They come from Africa seeking what all immigrants to America desire: a better way of life. But, like all immigrant groups, Africans have unique characteristics when it comes to how they think about personal finances and what they want in financial services.
A recent study commissioned by the U.S. African Chamber of Commerce sheds light on African immigrants from sociological and financial perspectives. Conclusions that can be drawn from the findings may point to African immigrants as a prime and largely untapped market for prepaid cards. According to the USACC, 1.4 million African immigrants live in the United States, and that figure is expected to grow. They tend to cluster in big cities. And they have an estimated purchasing power of $50 billion annually. The study was funded by The Minneapolis Foundation and performed by the Los Angeles-based multicultural research firm New American Dimensions. It surveyed 393 African immigrant adults living in California, Minnesota, Washington D.C. and New York State. As they relate to a potential market opportunity for prepaid cards, findings show:
According to Martin Mohammed, President of the USACC, the root cause of African immigrants' mistrust of banks stems from experiences in Africa. "Historically there is not enough of a banking system on the [African] continent," he said. "There is not enough trust built between the community and the banking sector."
Mohammed said when immigrants arrive in the United States, they are confronted with often confusing and unclear fees and rules - such as credit collection, overdraft and "hidden" fees - when they attempt to access financial services. The language barrier is largely not an issue, he said. Most West Africans speak English and many East Africans do, too. The problem is in financial literacy, which Mohammed said is "an issue whether they speak English or not."
According to the study, one of the main goals of Africans living in the United States is to provide for their families back home. Many work multiple jobs and send approximately $19 billion back to Africa, Mohammed said. "Wire transfer, money wire services, they use all kinds of different distribution channels," he said.
Given this snapshot, Brud Baker, President of Central National Bank and its prepaid card issuing and processing subsidiary Interactive Transaction Services Inc., thinks African immigrants may be an ideal market for prepaid products. "You would think prepaid, with the right ISO that knew the markets, understood how to sell into that market, would be just dead-on from the prepaid perspective," Baker said. From an ISO's viewpoint, the market has the added advantage of being "narrowly dense," he said. Unlike the broad Hispanic market scattered across the United States, the African populations are concentrated in metropolitan areas, which makes them easier to locate and market to, he said.
Baker envisions two primary ways ISOs can reach the African immigrant population with prepaid cards: by geographic location or employer. The first strategy is to target retailers that cater to African immigrants and propose open-loop, network-branded general spend cards for budgeting and money transfer purposes. But Baker prefers the second method - targeting immigrant communities with payroll cards through their employers. ITS is partnered with Funkoze, a microfinance lender to the U.S. Haitian community.
"And they [Funkoze] know where large majorities of Haitian immigrants work," Baker said. "It makes sense because if your cousin works in a hospital, that's who gets you the job in the hospital. So they have a pretty good feel - what geographic areas they're located in and where they work. And so they go to their employers. And that's the really good way to do it.
"If you can find an employer that hires large numbers of Somalis, and go to them and say, 'Look, you're writing the checks, they're not banked. So it's good for you to use cards because it saves you money. Look what it does for them if you offer them a value-added service as the employer.' That's the best way."
One of the main goals of the USACC and the study is to redefine perceptions about Africans. They want to overcome the stereotypes often portrayed in the media - tribesmen, AIDS sufferers, militants, and poor and starving refugees - and replace them with the knowledge that Africans are ambitious and hard-working, and they make family, religion and education top priorities.
Baker had an anecdote to share on that subject. He was in Atlanta and hailed a taxi. The driver was a Somali whose parents and brother were killed in the Battle of Mogadishu, which was later memorialized in the book and movie called Black Hawk Down.
Baker said that the cabbie, then just a boy of 11, spent years in immigrant camps before eventually arriving in the United States. When Baker met him, the cabbie was about to graduate from the Georgia Institute of Technology with a masters degree in medical engineering. "And his goal was to engineer medical products that were cheap enough to use in Africa," Baker said. "Isn't that a great story?"
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