01 October 2006

Banks Compete to Court Immigrant Clientele

Canadian Press, Rita Trichur, 1 October 2006

Big banks are targeting new immigrants in a bid to access an estimated $3-billion revenue stream.

Some of Canada's biggest banks are aggressively competing this fall to court the country's booming immigrant population, a largely untapped market of new clients worth an estimated $3 billion a year.

With those big bucks up for grabs, many banks are racing win over these deep-pocketed clients - particularly those from Asian countries - before they even set foot in Canada.

For its part, Bank of Montreal plans to hold free seminars in Hong Kong and mainland China in the coming months to brief prospective immigrants about Canadian banking, taxation, education, real estate and culture.

Prior to their departure, new Chinese clients are able to establish personal deposit accounts in Canada while also arranging MasterCards, banking cards and residential mortgages.

"We want to be proactive," said Peggy Sum, BMO's senior vice-president, Asian market. "All those things are important for settlement."

She added: "Our credit policies cater to the needs of the immigrants. That is, we understand that they have no credit history over here, and perhaps they don't have immediate employment, but we will help them buy a house or a condominium using other criteria to adjudicate the loans."

Bank of Montreal extends that same "immigrant friendly" credit policy to other Asian customers by using referrals through five correspondent banks in South Korea. "In India, we are about to sign up with two Indian banks," Sum said.

Canada accepts about 250,000 new immigrants each year with China and India being the top two source countries.

While there is no set limit to the amount of money a new immigrant can bring into the country, sums in excess of $10,000 must be disclosed at the border.

Immigrants, however, are generally encouraged to bring enough to support themselves for at least six months.

That's creating a lucrative opportunity for Canadian banks given the high savings rate in some Asian countries. In China, that number is high as 40 per cent compared to a negative savings rate in Canada.

"It is cultural," Sum said. "It is in their genes that they need to save money."

These savvy clients, she adds, are keen to save for their children's education and often invest heavily in RRSPs, RESPs and mutual funds, while also subscribing to online discount brokerages.

"Competition is always heating up," Sum said. "Everybody is going after that market."

And it's no wonder given the overall market potential, said Dave Ramsumair, director of local area marketing programs and multicultural markets with Scotiabank, which is planning to launch its own immigrant banking website by the end of October.

Conservative estimates peg the total immigrant market to be worth up to $3 billion a year. Skilled workers represent about $1.5 billion of that total, while those arriving under the family class and as investors represent $1 billion and $400 million, respectively.

"This is good for Canada," Ramsumair said, noting this debunks the myth that immigrants are a drain on the system.

"Clearly, people do come with money. They don't just come empty-handed. On average they bring a significant amount of money that gets invested here.

"They need to buy cars, they need to invest in small appliances for their homes, and multiply the effects of all of that, it's an amazing growth for the economy."

Scotiabank, with representation in about 50 countries around the world, plans to leverage its international presence and correspondent banking arrangements to widen the scope of its immigrant banking services down the road.

"In many ways, it's a new frontier in banking," said Ramsumair.

But to really understand the full market potential, Sum suggests taking a longer-term view. She points to research that suggests immigrants' earning power grows rapidly and exceeds the national average by 25 per cent in their fifth year in Canada and by 37 per cent in their tenth year.

Mark Whitmell, national manager, cultural and community markets with RBC Financial Group, said if Canada was able to eliminate age, gender and cultural barriers, it could add about 1.6 million people to the workforce and increase personal incomes by $174 billion.

"In terms of future growth, we expect that newcomers to Canada will actually exceed the number of individuals born in Canada," he added.

"It is quite an obvious opportunity from that perspective. So, if we want to grow, if we want to acquire new clients, we know that we have to play a role in helping newcomers be successful."

In order to reach them, RBC too has set up a multilingual website and can facilitate non-resident account openings online. The site averages about 5,000 hits a month.

"The Chinese version is already about 35 per cent of the traffic," Whitmell said.

"We've launched that so that anybody, anywhere around the globe has the ability to initiate that relationship with RBC - even before they arrive in Canada."