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Community Developments Investments

Fall 2004

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Banking without borders: How Citibank’s new services help consumers in the U.S. and Mexico

A photo of a citibank advertisement

When Banamex, Mexico’s leading bank, merged into the Citigroup family of financial companies in 2001, we began looking for ways to better serve customers on both sides of the border. Citigroup’s acquisition in 2002 of Golden State Bancorp, gave us an expanded branch network and a greater ability to reach Hispanic customers in the western U.S.

We knew that many recent immigrants had banking needs but lacked even the most basic banking relationships. Chief among their needs were inexpensive and user-friendly remittance services to enable them to send funds to families or friends back home, and basic bank accounts offering security and convenience.

In April 2003, we introduced Citibank Global Transfers, which offers U.S. bank customers affordable, convenient, real-time money transfers domestically or to Mexico for a flat $5 fee. With a money remittance service in place, we then turned to offering products to support sending funds from the U.S. and receiving them in Mexico. Our solutions are the Citibank Access Account and the Banamex Tricolor Card, two new products that we rolled out in the fall of 2003.

Focus on simplicity

Both products were designed with a focus on simplicity.

The Access Account debuted as an entry-level, “checkless” checking account, and provides an affordable origination mechanism for Citibank Global Transfers from the U.S. The Tricolor Card, issued by Banamex in Mexico, allows recipients of the transferred funds in Mexico to access the funds through Banamex branches, ATMs or debit card channels throughout the country, safely, and efficiently.

“We knew that many recent immigrants had banking needs but lacked even the most basic banking relationships.”

The Tricolor Card operates much like the prepaid cards that are prevalent in Mexico. To obtain one, a consumer goes to any Banamex branch and purchases a card for a one-time fee of 25 pesos (about US $2.50). The plastic has a card number on it, but no name, and the consumer selects a personal identification number (PIN). The cardholder then contacts the Citibank account holder in the U.S. and provides the Tricolor Card number. The U.S. account holder merely enters the Tricolor Card number as the destination for the Citibank Global Transfer. Transferred funds are immediately available in Mexico to the Tricolor cardholder, who can use it at Banamex branches and at any ATMs or point-of-sale debit locations in Mexico (but not outside the country).

For those without a Tricolor Card, remitted funds can be picked up in cash at any Banamex branch. But the Tricolor card offers greater security, since funds can be accessed as needed rather than having to be fully redeemed in cash at one time.

Attracted to Access

As we proceeded with Access Account’s pilot in Chicago, we were surprised to discover the wide range of consumers who were interested in the product. While focusing on the underbanked, we found that senior citizens, students, technology-savvy consumers and others with limited transaction needs were also attracted to the features of the Access Account. Most importantly, however, recent immigrants and people who had never previously had a banking relationship were drawn to its features and the low $3 monthly maintenance fee, waived with direct deposit.

The Access Account was designed to be a “starter” account that also offers a wide range of low-cost and convenient financial services. As such it may
be unique.

Because our research identified check writing as a major obstacle for many unbanked consumers, one of the account’s strengths is “checkless” checking. Unbanked consumers had told us they were not confident about writing checks and worried that they might overdraw their accounts, incurring additional fees. With a debit-card-only account, and no paper checks, the account can’t be overdrawn, putting this concern to rest. Unlimited free bill payment is provided through online banking or automated telephone service, in English and Spanish. Citibank Global Transfers can be sent from Citibank ATMs in multiple languages or through English or Spanish online banking and soon by phone.

Earlier, in 2002, Citibank began accepting the matricula consular, the Mexican Consular ID, as a form of primary identification for account-opening purposes. By adding this form of identification to its list of acceptable IDs, which also include passports, driver’s licenses, government-issued photo IDs and others, Citibank was more easily able to offer banking services to recently arrived immigrants from Mexico.1

The Citibank Access Account was also designed to make it easy for consumers to improve their financial security and plan for the future. The bank wants to impress upon these customers the importance of credit, and so it offers a secured credit card to those customers without a credit history. After 18 months of satisfactory payments, the customer may be eligible for an unsecured credit card.

The value of security

We have been surprised that many recent immigrants have opened Access Accounts with considerably higher balances than we anticipated. We think it’s because we are offering security beyond what they have ever experienced. Previously they kept cash hidden at home or carried it with them — and worried about being robbed. Now they no longer worry about that, and by using Citibank’s remittance services they can be confident that the funds they send home will reach their loved ones.

This summer Citigroup introduced a new binational program for its Banamex USA credit card customers in the U.S. who want to share their lines of credit and other benefits with their families or friends in Mexico. It is the first, and thus far the only product of its kind currently offered in both countries.

OCC’s Community Developments Insights, “Remittances: A Gateway to Banking for Unbanked Immigrants,” [http://www.occ.gov/topics/community-affairs/publications/insights/insights-remittances.pdf] addresses the role of banks in providing money transfer services and discusses a number of legal, compliance, and operational considerations that financial institutions should be aware of when offering remittance products.

A U.S. cardholder is issued a Banamex USA card by California Commerce Bank, the U.S. banking arm of Banamex, and the designated participant in Mexico is issued a card by Banamex. The U.S. customer receives a monthly statement listing all activity on both cards. The cardholder in Mexico receives a monthly courtesy statement, reflecting only his or her activity. The U.S. cardholder may make dollar payments on the entire bill, or allow the cardholder in Mexico to pay his or her portion in pesos at any Banamex branch.

The cardholder in Mexico may take cash advances on the card for a $5 fee. In this way the binational credit card becomes another efficient mechanism for sending remittances. The U.S. cardholder pays a $29 annual fee for the dual-card feature on the account.

This August, Citigroup announced it would acquire First American Bank in Texas. The addition of over 100 branches in the state will give Citibank an important footprint in Texas from which to grow. It will also enable the bank to begin serving the needs of the large Mexican-American population in Texas.

In a relatively short time, Citigroup has successfully rolled out several products and services to meet the needs of unbanked and underbanked people living on both sides of the U.S.-Mexico border. Step by step, we are knocking down the barriers — the borders, if you will — between the unbanked and mainstream banking. And in doing so we are developing strong, lasting relationships with our new customers.

For more information, contact Mark Rodgers at (212) 559-1719 or rodgersm@citigroup.com