Converting the un-banked

Northwestern Financial Review, Feb 1-Feb 14, 2005 by Hilgert, Jackie

Remittance products, education help bankers reach into Latino marketplace

Because of his role as regional manager of the New Iowan Center in Muscatine, Marco Adasme was attuned to the demographic shifts occurring all over the state. The Latino population was up in every Iowa county throughout the 1990s and recent estimates put the state's Latino population at between 170,000 and 300,000 people. The FDIC says 60 percent of them are un-banked. Yet even though he was armed with statistics, Adasme wasn't making much headway as he tried to convince banks they needed to wake up to the Latino market with products and services - or at least staff who spoke the language.

"There was a big need for financial education," Adasme said. But area banks weren't paying attention to the market, he said. "Every banker I talked to in Muscatine said it was too risky."

But then something fortuitous happened. The FDIC, armed with its MoneySmart financial education program, approached the center about a partnership. "We obtained the Spanish-language version of the MoneySmart program, hired a full-time teacher to give classes, and asked churches and other groups to send Latinos to our classes," Adasme recalled. That's when area banks began to take notice of the changes underway in Muscatine, and other communities around the state.

"This state is changing and bankers need to adapt to new marketplaces and new opportunities to help these people," said Ben Hildebrandt of the Iowa Bankers Association. IBA entered into a partnership with the FDIC a year ago to bring MoneySmart to a growing ethnic population - not just Latinos but Sudanese, Bosnians and others - and to help banks adapt to changes in what Hildebrandt said is still a very Caucasian state.

One of the biggest stumbling blocks for bankers trying to serve ethnic markets is the Hispanic culture. For bankers, that means earning the trust of a community whose mistrust of banks or other large entities is deeply engrained. "Latinos are used to having their money physically close to them," Hildebrandt said. Education about deposit insurance and the security of banks bridges that cultural divide.

"We can't be allowing people to keep money in their mattresses when there's a better way," said Mary Kellenberger, vice president of retail banking at THE National Bank in Bettendorf, Iowa. The $386 million bank just completed its first year of marketing to Latinos. "The FDIC got us started on this," Kellenberger said.

Kellenberger and a colleague had attended a Spanish banking conference hosted by the FDIC, the OCC and the Federal Reserve Bank of Chicago. The conference opened their eyes to the potential but they didn't know how to grab hold of the opportunity. A few months later, Kellenberger received a letter from Casa Guanajuato Cultural Center looking for funding to help host the Mexican Consulate from Chicago; they were coming to Moline to issue Matricula Consular cards. "A light went on and we thought, maybe this is how we do this," Kellenberger said.

At a follow-up board meeting, Casa Guanajuato's treasurer, Sylvia Mendez, asked Kellenberger if the bank had bi-lingual staff and what the bank was doing to serve the Latino community. "She asked great questions," Kellenberger said. "So we hired her."

Mendez joined THE National Bank in August 2003 with a primary focus of building the Latino customer base. "Most of the families I worked with at the nonprofit did not have these types of accounts," Mendez said. "They didn't know how to solicit a loan or a mortgage." Yet many dreamed of owning their own home.

Now Mendez helps them achieve that dream.

The bank adopted the MoneySmart program, which Mendez teaches at Casa Guanajuato. It also partnered with Tyson Foods, a major employer in the area, to bring financial education and information about bank products and services to its employees. It also became an Internal Revenue Service acceptance agent for IRS form W-7, which non-citizens use to obtain an Individual Taxpayer Identification Number (ITIN). The ITIN, when combined with a Matricula Consular card, will qualify customers - at least with respect to Patriot Act compliance - to participate in the bank's ITIN loan program. In a year's time, the bank has gained $173,000 in new deposit accounts, $1.6 million in mortgages and $327,000 in consumer loans from its Latino initiatives. Mendez now has eight bi-lingual colleagues at the bank and hopes to unveil a new remittance program soon.

Liz Kelderhouse of the Kansas City regional office of the FDIC reports that 15 banks have opened more than 9,000 accounts with Matriculas and ITINs in the seven Midwest states that make up the region. Those accounts typically open with between $2,000 and $3,000. "When we hold seminars, we pass around a Matricula so bankers can see what it looks like, learn how it's issued, and so forth," Kelderhouse said. "They have to make their own decision on whether they are going to accept it," she said, adding that Wells Fargo, Bank of America and U.S. Bank all accept Matriculas. There have been four FDIC-IBA sponsored seminars in Iowa in 2004 and one was held a few weeks ago in Sioux City.