Why Indian Banks need to focus on the less Tech Savvy US NRI’s ?

Silicon Valley and the boom in the IT industry propelled by the internet have made the Indian engineering talent a much prized item. Indian educated doctors, dentists too are a much sought after in the USA ( they have to clear the US certification requirements). But there are also a lot of Indians working in less celebrated ( although important) jobs : For eg: motels, fast food chains, entertainment industry (casinos,theme parks),gas stations, grocery stores etc.. So what is it about the Indian worker that makes them so ubiquitous and sought after in blue-collar jobs ? Its common to find Indians manning petrol pumps, working at local grocery stores such as Wal-Mart ,Kroger etc . Indians work hard and have an edge over their Spanish counterparts because they are more proficient in English .

Mandi Kaur ( full name Mansimran Kaur) is an Indian lady who works in a Kroger (grocery store) in Atlanta, GA. Like most Indians seeking success in the promised land of USA, Mandi Kaur and her family ( consisting of her husband , aged mother in law and three children -2 daughters and a son) migrated to the USA after their family petition was approved. Mandi was a homemaker and had never worked before coming to the USA. Her husband had a small business in their hometown but now does odd jobs in the USA. He is not very conversant in English although he holds a Bachelor’s Degree in History(medium of instruction was Hindi) and hence has not been able to find anything substantial. Mandi on the other hand has been able to find and keep her job with the Kroger grocery store ( it requires basic proficiency in English). The job requires her to be on her feet for eight hours and working in various sections of the store ( stocking produce, arranging shelves, manning the cash counter,handling customer returns, arranging the grocery carts in the parking lot etc). She has managed to learn driving and buy a car that she uses to commute to her store and back home. Mandi has to work in different shifts at the store and works hard to manage her home-family and the job. The main reason for her sticking on to her job with Kroger is that ( these jobs typically pay between US$ 8 to US $ 13 per hour approximately) it provides her with medical insurance coverage for her and the family- husband and kids (since all kids are under 21).She typically works for nearly 50 hours every week since she tries to put in more hours to make more money.

Mandi still cherishes the idea of returning to her hometown in Punjab. She has seen ads of some Indian banks operating in the bigger cities of the USA like NY,LA and even knows that they have websites however she uses Western Union to remit funds to her family incase there is a real emergency otherwise she arranges funds through her relatives and pays them off subsequently.

She is aware that the property prices are on an ascent in the Indian context and has also heard that fixed deposit rates for NRI accounts are showing an upward trend but Mandi wants more information. She tried calling the 1-800 number of an Indian bank operating in NY but was not able to follow some of the information completely and felt embarrassed to ask more questions She wants to be able to interact with a physical person who can answer her questions (preferably in Hindi/Punjabi), help her with the paperwork and navigate the process of maintaining accounts in India while being able to get information in the USA . Most importantly Mandi wants her hard-earned money to be safe. She does not want to involve her children too much into money matters at this stage and would like to save some money in India for the rainy days ahead. She does not want to depend upon her husband too much since she feels that he may spend some of the savings on personal consumption,relatives,celebrations etc thereby depleting the kitty

There are a lot of  men/women like Mandi Kaur who want to reach out to banks in India and want Indian banks to reach out to them. They are comfortable with most Public Sector Banks since some of these institutions have existed even before their birth! However they are unable to connect with Indian banks via the internet since they are not very comfortable in the usage of the net, plus they are not sure about the security of transactions and information given over the net. Typically such individuals are in the age group of about 50+, generally hail from smaller towns and villages in India and possess basic education up to Class 12 or in some cases have Bachelors Degrees ( the medium of instruction is generally not English but the local language like Gujarati,Hindi etc). They have low-medium paying consistent jobs (blue-collar jobs) that interestingly are recession proof! The reason that these jobs are recession proof are that during economic boom times nobody wants to do them because so many better options are available and during the bust consistent workers with a good track record willing to work at low salaries are retained. Services like grocery stores,petrol pumps,pharmacy jobs, F&B(fast food) , motel and hotel jobs, etc are always utilized since they constitute the necessities of the average American lifestyle . Also most of these jobs are physically demanding in terms of the work involved hence the turnover is high

We usually hear of the tech driven IT based demand in the West that has catapulted engineers ,mathematicians of Indian origin towards seeking Western shores. This crowd and even medical doctors of Indian origin constitute the upper crust section of the US Indian-American socio-economic section. This (affluent) section of the Indian NRI crowd is tech savvy,articulate,financially comfortable and with means and ends that sometimes allow using specialists such as ( CPA’s, CFP’ etc).Their requirements may be complex involving the usage of a combination of banking and finance products (with emphasis on wealth multiplication & tax planning) that may involve using multiple banks across continents

However the ‘other’ NRI section if serviced can be lucrative for Indian banks for the following reasons:

