations geared to serve individuals from standardized platforms. The specialized service required for immigrant markets is expensive, and some new relationships initially may be of low profitability. There are also some unique risk management issues involving verification of identities.
It is commendable that institutions such as Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. have stepped up to this challenge. Although they remain broad-based, generalist institutions, at least in this area they have made a commitment to stand for something — to serve a clearly-defined market in a comprehensive manner. Both BofA and Citigroup, for example, have gone so far as to link up with Mexican banks to develop electronic remittance transfer programs.
The resurgence of community banks in recent years suggests that centralized banks have lost ground in meeting the unique requirements of local customers. Perhaps the lessons learned in immigrant banking will help sensitize the larger institutions to the economic and social needs of domestic "communities," be they geographic or formed by the bonds of common interest.
Mr. Johnson is publisher of Banking Strategies and president and chief executive officer of BAI.