THE 200,000,000 GLOBAL EXPATS CASE FOR THE BANKS

Around the globe, 200 million people now live and work outside their homeland. From maids to middle managers to multi-millionaire investor­immigrants, they all need financial services that cater to their footing in two worlds. It's a new era of global personal finance - with Canada, a nation of immigrants, front and centre.

First-time expats ­an executive with a big consumer goods company, say - can suddenly find they have
more disposable income than they're used to. That makes them good customers. The banks help out with cash and wealth-management services, and get their hands on more deposits and healthy fees

ON A SUNDAY MORNING in late August, the shade of the towering headquarters of the Hong Kong and Shang­hai Banking Corp. Ltd. shelters dozens of women from the Phil­ippines, Indonesia and China's poor Western provinces from the sweltering heat that hangs in Hong Kong through the summer.

A clatter of voices fills the sticky air with Tagalog, Malay and Putonghua. This city is still the hub for commerce across Asia a decade after China regained sovereignty from the British, and Sun­day is a day off for tens of thousands of foreign maids and nannies that service Hong Kong's wealthy expatriate bankers and Canton­ese merchants. On patches of roadside grass and shaded under­passes all over the city the women gather, gossiping, dancing and picnicking on food that tastes of home.

Air-conditioned malls also become clogged with the almost exclusively female foreign workers. In Worldwide Plaza - one of central Hong Kong's few downscale malls - the women crowd narrow corridors and jostle in line at the Western Union to send money to their families, before strolling for a few minutes to the 47-storey home of HSBC - a prized spot because it pumps out cold air to a large open plaza on Queens Road Central.

It's fitting that so many choose to rest here given the central role of banks like HSBC and financial services providers like Western Union in oiling the wheels of globalization, and particularly the ever-rising tide of work­ers - from domestic help to middle management employ­ees to entrepreneurs to high­powered executives - that whiz around the world for work. Today, there are about 200 million people working and living outside their home country, a figure that's ris­ing steadily. They comprise 3 % of the world's population. Together, in one place, they would be the world's fifth most populous country. And the sums of money they earn, control and routinely trans­fer is staggering. Remittances
- money sent home by family members via Western Union and myriad formal and informal op­erations - was estimated at more than $300 billion in 2007 alone.

Banking industry experts divide the migrating multitudes into three general categories: (1) temporary labourers; (2) immigrants, split into two subgroups - a wealthy elite and a moderately afflu­ent majority; and (3) middle- and upper-income executives on for­eign postings. In human terms: cleaners in Hong Kong that wire cash home to waiting families; the super-rich who roam the streets here in high-end European sports cars, citizens of the World who have private bankers that charge high fees to take care of their every whim; and bankers fleeing the tumult of Wall Street and the City of London in search of better times abroad.

Though their needs are vastly different, all 200 million migrants have key things in common: mobility, a home in another country, and a need to move their money. In less-tech-obsessed days, people commonly carried cash-stuffed envelopes in their pockets anytime they went home. Today, technology and the banking industry's rec­ognition of this massive market means that each and every migrant is a potential customer of banks and other service providers. As a country of immigrants, Canada is a prime location. And our banks are stepping up for a share. At the same time, hard data remains scarce. Fortunately, there are plenty of people to tell us the story.

IN BAGUIO CITY, a seven-hour drive into the mountains from Manila in the Philippines, the phone rings at Marcelo and Patricia Gumolda's partially completed cemen~ house. Their 31-year-old daughter, Irene, is calling from Niagara-on-the-Lake, Onto

Marcelo and Patricia receive regular remittances from their three daughters in Canada: Irene earns her money working as a nanny; Nelda, age 36, works at a printing press in St. Catharines;