  1. The demographic profile and the comfort in dealing with Indian banks (due to emotional,cultural,linguistic reasons) generally ensures loyalty from this section
  2. The banking requirements of this target audience are generally quite simple and once resolved can lead to acquisition of other related family member accounts ( both in India and the USA)
  3. Good for building CASA base (Current /Savings Base). Banks need a diverse and wholesome base of low cost deposits in order to boost income.
  4. Possibility to cross-sell other products once a relationship is established thereby contributing to the fees,commissions of the banks earnings.
  5. Helps the Indian Banks get access to the USD ( foreign exchange) generally a sought after currency especially during the recent weeks
  6.  Availability to obtain authentic ID information ( Social Security Number) from Indians based in the USA-makes it easy to fulfill the KYC (Know Your Customer)requirements and obtain supporting documents if any by Indian banks.Moreover the US system of highly organized and detailed documentation requirements in general, makes such individuals more tolerant to the paper intensive system prevalent in India.
  7. Robust presence of the Indian community in the USA and its open immigration policy make is a desired destination for many who immigrate on different visa categories such as student,business,work,family etc. Unless USA immigration laws are amended drastically this trend is likely to continue even in the future leading to a strong need for banking products and services that help Indian Americans connect the two continents.  According to the 2010 USA Census the Indian population in the USA grew from almost 1,678,765 in 2000 ( approx 0.6% of the US population) to 2,843,391 in 2010 ( or approx 0.9% of the US population) a growth rate of 69.37%,one of the fastest growing ethnic groups in the USA( see link for details http://en.wikipedia.org/wiki/Indian_AmericanA recent World Bank report stated that India received USD 58 billion in remittances during 2010-11. China came in close at the second place with USD 57 billion. Approximately 61 percent of the remittances made to India went towards family welfare,bank deposits attracted 20 percent,3 percent towards equity investments and 4 percent towards real estate..

Some ways that banks can reach out to this section of the population are:

  • Working with local Indian community/ cultural and regional associations and disseminate information. This will also help banks get access to homogenous groups of people with similar needs,requirements. Information campaigns can be conducted in the respective regional languages. 
  • Using Indian hubs in respective cities on weekends (the time when most Indians frequent such areas) to provide information and answer queries. Eg : Edison area in New Jersey or the Decatur area in Georgia have a lot of Indian shops selling a wide variety of merchandise and which attract the Indian American community in big numbers from surrounding states.
  • Use the Indian TV channels to provide a contact number for obtaining information.Once the call is received at the respective call centre, the same can be directed to a person who is comfortable in speaking /query handling in the language of the caller. This can be made a 24 hour operation by using the Indian BPO model.In order to make the operation cost effective banks could consider allying their marketing costs. This ‘joint partnership model’ can help banks in cutting down on costs and can help he customer in reaching out to a bank that otherwise may not be that aggressive. Small to mid size banks could consider this option. For eg: Banks like Vijaya Bank, Canara Bank are very popular in the state of Karnataka .Hence a customer with roots in Karnataka wanting to establish a banking relationship with either of these banks is able to reach out to them rather than going to a competitor simply because they lack a presence in the USA. So while Vijaya Bank may not want to team up with Canara Bank ( for obvious reasons) it can certainly think of teaming with another regional player.
  • Strengthening correspondent banking arrangements by Indian banks will also help in increasing the options available to residents abroad in remitting their funds directly from their bank in the USA to their bank in India. The knowledge levels of retail banking staff in US banks about remitting funds to India and the mechanics involved therein are quite poor and very often they need to be given complete and detailed instructions to ensure that funds reach the Indian account in a prompt manner. The fees are high and its very common for the intermediary bank ( which acts as the link between the US-based bank originating the transaction and the Indian bank) to sit on the float even if it is for a period of a day or two. This typically happens if the transaction is originated close to the weekend i.e Friday in the USA. By the time the funds are debited to the senders account and thrown into this intermediate banks account, Saturday morning kicks in ( in the Indian sub continent) and since there are no foreign exchange transactions over weekends, the funds lie in transit -this float earns revenue for the intermediary banks.
  • Education about different types of NRI accounts. For Eg: NRE accounts are maintained in Indian Rupees which means that the sender is open to the foreign exchange risk on the day the funds are converted from US dollars to Indian Rupees and placed into either a checking (savings account) or a term deposit (CD). Similarly even though these funds are 100% repatriable, they need to be converted back into US dollars from Indian rupees at the time of sending them back to the USA-again leaving the customer open to a potential downside if the Indian Rupee appreciates vis-a-vis the US dollar 
  • Banks need to provide information documents ( preferably in different regional languages) that address the details as explained in the earlier point. This can be done in a simple Q&A form. The most common areas of queries are : conversion, exchange risk,tax deducted at source, repatriation benefits, ability to hold the accounts jointly with residents etc



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