Partners (Fall 2002)
Partners (Fall 2002)
The 2000 Census statistics have garnered much attention by the public and media to the changing demographics across the country.
Since 1980, the country's Hispanic population grew from 14.6 million to 35.3 million, representing a 142% increase. Some have speculated that the growth was even greater due to undercounting. Mexicans constitute the largest U.S. Hispanic ethnic group, followed by Puerto Ricans, Central Americans, Cubans, and South Americans.
This tremendous growth in the number of Hispanics in the U.S. has prompted both the public and private sectors to respond with strategies to address the unique concerns of this community. One concern of particular interest to the financial services industry is the number of Hispanic households without a bank account.
Although research has shown that Hispanics are more likely to be 'unbanked' than any other ethnic group, the National Council of La Raza reports that Hispanic purchasing power last year was $452 billion. These numbers represent significant opportunities for financial institutions to serve this relatively untapped market.
Addressing Common Barriers
A common problem for Mexican immigrants is not having the requisite two forms of identification, usually a social security number and driver's license or other photo ID, to open a bank account. Consequently, these consumers are limited to using high-cost fringe financial service providers, such as checking outlets and wire services, to handle their banking needs. In addition, carrying around large sums of money makes them more vulnerable to being a victim of crime.
Many banks have responded to this issue by instituting more flexible policies that allow for other acceptable forms of identification readily accessible to Mexican immigrants.
Alternative Forms of Identification
In 1996, the Internal Revenue Service (IRS) began issuing Individual Taxpayer Identification Numbers (ITIN) for tax purposes only. ITINs are tax-processing numbers issued to individuals required to file tax returns, but who are ineligible to obtain a Social Security Number (SSN). An ITIN is a 9-digit number beginning with the number "9" and formatted like an SSN (e.g. 987-65-4321).
To obtain an ITIN, an individual must complete IRS Form W-7. Some banks include the form in their "account application packets" for their immigrant customers.
The matricula consular is an identification card issued by the Mexican consulate to individuals of Mexican nationality. The card, the size of a driver's license and bearing a photograph, contains the individual's name, date and place of birth, current address, and signature along with a hologram of the official seal of Mexico. The Mexican Consulate enhanced the security features on the card this year to deter counterfeiters and improve its acceptance.
Mexican Consulates in the United States expect to issue over a million matriculas in 2002. According to the Federal Bank of St. Louis, 61 banks, 41 states, and 800 police departments accept matriculas as official identification. SunTrust, Wachovia, and Bank of America are among the financial institutions accepting the matricula card in the Sixth District.
Fed Hosts Hispanic Roundtables
The 2000 Census shows that Alabama, Georgia, and Tennessee were three of the fastest growing states nationwide for Hispanics, with the population increasing in each state by 200% to 300% in the last decade. In these states, the Hispanic population is primarily from Mexico or several other Central America countries.
Alabama has had particularly rapid growth in its Hispanic population, especially in Birmingham, Guntersville, and Mobile. Because of the large number of both regional and community banks in and around Birmingham, it was a logical place to hold a banking forum on this subject. Additionally, all of the large Alabama banks headquartered in Birmingham have a banking presence in one or more communities outside of Alabama with rapid Hispanic growth, thus presenting an opportunity to leverage discussions throughout the southeast.
The purpose of the banking forum, held July 8, 2002, at the Reserve Bank's Birmingham Branch, was to encourage dialogue between the local financial institutions and Hispanic community. In attendance were representatives from 13 State member banks, the Alabama Banking Department, several nonprofits, and the Mexican Consulate General for the Alabama region. Topics of discussion included the use of alternative IDs, the demographic composition of the local Hispanic community, and marketing strategies to reach the Hispanic market.
U.S. Patriot Act Issues
Many bankers have raised concern about whether the U.S. Patriot Act would prohibit banks from accepting alternate forms of identification.
In July of this year, seven federal financial regulators including the Treasury, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency jointly issued proposed regulations that will implement Section 326 of the Patriot Act. Section 326 will require financial institutions to establish minimum procedures for identifying and verifying the identity of customers seeking to open accounts.
The regulation, however, specifically states that one of the acceptable forms of identification may include "the number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard." Thus, the proposed regulations do not discourage bank acceptance of matricula consular cards.
Accessing Untapped Markets
Representatives of Community Affairs also participated in the Latino Banking Conference held in Knoxville, Tennessee in August 2002. Like in Alabama, the Latino population has increased significantly in several East Tennessee communities in the past 10 years.
The conference was co-hosted by the East Tennessee Latino Economic Taskforce and SunTrust Bank to discuss demographic trends, banking needs, barriers to banking services, and opportunities for banks to assist in serving the Latino market. Approximately 25 financial institutions were represented.
The Federal Reserve Bank of Atlanta shared the information noted above to help address the concerns of the banks. The Community Affairs representative also provided a number of suggestions for how banks could actively pursue the Latino market.
Both of these forums in Alabama and Tennessee initiated important discussions that will hopefully lead to new banking opportunities for the Hispanic community in these and other markets in the southeast.
Mike Milner and Jessica LeVeen also contributed to this article.