12 minutes
Rising immigration in Canada hikes demand for different services.
The search for new credit union members is never ending. They are the life blood of your business and the ones who will need new and more products and services as your current membership ages into RRIF land. This is true for any business but especially for credit unions, which have long had an older customer base than their banking competitors.
But where is the best place to conduct your search? There is a common marketing phrase: Fish where the fish are. To marketers, this means to first determine your target audience, then figure out where they are active, and that’s the best place to reach them.
Well, it turns out that the best place to find new credit union members might be the international arrivals area of your nearest airport. This marketing advice is brought to you by changing demographics, Statistics Canada, and Immigration, Refugees and Citizenship Canada.
Immigration has increased in recent years, setting records in 2021 with 405,000 new arrivals and again in 2022 with 437,000—118,000 from India, 32,000 from China and 24,000 from Afghanistan. Last November, the federal government announced even higher targets that will continue to set records. It aims to welcome 465,000 new permanent residents this year, 485,000 in 2024, and 500,000 in 2025.
All those new immigrants are needed because our population would soon be declining without them, and they already represent almost 100% of labour force growth. Canada’s aging population means that the worker-to-retiree ratio is expected to be 2 to 1 by 2035, a dramatic shift from the 7 to 1 ratio 50 years ago.
This is not just a Canadian phenomenon. It is hitting all nations as they develop, and some experts predict the world’s population will peak at about eight billion later this century and then start to decline. Some nations such as Japan are already seeing a decline. Even China, which for decades restricted births in an effort to keep its population down, has now reversed course.
“When high death rates started falling, high fertility rates sent populations soaring,” writes Canadian author Dan Gardner. “But then the fertility rates fell, too. To be modern, in a demographic sense, is to have both low death rates and low fertility rates. And when you have that, populations do not explode. They lie flat. Or they decline.”
The Globe and Mail columnist John Ibbitson and pollster Darrell Bricker have written that global population decline is inevitable and the challenge we face is how to manage that drop.
At this point, Canada is the world leader in turning to immigration to keep its population rising. To thrive over the next couple of decades, credit unions will need to recognize this shift and attract new members from the newcomers.
The federal government expects 60% of the new immigrants who will arrive in the next few years will be accepted under its economic applicant category, which means they should have skills that are in demand. But an RBC study by Nathan Janzen and Claire Fan found that Canada is doing a poor job of taking advantage of the skills that new immigrants have. Many of them face credential barriers when they arrive and try to find employment.
“Poor recognition of foreign credentials is the primary obstacle to better utilization of immigrant skills,” says their report Proof Point: Canada is failing to put immigrant skills to work, which was released in February. “Eliminating this barrier will be critical to ensuring the Canadian workforce is not only larger—but more productive.”
It notes that immigrants are better educated and younger than the domestic workforce, but they are much more likely to work in jobs requiring less education.
Economic forecasts by Desjardins predict the increased immigration will help the economy but will force up housing prices in Ontario and British Columbia if the newcomers continue to move to those provinces, as they have in the past.
Prairie Provinces Welcome Immigrants
“However, if they move to places that have done a better job historically of integrating immigrants, such as the Prairie provinces, this will provide a substantive offset to the impact of higher immigration on home prices,” says a Desjardins report issued in mid-February, The Ins and Outs of Immigration and Canada’s Housing Market.
To keep housing prices level, while adding almost 1.5 million people over the next three years, Canada would have to build a record number of new homes, which will be challenging, the report says.
“Canada needs talented, young immigrants to increase productivity and offset the economic and fiscal drag from aging. Economic immigrants are more likely to be employed and have higher earnings than native born Canadians, thereby raising Canada’s economic potential. Turning them away because of an inability or unwillingness to build more housing would leave Canada worse off.”
It concludes: “The contribution of immigrants to the Canadian economy well outweighs their impact on the housing market.”
The 2021 census shows more than 8.3 million people, 23% of the population, were or had been landed immigrants at some point. In the Greater Toronto Area 46% of residents were immigrants, while Vancouver had the second-largest proportion of immigrants at 42%, says a report by Statistics Canada.
“Given that the population of Canada continues to age and fertility is below the population replacement level, today immigration is the main driver of population growth,” the report says. “If these trends continue, based on Statistics Canada's recent population projections, immigrants could represent from 29.1% to 34.0% of the population of Canada by 2041.”
“Contrary to popular belief, people new to Canada are more likely to be employed than people born in Canada,” says a Desjardins report. “But this is a recent phenomenon. It’s the convergence of two trends: a sharp increase in the employment rate of new immigrants starting in 2016 and the gradual decline in the employment rate of people born in Canada.”
One surprise is that the percentage of permanent residents obtaining Canadian citizenship has plummeted since 2001, according to the 2021 Census. The proportion of immigrants who seize the opportunity to become Canadian is in freefall. Just 45% of permanent residents became citizens within 10 years, down from 60% in 2016 and 75% in 2001.
“To go from 75% of newcomers obtaining citizenship to only 45% is simply shocking,” said Daniel Bernhard, CEO of the Institute for Canadian Citizenship. “It goes against everything we tend to think about Canada being a welcoming country. It raises all sorts of questions that will have no easy answers, but it is certainly a wake-up call.
“Canada’s future depends on newcomers becoming Canadian and contributing their energy and talents to our shared success. We should be extremely alarmed that newcomers are falling out of love with Canadian citizenship, which has, for decades, been highly desirable.”
Newcomers Need Assistance
Access Alliance Multicultural Health & Community Services is a Toronto group that can provide advice on the challenges newcomers have. It provides health care and settlement help to immigrants and refugees. It surveyed newcomers several years ago to understand their financial vulnerabilities and challenges.
