Banks look to immigrant market for growth
Major banks are duking it out to attract Canadian immigrants, a key market in a retail banking sector that is grappling with an aging population and a tighter lending environment.
Some of Canada's largest financial institutions are offering unsecured credit cards, multilingual banking services, periods of no-fee banking and help sending money to relatives overseas.
Banks are looking to the immigrant market in a bid to broaden their retail divisions; as the growth of the Canadian-born population slows, these newcomers represent a key category for banks and the economy as a whole.
"It's really somewhat of a clear-cut business case," said Paul Sy, director of multicultural markets at Royal Bank of Canada. "The forecasts are quite clear that Canada is an aging population. Moving forward, newcomers are really the key source of growth and will be fueling the ... growth of the Canadian economy for years to come."
The most recent census showed two-thirds of Canada's population growth over the previous 10 years came from immigration. In 2010, about 280,600 immigrants became permanent residents in Canada, more than in any of the 50 preceding years. Some projections show immigration will account for 72 per cent of growth by 2036.
"These are great new customers to the bank," said Winnie Leong, vice-president of multicultural banking at Bank of Nova Scotia, which, like many other banks, has started to market unsecured credit cards to recent immigrants.
Traditionally, a lack of credit history barred recent immigrants from taking out loans or applying for a mortgage until they built a credit history; that often meant starting from the ground up with a secured credit card for $1,000 or less.
When Kamal Jain came to Canada 40 years ago with a master's degree in engineering. In his first 18 months here, he found work as an engineer, saved enough money to buy a car without taking on debt and had started to save money. Still, he was denied a credit card because he had no credit history.
"I remember telling [the bank] that there could be no better credit record than not having to have taken a loan at all and still managing to accumulate the necessities of life, paraticularly having come here with less than $400 in my pocket 18 months prior," Mr. Jain said.
Decades later, Canadian banks are trying to woo customers like Mr. Jain.
Similar to Scotiabank and Canadian Imperial Bank of Commerce, RBC's unsecured credit card for newcomers has a base limit of $1000, an interest rate of 19.99 per cent and a monthly fee, which is waived for the first six months. The limit may be increased on a "case-by-case" basis, Mr. Sy said.
Ronald Miranda, originally from the Philippines, said that although he had a job lined up in Canada, he arrived in the country with less than $1,000 in cash. In the beginning, money was tight and having access to a credit card at Scotiabank made things much easier, he said. Mr. Miranda and his wife now have a joint $10,000-limit credit card.
While these products can be helpful, offering unsecured credit cards to immigrants introduces them to risks too, said Adam Fair, a program manager for the Canadian Centre for Financial Literacy.
"Some people come from countries where they didn't even have credit or credit cards ... there needs to be a good understanding of what credit is useful for, how it can be helpful, but how it can also be harmful," he said.
The immigrant unemployment rate is close to double the figure for the population as a whole. In 2011, 14.2 per cent of immigrants who had been in Canada five years or less were jobless, compared with 7.4 per cent for all Canadians, according to Statistics Canada. Nearly two thirds of immigrants experience periods of low-income during their first 10 years in Canada.
Still, it's clear why the banks are targeting this group, Mr. Fair said.
"A lot of newcomers come highly educated and if they are able to adapt and establish themselves in Canada, they and their family could be lifelong customers of that institution," he said.
Luis Meza, for example, first met an RBC representative while still living in his native Venezuela. After having lived in Canada full-time for about a year now, Mr. Meza has a mortgage, car loan and $20,000-limit credit card with the bank. He launched a cafe in Ancaster, Ont., when he settled in Canada and does his business banking with RBC too.
Mr. Meza provided statements from his bank in Venezuela and that was enough for RBC to assess his credit-worthiness.
"It's about the potential of the market," Mr. Sy said. "From what we've seen, there's a strong determination by newcomers to succeed."
ADVICE FOR NEWCOMERS
Immigrants to Canada can find financial advice and assistance from a variety of sources:
Many organizations offer courses or workshops to bring newcomers up to speed with the Canadian financial system. They provide advice about banking, taxes and investments, and some have special courses for entrepreneurs seeking business loans. Some immigrant settlement organizations have partnered with banks to allow immigrants to go to a bank branch and become familiar with ATMs and speak with bank representatives, one on one.
The Financial Consumer Agency of Canada lists information on credit cards, insurance, mortgages and fraud on its website. The Citizenship and Immigration Canada website also has a "protecting your money" section as part of its "Welcome to Canada: What you should know" guide. Many banks have webinars and online tutorials on topics such as buying a car and saving for a child's education.
At the bank
Many banks offer services in a range of languages beyond English and French and offer packages of products for newcomers. Visit local bank branches in your area to find a financial adviser you trust.
To open a bank account, newcomers need identification such as a passport and landing paper, permanent resident card or a study permit for international students. Once an account is created, they can set up automatic bill payments, and send money to relatives overseas.