Commentary

A New Hispanic Approach For Financial Services

The financial services industry is no stranger to the Hispanic market. Many of the largest national and regional banks, insurance companies, tax preparation and investment firms have been targeting the Hispanic market for years. In 2014, the financial/insurance category spent a total of $352 million in measured Hispanic-targeted media (Nielsen, SSG). According to AHAA, from 2006 to 2010, expenditures by the financial services category saw a major increase in allocation of overall ad spending to the Hispanic market.

However, a closer look at the data by industry sub-category shows these numbers are heavily skewed by tax preparation and auto/home insurance companies, accounting for roughly two-thirds (67%) of the Hispanic financial services ad spend. The big spending is primarily low-ticket (tax prep) and consumer purchase driven (auto insurance) financial products. 

Banks, investment firms and life insurance providers are investing less than $130 million annually in Hispanic targeted media combined. Their average allocation of overall ad spend to the Hispanic market is less than 2.5%. And a few banks — Wells Fargo ($17 million), Chase ($8.6 million) and Citibank ($1.6 million) — are skewing these numbers. 

These meager investment levels by banks, mortgage providers, life insurers and investment firms seem to be at odds with broader trends in the U.S. Hispanic economy:

  • Hispanic spending growing. Hispanics drove 38% of aggregate consumer spending from 2002 to 2012 (Latinum, 2015)
  • Hispanics are driving home ownership. Since 2000, Hispanics have accounted for 52% of the growth in U.S. homeownership, with a net gain of 2.8 million homeowners compared to a net decrease of 85,000 homeowners among non-Hispanic whites (Hispanic Wealth Project, 2016).
  • Hispanic entrepreneurship is on the rise. Hispanics are 1.5 times more likely than the general population to start a new business (Kauffman Index) and Hispanics have the highest business creation rate in the U.S., topping 4.2 million Hispanic-owned businesses in 2016 (Stanford Latino Entrepreneurship Initiative Research).

What is underlying this misallocation? The main issue is the predominant “unbanked” and “underbanked” view of the Hispanic market by the financial services industry. As defined by the FDIC:

Unbanked: Households that do not have a checking or savings account and have used alternative financial services like money orders, check cashing, remittances, payday loans, etc.

Underbanked: Households that do have a checking and/or savings account but still use alternative financial services like check cashing, etc.

While “underbanking” characterized the majority of the Hispanic market 30 years ago, this is changing. According to the FDIC, as of 2013 almost half (48%) of all Hispanics were fully banked, while only 18% remained unbanked. While 29% are still defined as “underbanked,” this group captures a lot of Hispanics using banking products in mainstream ways. Financial services firms need to start moving on from this view of Hispanics as an underbanked segment and shift to viewing Hispanics as their core growth segment.

This shift is fundamental and means more than just increasing ad dollars towards Hispanics by banks, investment firms, and life insurers. It means a shift from a focus on basic education to one defined by cultural relevance and aspirational tones more aligned with the growth characterizing the Hispanic market. The blueprint moving forward involves placing Hispanics front and center in their marketing efforts — from product design to advertising to customer service. For national brands, a Total Market Approach is appropriate. For regional brands in large Hispanic DMAs, a cross-cultural approach is the way to go.

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