Grace, 27, is in Niagara Falls where she is a nanny like Irene. The money the three send - approximately $500 a month - pays most of the expenses for their parents, their two sisters and one nephew living in the house on a steep hillside in a poor neighbourhood. "We depend on the money," says Marcelo. "I have a small pension, but it's only enough for food. We use the money from our daughters for our household, and to payfor school for the children.
Their story is a familiar one to almost every family in the Philippines. By some es­timates there are 11 million Filipinos living overseas - about 11 % of the population. They sent home US$13 billion in 2006, a figure that represents 13.5% of the national gross domestic product.
In Baguio, Marcelo's money is wired to the Western Union on busy Session Road. It is one of 320,000 Western Union locations ­that's more than the total number of outlets owned by McDonald's, Burger King, Star­bucks and Wal-Mart combined, the company boasts. Irene's money, about 3,000 pesos or $68, arrives within 15 minutes of her sending it from Canada.
India, China and Mexico all receive more remittances than the Philippines. Indeed, the World Bank says remittances can be as high as a third of GDP in some countries. In 22 countries, remittances were equal to more than 10% of Gross Domestic Product (GDP) in 2006 and in six countries they were equal to more than a fifth of GDP, according to fig­ures from the Washington, D.C.-based
Mi­gration Policy Institute.
Globally, this industry translates into hefty revenue for the wire transfer companies that charge an average fee of about 12.5% of the cash being remitted. Around the world, re­mittances to developing countries hit US$2 5 0 billion in 2007, according to the World Bank. That means global annual revenue (for all car­riers) of more than $30 billion from cash sent home to some of the world's poorest nations. Little wonder that Scotiabank set up links in the past year with Western Union and HDFC Bank of India. "This partnership provides Scotiabank customers across Canada with the ability to send money to friends and fam­ily in 220 countries," says Rania Llewellyn, vice-president of multicultural banking at Scotiabank. "For many people, this service represents an important connection with im­mediate and extended family."

IF REMITTANCES lie at one pole of the global banking trend, then the opposite extreme is the world of the private bankers.
Jessica Shi wears a stylish Bay Street suit, as she talks about her career over tea in a lofty meeting room in First Canadian Place in Toronto. Shi is a chartered financial analyst and a private banker to some of Canada's wealthiest immigrants. Originally from Shanghai. hai, Shi grew up in Guilin and went to the People's University of Beijing, then on to her first job, in risk management for Industrial and Commercial Bank of China, the country's biggest commercial lender. After moving to Canada in 2001 and completing her MBA, Shi got married and started working for BMO in Toronto, where she was recruited into the private banking group - an exclusive banking niche that involves a highly personal concierge-type ser­vice for the rich and super-rich, clients that often have US$2 mil­lion or more in liquid assets.

While the world leaders in this market have traditionally been UBS AG of Switzerland, Citigroup and Merrill Lynch - each with an estimated US$l trillion in assets under management for private clients - the whole industry has seen an increase
in demand for this type of service that often appeals to in­ternationally mobile clients like successful entrepreneurs, c-suite executives, celebrities and even sports stars. Verifiable statistics on this group are scant, but according to a recent report by Merrill Lynch and the Capgemini con-
sulting outfit, in the world last year there were 10.1 million "high-net-worth" individuals - people with at least US$l million in financial assets excluding collectibles, consum-
abies and primary residences. That's up substantially from 8.8 million in 2005.

"They're very needy for sure," says Shi of the 40% or so of her clients that are new Chinese immigrants, typically factory owners or real estate developers or mining com­pany executives and their families. "They call me day and night, asking where to live and eat, how to get a doctor, a driving license, a lawyer or an accountant. I've had to learn where all the good public and private schools are. I've had to learn to be a real estate agent, and learn about tax laws and how my clients' businesses might be taxed in China," says Shi. Some clients even want to be put in touch with a Feng Shui consultant or fortune teller.

These new immigrants often want different banking products than other customers, and are more likely to ask for a safety deposit box or for advice on buying vacation property overseas, or for low-cost, safe methods of shuf­fling cash around the world. It is lucrative, high-margin work for the banks, that also find tapping this market can lead to relationships that bring in more work for their investment banking and capital markets businesses, too.