The report suggests opportunities for credit unions to provide information and services the many new immigrants need. For example, it found newcomers said they had limited knowledge about the Canadian banking and financial system, faced barriers to saving, and weren’t familiar with all their potential tax credits and benefits.
“The focus of the research was to explore not just the knowledge gaps, but what are those broader factors that are working in the background to prevent people from achieving or working towards financial security?” said Miranda Saroli, knowledge mobilization and social action coordinator at Access Alliance.
Saroli says there are cultural and religious nuances that credit unions need to consider when serving new immigrants. For example, many of the Muslims surveyed expressed a preference for products that do not involve interest.
One particular risk area for the immigrants surveyed was retirement income, Saroli says. Many newcomers work in precarious jobs and cannot save a lot, meaning they expect their children to provide retirement help. But she notes that the second-generation often has a more North American outlook and isn’t prepared to provide that help.
One area that has been a problem in recent years is scams that prey on newcomers, Saroli says. “These people are more vulnerable to loan sharks and scam artists.”
She notes that there are a lot of systemic barriers that cause problems for newcomers.
“It was also our intention to shift the onus off of individual newcomers and the messaging that says they need to learn how to budget better and then they won't have so many financial issues. But obviously when it comes to our clients, no matter how well you budget, if you're only starting with this small pool of money there's nothing you can really do. Toronto is just so expensive that even if you think you're going to be set for a while the money runs out so quickly.”
About half of survey participants said that they had no knowledge about RRSPs and TFSAs. A third of the participants indicated that they had no knowledge about RESPs. More than 80% said they were not currently saving for retirement and 77% did not expect to be financially able to retire.
Providing Loans, Services to Immigrants
Many credit unions do have programs that help immigrants.
For example, at $33 billion Vancity, Vancouver, the credit union’s efforts have included supporting financial literary courses to help both immigrants and refugees, while it also looks to help newcomers on the business side, said Gurpreet Jhaj, VP/marketing.
“We support them with microfinancing, and we provide that financing at favorable terms,” Jhaj says. “We look beyond just credit history; we consider their ambition, character and determination.”
Vancity also provides loans for newcomers to help them write exams to allow their foreign credentials to be recognized, a key barrier for many, and has also been working with the B.C. government to support arriving displaced Ukrainians.
$18 billion Servus Credit Union, Edmonton, Alberta, offers a range of services for newcomers, including loans of up to $15,000 to help professionals have their qualifications recognized. In partnership with the government of Alberta and the Bredin Centre for Career Advancement, the program can cover licensing and certification, exam fees and education upgrading.
RBC has been the bank most aggressively targeting new immigrants. Last year it announced a collaboration with ICICI Bank Canada, which sees the Indian parent bank refer its newcomer clients to RBC, making it easier for them to open a bank account upon arriving in Canada.
Given that the number of Indians settling in Canada has tripled in last three years and now represents the top source country for Canada, the collaboration marks a significant growth opportunity for the bank, which told investors it expects the partnership will add about 50,000 clients annually.
Jacqui Allard, EVP/personal financing products at RBC, says the bank will initially focus on India’s international students, which represent about half of Canada’s 460,000 international students. Moreover, the majority of people seeking permanent residency in Canada come from this cohort.
“Many international students are already allowed to work in Canada, have a strong command of one of our official languages, and possess in-demand skills. All these factors increase their likelihood of financial success,” Allard says.
RBC is buying HSBC Canada (formerly the Hongkong Bank of Canada) for $13.5 billion as well. It expects the deal to close later this year, subject to federal approval. CEO David McKay says the deal will give the bank “connectivity to the next generation of immigrants.”
“This is a client strategy at the end of the day, and a client growth strategy,” McKay says. “It really does represent a once-in-a-generation opportunity.”
RBC offers what it calls the RBC Newcomer Advantage, which for new immigrants includes a credit card limit of $15,000 or $2,000 for students. The bank has also created a website called Arrive, which provides free tools and features subject matter experts from housing to healthcare, schools to transportation. Allard says Arrive is part of RBC’s goal to develop long-term relationships with newcomers. The bank’s research shows that in their first year in Canada, 69% get a credit card, 52% begin investing and 20% buy a home.
Several years ago, $170 million Luminus Financial in downtown Toronto worked hard to attract members from the Filipino community by offering an easier way for them to send money back to family members.
Chief Executive Officer George De La Rosa said the program succeeded for some time, but eventually new competitors made it tough for Luminus to keep that business.
“We started providing services to money service businesses about 10-plus years ago and realized that those businesses help immigrants buy and sell foreign exchange, or send money back home,” De La Rosa says.
That led him to realize how much money Filipinos were sending home. So Luminus developed a remit now, pay later program that gave members a $500 overdraft they could use to send money home, then repay the loan when they were paid.
But the program required a lot of work to develop and maintain a relationship with a bank in the Philippines and to match new fintech competitors who soon came along, he says.
“We ended up getting rid of the program prior to the pandemic, because operationally, it was becoming very difficult,” he says. “We couldn't keep up with the technology because it isn't our core business.”
De La Rosa says Luminus now focuses on meeting the needs of underserved groups, which has led it to provide loans to new businesses that are operated by new immigrants or self-employed people who have trouble qualifying for loans. It is also working with housing co-ops and provides co-ownership mortgages.
Credit unions in Nova Scotia are also offering a small business loan program that aims to help immigrants who are interested in starting, expanding or buying a small business. This pilot project is available exclusively through credit unions is an extension of the Small Business Financing Program, which is also administered by the Nova Scotia Co-operative Council through credit unions.
In the coming decades, these programs and other efforts to attract and serve newcomers to Canada will be vital to the health of all credit unions. cues icon
Art Chamberlain is a writer based in Canada who focuses on credit union issues.
