• by Denise Marks , August 21, 2008

The recent projections from the U.S. Census Bureau indicating that minorities will be the majority by 2042 -- eight years earlier than thought -- are an important wake-up call for marketers, who need to start planning for this important demographic shift. The financial services sector, in particular, is one area that needs additional focus especially considering that, despite growing use of financial products and more targeted communications, Hispanics continue to be significantly 'unbanked' and 'underbanked' compared to other consumers.

While the percentage of Hispanics with any type of bank account is up, it's still quite low when compared to the general market. According to a recent study by market research company Synovate, 77% of Hispanics have a bank account versus 98% of general market consumers. Many foreign-born Hispanics, especially those with lower incomes, did not have bank accounts in their home countries due to strict banking policies, and many who did experienced instability due to fluctuating local economies. These factors have likely created some possible barriers for them when it comes to banking here in the U.S.

Hispanics also have much lower ownership of several types of investment accounts, including IRA/401k plans, CDs, and stocks and bonds. This isn't surprising given that almost half of Hispanics are employed in the blue collar industry in jobs that don't offer retirement plans.

Percentage Of Ownership

	Hispanics	African Americans	General Market
Retirement account (including 401K and IRA)	32%	54%	72%
Stocks or bonds, individually or part of a mutual fund	18%	33%	60%
Certificates of deposit	24%	25%	36%

This gap is also evident in credit cards, home ownership and health insurance. Just over half (51%) of Hispanics have credit cards compared to 87% of the general market. While more than half (54%) of general market consumers hold a mortgage, only 26% of Hispanics do, and just 62% of Hispanics say they have health insurance. Similar to investment accounts, lower coverage is likely related to their employers not offering health insurance.

Socioeconomic circumstances are certainly a factor when it comes to ownership of financial products and services - for some, living paycheck to paycheck is still a reality - but the relationship Hispanics have with financial institutions is also impacted by cultural differences. While about the same number of Hispanics and general market consumers feel that they are treated well by financial institutions (36% and 41%, respectively), this changes when considering acculturation level. Almost 40% of more acculturated Hispanics - those with higher incomes that speak English or are bilingual - agree that they are treated well compared to those who are less acculturated (29%), who tend to be foreign-born and rely on Spanish-speaking services.

One of the bright spots for the financial sector is remittance. Sending money to relatives who live outside of the U.S. is important (and less risky than crossing the border), although there are some signs that this too has been slowing due to rising unemployment. More than half (54%) of U.S. Hispanics say they send money to family or friends outside of the U.S., and almost three in ten (28%) send money once a month or more, with amounts averaging about $230. Along with traditional remittance companies such as Western Union and Orlandi Valuta, banks such as Bank of America and discount retailers including Wal-Mart have launched their own remittance programs over the past several years to attract this audience.

While it appears that multicultural consumers in general are building more trust towards financial institutions and owning their products, there are clearly many gaps that still need be addressed. This can be achieved with culturally relevant communications targeted to the diverse segments of the Hispanic population. Changing demographics can actually work to a marketer's advantage. With the vast array of communications channels available, there are now more ways than ever to get in front of an audience.