U.S. Financial Institutions Banking on the Untapped Hispanic Market

CHICAGO, IL – Almost half of Hispanic adults do not own checking accounts, according to a recent report on Hispanics and Finance from Mintel International Group. With more than $414.2 billion in buying power reported in 2003, the Hispanic community provides strong opportunities for economic development and growth. According to Mintel, the majority of survey respondents without checking accounts cite lack of money, trust, and documentation as key obstacles. Many Hispanics also substitute checking accounts by paying with cash and money orders.

Since Hispanics are the largest minority group in the U.S., many financial institutions are increasing their advertising and marketing budgets. In 2004, several banking institutions began to target the Hispanic community more heavily. According to Mintel’s Comperemedia, a media monitoring resource, companies such as Bank of America and Bank One increased efforts in Hispanic marketing last year with major campaigns.

“The Hispanic community is a major untapped market for U.S. banks,” said Carrie Merritt, senior financial analyst for Mintel. “The average disposable income for the Hispanic market increased by almost 48% between 2000 and 2003. This provides an excellent opportunity for financial institutions to explore more initiatives within this rapidly growing market.”

One of the biggest avenues for growth in financial institutions stems from the remittance and wire service industry, which is currently dominated by well-established companies such as Western Union and MoneyGram. More than $30.1 billion in remittances were sent to Latin America last year, with $12.5 billion sent to Mexico alone in the first nine months of 2004. The remittances to Mexico were up 23.8% in comparison to the same 2003 time frame. Both Bank of America and Citigroup are among the financial institutions that have expanded their competitive efforts in the remittance arena.

In addition to competing with remittance companies, check cashiers and payday lenders also provide strong competition for the Hispanic dollar, specifically for lower-income families.

“There is a key communications avenue available to increase trust and develop stronger relationships within this segment, specifically by increasing the availability of bilingual marketing materials and services, ” Merritt said. “Mintel’s analysis shows that U.S.-born Hispanics are actually more likely to distrust banks than foreign-born Hispanics. This is in contrast to the claims of some sociologists that foreign-born Hispanics are less likely to trust banking institutions, particularly because of the lack of such institutions in their home countries.”