President Obama announced a new executive order Friday that will allow for the children of illegal immigrants, who are also immigrants themselves, to be free from the fear of deportation and eligible for work permits. The policy has touched off plenty of political debate already, especially since a conservative journalist interrupted the president in the middle of his remarks, but that’s not what we’re interested in. The president’s policy decision dovetails nicely with some research on the underbanked that came out Thursday.
Javelin Research released a report on Thursday titled Reaching Underbanked and Unbanked Consumers in 2012: Strategies for Connecting with Mobile Financial Services. The report attempts to help those who work in mobile technology and financial services understand who the underbanked are, how much money they have, and what sort of services they need.
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The demographic breakdown of the underbanked is worth noting. White Americans are underrepresented, accounting for 45% of the underbanked, compared to 64% of all consumers. Black Americans make up 17% of the underbanked population, but just 11% of consumers. The most overrepresented group is Latino Americans, who make up 23% of the underbanked — nearly double the 14% of all consumers they represent.
Age-wise, the contrasts are starker. Those aged 18-24 account for 36% of all underbanked consumers, but just 13% of all consumers — nearly three times overrepresented.
Furthermore, it appears that the underbanked tend to be immigrants. The underbanked are twice as likely to send remittances to foreign countries. This is a massive business in the United States, which sends $48 billion overseas every year. The No. 1 recipient of American remittances isn’t hard to guess: it’s Mexico, where we’ve, in essence, been importing labor from for decades now, with no clear and consistent message from local, state, or federal authorities as to whether this is OK. Obviously it violates the law of the land, but it’s been an integral part of our economy for decades now.
Which brings us back to Obama’s executive order. If you had to imagine what the Joe Sixpack or John Doe of the underbanked is like, you would have to conclude he or she is young and Latino. This isn’t news to the industry; both the TIO Network and the Mango Card, which uses George Lopez as its spokesperson, are nonbank financial products specifically aimed at the underbanked Latino demographic.
A portion of this demographic might very well be undocumented — and they might not have any idea. Before the executive order, an 18-year-old brought to the States at 18 months of age could face deportation to a Mexico as foreign to him as it is to you or I. Now they have a path to residency, which is great news for them, assuming they’d even like to stick around.
Latinos’ uncertainty with regard to immigration status has no doubt played a role in their overrepresentation in the underbanked demographic. One imagines that even native-born children of un- or underbanked immigrant parents are less likely to be properly banked themselves. It’s possible that Obama’s executive order could bring more of this young, Latino demographic into the banking world. Even inventive products like TIO and Mango aren’t yet able to properly replace a relationship with an actual bank over the long term.
But these companies, along with Western Union and others, have been there for the Latino community when banks have not. It will be interesting to see if Obama’s new policy has any effect on underbanked numbers at all: will immigrants stick to what they know and what has worked well for them? or will they move to the banking world? It might be low on their list of priorities, understandably.
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