Financial institutions are searching for new revenue sources. Has your banks considered the rapidly expanding Hispanic market?
The Hispanic market is attractive for its size, youth, economic strength, technological savvy, and willingness to embrace low-cost self-service channels. This is a demographic that tends to loyalty, and one that refers family and friends to those businesses providing exceptional products and services to the Hispanic community. They also tend to be more engaged with their bank, lessening the likelihood that they would leave for a competitor.
We’ll explore how to enter this market in a moment. But first, here are six reasons why the Hispanic market is good for your business:
Reason 1: The Hispanic market is large and growing
From the perspective of sheer market size, it makes sense to try to attract a demographic segment that accounts for such a large percentage of the U.S. population.
The Hispanic population is one of the fastest-growing demographics here, increasing by a remarkable 43% to 50.5 million from 2000 to 2010, according to the 2010 U.S. Census. Today, one of out every six Americans is Hispanic, making Hispanics the nation’s largest minority group.
No longer is this segment concentrated solely in those states with longstanding Hispanic communities such as California and Texas. Other states are experiencing growth as well, particularly in southeastern states including Alabama, Arkansas, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee. In Maryland and South Dakota, the Hispanic population has more than doubled.
The U.S. is the second-largest Spanish-speaking country in the world.
And while many Hispanics have immigrated from Mexico and Latin America, the growth of the population is fueled largely by second-generation Hispanics, with more Hispanics being born in the U.S. today than through immigration.
Reason 2: Hispanic economic power continues to grow
In addition to influencing music and popular culture, the Hispanic population is growing in financial influence as well. Hispanic buying power is estimated reach $1.5 trillion by 2015, a $500 billion increase from 1990.
This increased financial power translates directly into more assets potentially captured by a financial institution. After launching a Hispanic banking program, one regional financial institution increased the number of Hispanic customers with more than $125,000 in income by 20% in 14 months compared to zero growth in the number of non-Hispanic customers with similar household incomes. In addition, Hispanic customers with revenue-producing assets of more than $50,000 outpaced the growth of non-Hispanic customers: 27% for Hispanic customers versus 14% for non-Hispanic customers.
Reason 3: Hispanics are young and connected
The average age of the Hispanic population is 27.4 years old, which is nine years younger than the average age of the overall U.S. population.
This young demographic is also connected, with 32.2 million Hispanics online today and projected to increase to 42 million by 2015. For many in the Hispanic community, a mobile phone replaces a landline. According to Pew Research, 51% of Hispanics live in a cell phone-only household compared to 33% of whites and 39% of blacks.
This means that financial services firms can offer products and services to this market using less-expensive delivery channels, such as online and mobile banking. The statistics bear this out: According to the Federal Reserve’s 2012 study of consumers and mobile financial services, Hispanic consumers accounted for 17% of mobile banking usage. They are also active users of mobile payments, accounting for 27% of mobile payments.
At the same regional financial institution mentioned earlier, usage of automated telephone banking by the Hispanic market increased 110% in only 14 months, from 7,100 customers to 15,100. Not only was the bank able to provide twice as many Hispanic customers with a low-cost yet effective alternative to speaking with a bilingual call center representative, but the bank was able to reallocate staff to answer both Spanish and English-speaking calls from additional customers. With shorter wait times, costs per call decreased yet customer satisfaction improved.
Reason 4: There’s still time to capture market share
The Hispanic population has been increasing for some time, but the market continues to be under served, with only a handful of banks launching successful Hispanic banking programs.
This means that it’s not too late to appeal to these potential customers.
And growth can come quickly.
At one regional bank, the Hispanic banking program resulted in a 13% increase in the penetration of Hispanic households in just over two years compared to a 7.5% increase in the number of non-Hispanic households.
Reason 5: You already have the products and services you need
The Hispanic market is really no different than any other demographic. These customers want to own a home, provide for their children’s education, and save for retirement. Your bank already has the products and services in place to meet these goals.
In fact, it’s not the products and services that take center stage in a Hispanic banking program. It’s how you offer these products and services.
You’ll need to educate the Hispanic community on U.S. banking products and provide adequate Spanish-speaking staff to meet demands for customer service. While staffing a bilingual workforce can be challenging, it’s unlikely that you’ll need to retrofit any of your existing products or services.
Reason 6: It’s good for your community
Increasing rates of home ownership and small business growth are just two of the positive impacts a Hispanic banking program can have on local communities. Banks are inextricably linked to the communities they do business in. If the community thrives, the bank will tend to be more successful as well. It’s difficult to put a price tag on service to the community or the goodwill that your bank can foster with a thoughtful and strategic Hispanic banking program.
Now, how do you do it?
A successful Hispanic banking program requires more than a sign proclaiming “Bienvenidos,” a few bilingual employees, and a website translated into Spanish.
