The NYC Department of Consumer Affairs/Office of Financial Empowerment, in partnership with the Mayor’s Office of Immigrant Affairs and the NY Community Trust, and thanks to funding from Citi Community Development, commissioned primary data collection of over 1,300 first generation immigrants residing in NYC, and a limited in-depth assessment of the city’s financial services marketplace in neighborhoods with a high immigrant population density.

We sampled both banked and unbanked recent immigrant of three communities: Mexican, Ecuadorian, and Chinese. We chose these communities because they comprise a large and growing proportion of NYC’s first-generation immigrant population, and because they vary in assimilation levels and current degree of financial access. We obtained sufficient samples to examine statistically significant differences in financial service usage and needs among those with and without a relationship to the formal financial sector. By examining transactional activities, savings patterns and behaviors, and debt burden and habits, we also begin to understand how immigrant households work toward financial security.

We examine how short-term savings, both formal and informal, are important financial capability strategies that are often accumulated to protect immigrant households from short-term financial shocks such as losing a job or health emergencies.  Among the three immigrant groups we surveyed, the primary reason for saving is to protect their households from such emergencies. Risk coping strategies vary significantly among banked and unbanked, with the former tapping into financial instruments to manage unexpected expenses or shortfalls in income to complement the help of friends and family. In contrast, those without bank accounts primarily rely on family and friends, and working more hours. Given that a large number of our respondents were unbanked, or underbanked, our results highlight the need to improve financial access to these segments in particular.  

To understand some of the barriers to financial services access, we relied on survey findings and probed these with qualitative focus group discussions as well as a scan of supply side barriers. The main barriers are primarily related to their price sensitivity.  The most important reasons for not having a bank account cited by the unbanked in all three communities is not having enough money for minimum balances and high fees.  However, we suspect that this constraint is not the main driver of an individual’s decision to open a bank account, since holding everything else constant, income was not correlated to whether an individual was banked or unbanked. More likely, information barriers are at play.  The recent changes in fee structures by banks in the City has led to suspicion about undisclosed fees.  Documentation and language continue to be cited as barriers, primarily by Mexicans, despite the fact that Spanish is spoken quite widely and broad types of documentation are accepted by banks city-wide.  We also found evidence of different forms of information asymmetries impeding bank access rather than supply-side constraints.

We conclude by laying out the product and program opportunity to better serve this dynamic market segment, particularly a municipal strategy that leverages both DCA/OFE and MOIA’s respective comparative advantages.