Why banks are missing a great investment opportunity
According to the latest FDIC report survey, 48.7% of Latino households were “unbanked” or “under-banked”. This means, they never had an interaction with a financial institution in the past or they have poor access to mainstream financial services normally offered by retail banks.
Hispanics have a growing need and demand for financial services. It is estimated that by 2020, one in five Americans will be Hispanic and by 2050 the gap will be even shorter, one in three.
Among Hispanic banking users, the financial service products with the biggest percentage difference of growth from 2008 to 2012 were debit cards/ATMs, home mortgages, and online banking. It is also estimated that 44% of Hispanics utilized online banking compared to 29% of the general market. Nearly half of the Hispanics listed online banking as their preferred channel to conduct transactions.
It is important to understand that Hispanic target marketing is not a passing fad. On the contrary, it is a long-term investment that will significantly pay off.
Based on the latest study conducted by The National Council of La Raza in California, 45.3% of the Spanish-speaking participants who did not have an account cited that the ability to communicate in their language was one of the most important things they were looking for in a bank. This is not surprising due to the fact that Hispanics, especially, want to feel like they are acknowledged and respected. Reaching out to them in their own language with a culturally relevant message is a crucial element to remember if you really want gain their business.
Banks and financial institutions generally face cultural and institutional barriers when reaching out to Hispanics. These challenges can be easily prevailed by understanding their needs and to know exactly they look for in a bank.
For example:
Language: Understanding financial jargon in a native language is difficult enough. Understanding it in English is a major challenge for Hispanics among recent immigrants. Plus, they are not familiar with the U.S. credit score system.
Trust: Some Hispanic immigrants arrived from countries without a deposit insurance system. Some of them had a negative experience with financial institutions in their home country. For example: Banks in South America are not perceived as a reliable source because the government controls them. They can freeze your investments or savings during downfall economies. This is one of the main reasons why they prefer carrying cash and keep their savings at home.
Financial Institutions such us Bank of America, Citibank, TD Bank, and Wells Fargo, are very successful in this market niche because they have combined basic banking services with an outreach mission. Their goals are to educate and serve the Hispanic community, making sure their needs are well covered. They have learned that by gaining the trust of Latinos it secures them as loyal customers and also spreads a positive endorsement throughout their community. At the end of the day, that means more capital in any language.