What you need is buy-in and commitment from the entire organization, educating the Hispanic community on financial literacy, appropriate staffing, and earning the trust of Hispanic customers.
Here are a few of the tenets of a successful Hispanic banking program:
Commitment of the whole bank
You’ve heard time and again the importance of senior-level and employee buy in and support to the success of a wide variety of programs. A Hispanic banking program is no different and in some ways, commitment of the entire organization is even more important, because the program directly impacts customers and employees.
Including all levels of employees in the success of the program also avoids the sense that the Hispanic banking program is a “bank within a bank.”
Employees should understand that the program is part of an overall bank strategy to serve all customers better, both Spanish and non-Spanish speaking.
Banks can foster employee engagement in many ways. For example, one bank offered Rosetta Stone Language Learning software to employees interested in learning at least rudimentary Spanish. Focus groups and surveys can help measure engagement over time and enable the bank to make program changes or provide employee education where needed.
A great way to foster employee commitment is to involve staff at all levels of the bank in volunteer activities in the Hispanic community. Not only does volunteerism demonstrate to employees that the bank is serious about their Hispanic banking program, but it also creates goodwill in the community. Employees are often more than willing to get involved, especially if they are able to volunteer side-by-side with senior management.
One financial institution increased the number of annual volunteer hours from 375 hours to almost 3,000 hours in just two years.
Staff for success
Obviously, offering a Hispanic banking program will require hiring staff bilingual in Spanish and English. And many banks, especially if they are geographically located in a community with Spanish-speaking citizens, already employ a few Spanish-speakers. While that’s a great first step, banks need to be more thoughtful about their staffing to ensure that there are a sufficient number of Spanish-speaking employees available at all times at any location deemed a Hispanic banking center.
A branch may have one staff person who speaks fluent Spanish. However, if that employee is out sick, on vacation, or even just at lunch, the bank is unable to serve Hispanic customers in their language of choice.
Or, if that one staff member is available, Hispanic customers may queue up to wait to speak with that employee, creating long lines for a few employees. Or, the staff member who does speak Spanish acts as a translator for their non-bilingual co-workers, meaning that two employees are doing the job of a single employee. That second employee could have been taking care of another customer.
Determine what the baseline staffing should be on a branch-by-branch basis.
Categorize branches as tier one, tier two, or tier three, based on the size of the Hispanic market in that branch. A tier one branch may need a bilingual employee at both the platform and the teller window, while a tier two branch may only require a bilingual employee to be in the branch at all times.
It’s critical that bilingual staffing account for lunch breaks, vacations, and the like, so a Hispanic banking center may require that a large percentage of its employees speak Spanish. The same staffing rules apply to the call center.
Even if employees are not bilingual, ensure that they are culturally sensitive by providing training in the needs of the Hispanic market.
Equip every employee with a guide covering key English phrases and the Spanish translation so all employees can have a basic conversation with Hispanic customers. Customers also appreciate that bank staff is making an effort to converse in Spanish.
Finding bilingual staffing can be a challenge. Consider hiring a bilingual recruiting firm. This firm can evaluate language skills as well, which is particularly important if the hiring manager or human resources staff is not bilingual. Finally, realize that it takes time and a concentrated effort to build a strong staff to support a Hispanic banking program.
Gain trust from the Hispanic community
Banks often provide financial literacy programs to unbanked or under-banked communities. While these programs are important, banks typically deploy them incorrectly.
Most rent a community center or other location, bring in a few employees, and invite customers and potential customers to attend a presentation. At the end of the presentation, they direct the attendees to a table set up in the back where they can sign up for accounts.
It’s financial literacy, sure—but with a sales pitch at the end.
This self-serving behavior will fall flat with the Hispanic community.
Instead, make the sessions purely educational. Explain the differences between U.S. banking products and products that attendees may be familiar with in their native countries. For instance, customers may not understand how NSF charges work in the U.S. The key is to enable them to make sound financial decisions as you create lasting relationships with the community. A good source of financial literacy education materials is Money Smart, from the FDIC.
Another way to gain trust in the community is to reach out to religious and community leaders and other centers of influence. Establish relationships with these centers of influence by attending events and volunteering in the community.
When building trust, details matter.
If bank staff attends a financial literacy program dressed in business attire and the community attendees are dressed less formally, barriers can be created. Instead, create t-shirts or polo shirts with a Spanish phrase.
One bank favored “Hablamos su idioma.” This means “We speak your language.”
Structure the financial literacy program as a volunteer opportunity for staff at all levels of the organization and let attendees know that bank employees are there because they want to be there—not because they are forced to be there.
A Hispanic banking program can succeed in bringing in new sources of revenue for the bank and increase its penetration into the community. However, the program does require an ongoing commitment from everyone in the bank.
It’s not possible to fake it—the bank must believe in the value of the Hispanic banking program and project that value into the community.
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