Last month I wrote a blog post about how banks and financial institutions can better connect with Hispanic clients. Despite a general mistrust of banks among Latino populations, I suggested there are many overlooked opportunities. My main example was the money transfer business, a lucrative market because many hard working Hispanics in the U.S. send funds to support families in their home countries. In addition to remittances, what other options exist for financial institutions? Recently, I was pleased to see a study by the University of Virginia that also suggests there is lost opportunities within the Hispanic market for banks and credit unions.
The Tayloe Murphy Center, a research arm of the University of Virginia’s Darden School of Business, recently completed a year-long study that defines how financial institutions can capture billions of dollars by connecting to “unbanked” Latino households in the U.S. The aptly entitled report, Perdido En La Traducción (Lost In Translation): The Opportunity in Financial Services for Latinos, states there is over $169 billion attributed to unbanked households throughout the nation, $53 billion of which can be attributed to Latinos.
Although the study focuses on unbanked households in Virginia and North Carolina, the Tayloe Murphy Center feels the insights can be applied throughout other states. In conducting the study, Kulwant Rai, research director at the Tayloe Murphy Center, stated that by “using rigorous statistical analysis, qualitative field research and case study, we focused on the challenges of serving Latinos and other unbanked households as well as how banks and credit unions can reach this market nationwide.”
Many findings from the research were completed at the Latino Community Credit Union (LCCU); a North Carolina based credit union established in 2000. The LCCU is one of the fastest growing credit unions in the nation, soaring from 917 members in 2000 to 53,073 in 2009. In one of many shining examples, LCCU member and Mexico City native Roberto Maya Sánchez moved his finances to the LCCU after being robbed twice. Maya realized he needed a secure place to keep his money and build credit. He has since financed a new home and started a business, largely due in part to the educational workshops offered in Spanish by the LCCU.
The University of Virginia’s report, along the highlighted success of the LCCU, has inspired me to consider how financial institutions could potentially benefit by connecting to unbanked Latino households. Because many Hispanics, especially immigrant populations, are uncomfortable dealing with traditional banking methods, financial institutions may need to think outside the box to capitalize on this growing market.
• Location, location, location: Capturing Latino customers may mean considering alternative locations for branch offices. Are there neighborhoods where Hispanic households reside or frequent? Can smaller satellite offices in stores, markets, bodegas, or other related businesses build credibility among Latinos?
• Educational opportunities: Hispanics that are recent arrivals to the U.S. may not be familiar with managing their money with a bank or financial institution. Many of these individuals come from modest backgrounds and economic conditions. Investing in opportunities to educate Latino families on how to make their money work for them can go a long way for customer loyalty. In addition, many Hispanics like Mr. Maya mentioned above bring with them an entrepreneurial spirit that can be augmented.
• Se habla Español: Of course, it can’t hurt to provide services in Spanish by investing in bi-lingual and bi-cultural staff. Even for bi-lingual Latinos, being serviced in your native tongue can garner much trust and credibility. Don’t forget though, while language may be important, cultural relevance is key.
• There’s an app for that: Just a thought, but with the growing numbers of Hispanics connecting to the web via mobile devices, perhaps there is a lucrative market for these populations with mobile optimized banking options. I would be curious to see what potential exists with this option.
Last week I challenged retailers to better connect with Latino shoppers. This week, the challenge still stands. Only now, the gauntlet is thrown down to our financial institutions. The recent study by the University of Virginia has proven that connecting to Hispanic clients can be successful for banks and credit unions. Is your community ready to take Latinos to the bank?
The following was a guest blog post by Jonathan A. Barrera Mikulich of www.latinobrandingpower.com