How migrant banking’s expansion means different approaches in US vs. Europe

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How migrant banking’s expansion means different approaches in US vs. Europe


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.

Migrant banking solutions, or banking for refugees and other recent arrivals, have been increasing in type and number in both Europe and the US for a while now. However, the number of programs available to new entrants to the Eurozone is far more numerous, especially on a per capita basis, than in America. There are some key differences in product offerings too.

European migrants pool funds in wealth-building ‘clubs’, open banking – for existing accounts

Examples of European migrant-focused financial providers include: Bloom, a “money club” connector that brings new arrivals and their communal money pools budgeting, account access, and inter-member exchange tracking methods, and a focus on planning and access to “build wealth for future generations” through its app-based service offerings. In the company’s words, it promotes financial resilience “for anyone who’s made the UK their home. Whether you met at the market, mosque, or middle school, you can use Bloom to connect with your club contributors.” However, participants must already have bank accounts to join.

Trustly, an open banking payment fintech founded in 2008 in Stockholm, combined in 2019 with Silicon Valley-born PayWithMyBank, which was focused on non-card-based payments and receivables solutions for consumers and businesses. The new company partnered two years ago with Azimo, based in London and Krakow, Poland, to provide secure money transfer services targeted at migrant workers across the globe. Trustly offers its open banking services in Latin America and increasingly in the US, where it is regulated as a payment services provider in several states.

However, Azimo shut down its main international transfer services when it was acquired by Papaya Global in November 2022. It is now “focusing on providing salary payments to business customers”, per a ’farewell’ note on the company’s still-live website.

Address and bank accounts required; government crackdown makes it tougher on new arrivals

Banks have a challenge providing financial products to migrants without addresses in many countries, though HSBC UK does offer a “No Fixed Address” service, primarily focused on offering banking access to the homeless through select branches and in cooperation with certain UK charities. According to Maxine Pritchard, Head of Financial Inclusion and Vulnerability at HSBC UK: “No one in today’s society should be without a bank account, but if you don’t have a fixed address, it can be very difficult to get one. HSBC is changing this and with every branch that offers the service we have the opportunity to make a difference to more people’s lives. “I am incredibly proud that we can play our part in helping some of society’s most marginalised and vulnerable people access the services necessary to help break the cycle of homelessness and become financially independent.”

Prime Minister Rishi Sunak’s administration, however, has been cracking down on illegal migrant banking in the UK. His government’s description of why they are doing so is almost a complete reversal in approach from that of many providers emerging elsewhere. “Making it more difficult for unlawful migrants to access financial services is an important tool to help deter illegal migration by preventing people from working illegally and profiting from services they are not entitled to […] Having access to a current account can assist those here unlawfully in obtaining work illegally and securing credit. It can help those without permission to be in the UK gain a foothold in society, regardless of their immigration status.”

In the US, migrants face significant barriers to financial inclusion

According to the US Federal Reserve, six percent of all adults in the country don’t have bank accounts, and a relatively larger share of these are likely immigrants to the country, who make up an estimated 13% of the adult population. Interestingly, the same percentage of adults “used nonbank check cashing or money orders” during 2022, a figure unchanged from 2021 but down three percentage points from 2019. The common theme of the unbanked, wherever they are from, is that they are often simply ‘left out’ of opportunities to facilitate typical banking transactions and build wealth beyond the short term.

We’ve covered the topic of U.S.-focused Inclusiv banking services here in Finextra in several ways, reporting on specific programs and presentations by non-profits and other advocates at events like the annual SIBOS conference and the CERES 2023 gathering in New York City. We’ve also interviewed key managers from both organizations and focused on how sustainable financing and renewable energy investment and development was being propelled forward by US legislation like the Inflation Reduction Act, passed earlier this year.

Broad range of approaches to offer financial system access emerging in US

Finextra previously interviewed the CEO of StellarFi, Lamine Zarrad, a former federal banking examiner as well as multiple startup founder.  We also provided an extensive overview of the Austin-based fintech’s services to help consumers of all backgrounds establish and improve credit scores through education and by enabling reporting of previously undocumented monthly payments to utilities like streaming services or mobile phone providers. Additionally, there are other companies aiming to supply recent immigrants payment services and education to gain a foothold in the US financial system, like Upwardlii, formed by veterans of well-known cross-border payment provider, Seattle-based Remitly.

In the US, MAJORITY is a privately held company that offers a suite of “carefully curated” banking services to what CEO Magnus Larsson describes as “specific diasporas and communities". This includes easing client/Majority financial advisor interactions through speaking the language and culture of say, Cuban or Colombian migrants at community events and at four company centres located in Central and South Florida. New arrivals from Mexico and other Latin American countries are introduced to the company at local businesses or “meetup spaces”, either in Florida or in proximate locations to the border in Houston and Laredo, Texas.

Focus on specific language, cultural connections key tenet of Majority’s outreach

Sweden native Larsson explains that a number of his company’s staff members have been through similar journeys as experienced by the company’s clients. “We are in a very unique position where many of our employees started out as users in the early part of their journeys to America. This is particularly meaningful to us as our goal has always been to provide more than just financial services to our customers. We want to show them they have a place here with us at Majority {…} When a user becomes interested in employment it means that we’ve done our job and not solely provided them with a debit card; we’ve provided them with community, networking opportunities and a chance to master the American financial system and use that expertise to help the migrants that come after them.”

Majority offers a subscription model that for $5.99/month includes a base checking account and debit card, community discounts, and discounted international calling rates. A primary focus of many migrants - payments back to family members in their home countries - are supported through what the company calls “international money transfers with competitive exchange rates and no hidden fees.”

Though many of its services are provided through digital channels, Majority’s ‘brick and mortar presence” in Florida and Texas offers its clients opportunities to connect directly with others in their community, as Larsson explains, “a place of belonging where all migrants are celebrated and supported to reach their full potential in the US.”

Aim is to make migrant banking easier, more familiar, and deliver greater value

A key differentiator for Majority’s service offering, says Larsson, is how the company’s representatives reach out to attract new clients, and also how they make it simpler for them to join the program. “We reach our potential customers in person and digitally. Our social presence is growing, and it certainly helps when people refer us via social media. A big focus of our efforts is to be a part of the communities we’re looking to reach, so our teams spend time on the ground with these communities to reach them.”

To help establish trust and build value with its clientele, the company has produced a Migrant Handbook that provides Majority’s clients with “information on employment, health insurance, housing, how to enroll kids in school and more.”

Noting that immigrants to the US can have a distrust of large banks and financial systems, we asked Larsson how, beyond setting up its local ‘meetup’ centres and employing staff focused on specific cultures and languages of their client base, Majority is able to deal with the stringent requirements to open new accounts? This is an especially sensitive issue now, given the increasingly strong focus on immigration policies within US society and in political/government circles.

Larsson says that while Majority registration is open to all immigrants in America, even those without a social security number (SSN), the company does require an international government-issued ID and proof of US residence (such as a utility bill), which he asserts, means “creating the ability for those who’ve been previously turned away from traditional institutions to access a bank account for the first time in their lives.”

What’s on tap for Majority as its migrant client base and service offerings grow? Larsson points out that services outside the US are on the horizon. “We’re currently working on ways to support the hundreds of thousands of individuals connected to our Majority members in their home countries. While we serve migrants in the US, we know that their financial growth extends to their family and friends back home and offers them a seamless way to assimilate to the US whilst simultaneously maintaining their responsibilities in their home country.”

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This content is contributed or sourced from third parties but has been subject to Finextra editorial review.