In younger Hispanics, financial institutions see a future
Hispanics 鈥� or Latinos, a term some prefer 鈥� are an attractive market because the population is young and growing at an extraordinarily fast rate. Along with that, spending by Hispanics is growing at a faster clip than for non-Hispanic consumers.
Shoppers carry bags as they cross a pedestrian walkway near Macy's in Herald Square, in New York.
(AP Photo/Bebeto Matthews, File)
Hispanics in the US have long been known as 鈥渢he sleeping giant鈥� for their potential as a substantial and still-growing voting bloc. Now, some in the financial services industry are getting serious about targeting Hispanics 鈥� and Hispanic millennials in particular 鈥� as a prime source for market growth.
Hispanics 鈥� or Latinos, a term some prefer 鈥� are an attractive market because the population is young and growing at an extraordinarily fast rate. Along with that, spending by Hispanics is growing at a faster clip than for non-Hispanic consumers.
鈥淎ll of these combine to make a pretty potent formula for growth among Latino consumers,鈥� says Robert Brown, an analyst with Packaged Facts, which released a report in June titled, 鈥淗ispanics: Demographics and Consumer Spending Trends.鈥澨齌he report calls Hispanic millennials a key to growth for the financial services industry.
A population defined by its youthfulness
Marketers looking to reach the Hispanic market get a better return on their investment by reaching out to millennials听(ages 18 to 36) because they make up an outsize portion of the Hispanic听population overall, Brown says.
More than any other group, the nation鈥檚 Hispanic population is defined by its youthfulness. One-quarter of all Hispanics in the U.S. are millennials, and nearly 6 in 10 of all Hispanics are under 34, according to the Pew Research Center. Meanwhile, the surging Hispanic听population overall, 57 million in 2015, is the nation鈥檚 largest minority group, and Hispanics听accounted for 54% of all population growth from 2000 to 2014, according to Pew.
Connecting on a cultural level
Financial services marketers are paying attention, says Miriam De Dios, CEO of Coopera, a Des Moines, Iowa-based firm that听advises credit unions on how to connect with Latino consumers.
The successful ones have long-term strategies that include having bilingual, bicultural staff and understanding cultural nuances of the market, which is anything but one-size-fits-all, De Dios says.
Hispanic millennials want to see employees who 鈥渓ook like them,鈥� she says, adding, 鈥淚t鈥檚 not enough to say, 鈥榃e want to service this market.鈥欌��
Financial institutions need to earn Hispanic millennials鈥� respect, says Luis Lobo, an executive vice president with BB&T Bank who heads its听multicultural markets division. 鈥淵ou enable respect by showing up where the people are,鈥� Lobo says.
BB&T is based in Winston-Salem, North Carolina, where Latino population growth has changed the demographic landscape dramatically. The bank has a Spanish-language website and provides Spanish-language services at its Vecino 鈥� Spanish for 鈥渘eighbor鈥� 鈥� financial centers in 12 states and Washington, D.C.
BB&T bankers regularly visit 鈥渢rusted places鈥� in the community, such as churches, colleges and workplaces, where they meet Hispanic millennials hungry for information on how to make better financial decisions. According to a Hispanic Millennial Project study, 31% of Hispanic听millennials say it鈥檚 important for a bank to help them understand financial topics, compared with 22% of older Hispanics.
Typically at BB&T community events, a banker presents an instructional video, such as one on how to open a checking account, then opens the floor to questions. The gatherings allow the bank to build trust, Lobo says.
The Packaged Facts study found that听Hispanic millennials are more likely to have checking accounts, accounting for 22% of all Hispanics with checking. Non-Hispanic millennials comprised only 14% of non-Hispanic checking account owners.
Not all marketers are sold
Not everyone in the financial services industry is convinced it鈥檚 important to market to Hispanic millennials, De Dios says. A common misconception is that younger Hispanics don鈥檛 care as much about their culture or language as older Hispanics do.
鈥淭here鈥檚 this notion, 鈥榃ell, they鈥檙e very similar to mainstream millennials. Why do we have to do anything different?鈥欌�� she听says.
Like the Hispanic population overall, Hispanic millennials are not monolithic. Differences can include whether they鈥檙e foreign-born or U.S. natives, whether they speak Spanish, English or both, and whether they grew up in households with banking relationships.
Brown, the Packaged Facts demographer, says Hispanic millennials are more likely to have been born in the U.S., speak English and be more acculturated than older Hispanics, who might distrust banks more.
Hispanic millennials might prefer English, but some easily switch between English and Spanish, depending on the situation, De Dios says. Compared with non-Hispanics, Hispanic millennials are more likely to be involved in helping their parents and grandparents meet financial obligations, she adds.
Latino millennials who grew up in unbanked households present special challenges for marketers. Like their parents, they might gravitate toward nonbank options, such as using informal savings and lending circles that are common in immigrant communities.
De Dios, a Mexican immigrant who came to the U.S. when she was a child, grew up in one of those unbanked homes. She was the first in her family to become proficient in English, and she听was 9 when she began going with听her father to help him cash his paychecks at a neighborhood store. Her father, a construction worker, would then take the cash and buy money orders to pay utility bills and rent.
When he was injured on the job and received a large settlement, the family couldn鈥檛 find a bank to cash the check until a friend with a banking account helped.
Being unbanked 鈥渨as a struggle we all ended up sharing,鈥� De Dios says. 鈥淲e didn鈥檛 know any different.鈥�
A common denominator: Proud of their heritage
For all their differences, Lobo says, Hispanic millennials share a common trait: They are proud of their heritage, whether they were born in the U.S. or not.
Lobo, a Costa Rican immigrant, counts his children, ages 23 and 26, among those who hold culture close to heart. Born in the U.S., they don鈥檛 speak Spanish and are 鈥渄igital natives,鈥� Lobo says. That鈥檚 consistent with research showing that Hispanic millennials are tech-savvy and more apt to use smartphones and mobile banking than the general population.
But digital alone isn鈥檛 the answer. 鈥淚t is the complement to being physically present,鈥� Lobo says.
De Dios says financial institutions would do well to consider Latino millennials as a lifeline to the future. With the median age of a credit union customer approaching 50, she says, 鈥淐redit unions need to be reaching out to this young market that represents a lot of growth opportunities for them.鈥�
Juan Castillo is a staff writer at NerdWallet, a personal finance website. Email:听jcastillo@nerdwallet.com. Twitter:听.
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