Expats with Early Bank Accounts at Locations Likelier to Succeed

By J.J. Smith Sep 15, 2008
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Because financial problems are a leading reason for failed expatriate assignments, firms can increase the chances of an expat completing a tour by helping the employee open a bank account at the location prior to departure, says a British banking expert.

Expat employees need to be able to cash their paychecks just like everyone else, and if they cannot cash a check, or have to deal with other financial problems—such as an inability to pay a mortgage in the home country—the worker will not be as productive and may want to return home early, Christopher Gardiner, an associate director for the British bank Lloyds TSB, said at the British Embassy in Washington, D.C. on Sept. 15, 2008.

In surveys, only 4 percent of expat employees say companies helped them establish a bank account before the expat embarked on the assignment, but if an expat does not have access to banking at the location, there will be problems, said Gardiner who was part of a program on doing business in the United Kingdom hosted by the embassy. If an expat employee is not happy and wants out of an overseas assignment, the company ends up losing $100,000 to $300,000 on the expat, he said. Not losing that money should be the incentive for companies to help employees set up a bank account and plan on how to manage specific financial situations if there is a need, before departing for the assignment, he added.

In addition, for an expat assignment to get off to a successful start, there are some things the employee has to do prior to leaving the home country, and immediately upon arrival in the work country, Gardiner said. The expat “to do list,” includes the basic tasks of the international business traveler that have to be complete before leaving on an assignment, but there are also cases in which specific jobs may require more—or modified—tasks be complete, he said. The basic tasks are:

Obtaining visas.

Securing vehicles.

Find housing.

Coordinate schools.

Transport pets.

Move furniture.

Manage banking and other financials.

Traditionally, until most items on the list—except banking—are sorted out, the expat is not likely to depart for the assignment, Gardiner said. Banking is on the list, but prior to departure it is at the bottom because it is not important yet, he said. However, as soon as the expat steps off the airplane in the assignment location, “manage banking and other financials” jumps to the top of the list, he adds.

Bank Assumptions

A major reason that many U.S. expats do not get started on the banking issues until they are at the work country is they assume their local banks are going to work overseas, Gardiner said. “Their banks may advertise themselves as global, but it doesn’t mean that it transitions into other countries, including the UK,” he said. There are U.S. banks with branches in the United Kingdom, but those banks are on entirely different systems and work with different currency. Expats who believe that they will walk up to an automated teller machine (ATM) as a means to conduct their banking will find that the ATMs overseas either do not work, or charge such high fees it becomes prohibitive to use them, he said.

The banking hurdles employees have to over come while on the international market place including opening an account in the work country, and, if they have not opened an account before arriving at the location, there will likely be delays, Gardiner said. Using the United Kingdom as an example of what delays could occur, expats assigned to a UK nation would lack two very important criteria necessary to open a bank account, he said. They would need a “national ID number” (the British version of the U.S. Social Security number), and proof of residency, he said. To obtain a national ID number, the expat needs to apply at Her Majesty’s Revenue and Customs. Once an application is filed, an appointment will be scheduled to determine if the expat needs a national ID number, or if the expat already has one, and if the applicant has a right to work in the United Kingdom. At the meeting, the expat needs to establish identity, which can be done with a passport, driver’s license, birth certificate and marriage, or civil union certificate; and the expat has to show he or she has the proper visa allowing them to work in the United Kingdom. An expat may also be asked to provide a pay stub or a letter from the employer.

In addition to needing a national ID number for a bank account, an expat will need to establish residency in the United Kingdom, and that can be done by providing three utility bills that list the account applicant’s current address, Gardiner said. However, most people are not going to have any utility bills until they have been living at the address for at least a month, during which they will probably need to cash some checks, he said.

What expat employees really want is “borderless banking” that allows them to conduct their routine finances with banks that are secure, simple and reliable, Gardiner said. The individual expats are doing the due diligence on the banking institutions and they are no longer limiting the bank the select based on the interest rates, but are looking at whataccount features are offered, the institution’s credit rating; and they want to know what deposit protection assurances are provided for if the institution goes bankrupt, he said.

J.J. Smith is an online editor/manager for SHRM.

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