THE SUPER-RICH are not typical among immigrants. Not surprisingly, then, bankers around the world ­nowhere more so than in Canada - spend even more time targeting the much bigger pool of immigrants of mod­est means. Royal Bank of Canada has calculated Canada's new-immigrant banking market is worth about $3 billion a year. And it's growing fast: By some estimates, there are 300,000 new arrivals each year in Canada.

It's no wonder banks covet them. While it's notoriously difficult to convince established retail customers to change their bank - because of the perception it's a hassle to re-new direct deposits, cheques and so on - a new immigrant is, al­most by definition, in the market by necessity.

The banks respond with targeted marketing - ads in multiple languages or on ethnically focused cable television networks tout­ing new products, services and international treaties with overseas banks, such as Scotiabank's links with Western Union and HDFC Bank ofIndia. The bank also sponsors pre-immigration workshops in China, and permits immigrants to open Canadian bank accounts before moving, says Scotiabank's Llewellyn, herself a Kuwaiti­born, Egyptian immigrant to Canada.

Other Canadian banks have similar global hook-ups and pre­immigration programs, too. After moving, new Canadians will find ATMs in a multitude of languages as well as polyglot tellers. This summer, Royal Bank of Canada announced its customers can call a helpline manned by agents that can translate their queries into 150 different languages, including Spanish, Russian, Vietnamese and Korean. Meanwhile, the banks deliberately target this migrating workforce with a slew of sponsoring and marketing efforts aimed at different national and ethnic groups. Big banks are now the main sponsors in Canada for cricket and soccer, as well as a host of inter­nationally themed festivals and outdoor events.
BACK IN HONG KONG, high above the nannies and maids, HSBC, the world's most successful global retail bank, plans to grow its share of yet another piece of the shifting global workforce.
The Hong Kong international banking centre (lBe) is one of 40 the bank has around the planet. Bankers from India, China, Hong Kong, the United Kingdom, Aus­tralia and elsewhere sit in an open plan room with low­walled cubicles. There are all colours of national flags on many desks. There are dozens of languages spoken in these IBC's where staff answer questions on local banking regulations from colleagues all over the world who have customers moving from one country to another.
This office is part of HSBC's efforts to grab an ever-bigger slice of the global "mass affluent" market - the lawyers, accountants, sales staff and other middle­management types that travel the world for work, often in the employ of multinational companies, and have an annual family income of up to US$lOO,OOO to deposit.
HSBC, the self-styled "world's local bank," has grown a global retail business by following the international growth of its commercial clients, says Nick INinsor, head of personal finance for HSBC in the Asia-Pacific region. "Because we were banking the companies, we tended to bank the individuals who worked for those companies to."
A slim, amiable middle-aged Brit, INinsor has been with the bank for 25 years in the United Arab Emirates, Qatar, Japan, Hong Kong, Brunei, India, Singapore and New York as well as the Unit­ed Kingdom. He has bank accounts in five countries.
\Vhile there are several banks with global retail banking franchises - Citibank and Standard Chartered, for instance, or Scotiabank in Latin America and the Caribbean - HSBC is with­out a doubt the market leader and is working hard to cement that position. \Vhen HSBC talks about global retail banking services, it's worth listening.
INinsor explains that first-time expatriates - a marketing ex­ecutive for a big consumer goods company that has just been trans­ferred from Atlanta to Shanghai, for instance - can suddenly find they have more disposable income, and that makes them good cus­tomers. They may have a house to rent, which will generate more income, or they may find tax savings that free up extra cash. The bank can help out with cash and wealth-management services, and get its hands on more deposits as well as some healthy fees.
Around the world, there are an estimated 200 million people in the "mass affluent" category, according to Datamonitor - a figure that's increased 34% since 2005. Not every one of them is on the move, but a sizeable portion are. Last year, HSBC's chief executive Mike Geoghan set an ambitious target - to triple the number of HSBC's global premier accounts clients by 2012. Considering that the bank had about two million such clients in 2007, that translates into a goal of a 3 % share of the global mass-affluent market.
Three percent might not sound like a lot. But, as INinsor says, banks in Canada and elsewhere would be thrilled with another six million wealthy clients - wherever they happen to live.

Source: FP October 2008