Rayo On Designing Financial Services For Immigrants’ International Banking Needs

Many immigrants migrate to the U.S. for better earnings opportunities, both to support themselves and their family members back home.

This makes it essential for these consumers to quickly get set up with bank accounts, cross-border payments services and other financial capabilities, but service providers can struggle to make this happen with the speed these consumers need.

Immigrants’ transitions to new countries are only made more difficult by the fact that many banks cannot provide all the functionalities that this customer group typically desires. This forces new U.S. residents to work with several different financial services providers to meet their needs, for example opening deposit accounts at one financial institution (FI) while turning to a separate money transfer organization to send remittances.

These and other difficulties are why Joaquin Ayuso, general manager of immigrant- and expat-focused banking services provider Rayo, said he regards “the immigrant community as one of the most underserved in financial services.”

In a conversation with PYMNTS, Ayuso discussed serving immigrants’ banking needs, the struggles FIs and FinTechs face to cater to them, and how Banking-as-a-Service (BaaS) can help.

Establishing Accounts In Advance

Immigrants need to learn the ins and outs of their host countries’ financial systems, which may differ from the policies they have previously encountered. Having to wait until they arrive in their new countries to start this transition can be a challenge, however, because it forces them to do this while simultaneously adjusting to new homes, jobs and social environments.

Consumers cannot dawdle on these adjustments, either. Those arriving in the U.S. on work visas typically need to quickly set up bank accounts for their paychecks and obtain debit cards they can use to start making purchases, Ayuso said. Financial service providers can ease the stress of getting established in new countries by enabling immigrants to handle some of their financial transitions before leaving their home countries. This can include enabling customers to open U.S.-based bank accounts before arriving in the nation.

Many FIs would balk at extending prearrival account opening services, despite the benefits to consumers, because there can be greater financial risk involved when onboarding customers living in other countries.

“The biggest challenge we had was … convincing our bank partners that we could measure the risk of this community to the extent that we can open accounts for them before they arrive in the country — which is something very hard to do in the banking industry today,” Ayuso said.

Getting FIs on board required persuading them that the digital bank’s executives had the prior experience in international banking necessary to prepare them to accurately assess and limit such risks, Ayuso noted. Finding BaaS solution provider partners that had international focuses and licensing was also key.

Streamlining Remittances

Once newly arrived residents have their immediate financial needs met, they need to find services that let them transmit funds back home, Ayuso said. Sending cross-border payments can be a fragmented experience, however. Consumers seek quick, digital transfer options and are often frustrated in their pursuit of such seamlessness. They often instead have to juggle various services to achieve all their financial goals.

“Usually, what you have is a neobank, then the remittances [are] in a separate app,” Ayuso explained.

These kinds of frictions could fall away in the future because a growing number of companies are now working to design more holistic digital banking offerings, he said. Financial service providers can create one-stop platforms that integrate a variety of BaaS offerings on the back end to meet this demographic’s various needs while presenting end customers with unified user experiences. This means immigrants will get access to deposit accounts, bill payment, cross-border transfers and more all via the same app.

Providers that want to start offering such all-in-one experiences need to both adopt the technologies that will support functionalities like cross-border transfers as well as be ready to comply with the regulations of each market they wish to serve. The latter can be particularly complicated, Ayuso said, but firms can accelerate these financial journeys by partnering with BaaS providers that handle licensing and regulations on their behalf in various markets while also providing ready-to-integrate functionalities.

Branching out to offer all-in-one financial services packages could also help providers tackle another common remittance friction: cost. The World Bank found that consumers globally are charged an average of 6.75 percent of their transfers’ values to send remittances, but Ayuso explained that providers that make revenue from other banking services may be able to offer cross-border transfers for lower fees. The earnings from other banking products can be enough to make reduced remittance prices affordable to the firms.

Today’s consumers want seamless, affordable financial services, and immigrants are no exception. These customers’ international lives can make them more challenging to serve, but relief is in sight. Providers are turning to BaaS partnerships and careful risk assessments to help them step up to the plate and deliver banking and payments experiences that give immigrants a smoother transition to new countries.