Cash use was declining before the pandemic started. But like so many things in society, the trend was accelerated with COVID-19.
Cash use dropped 57% since the start of the pandemic, according to an EY report. Use of alternative payment methods, however, has increased, with credit card usage up 7%, debit card usage up 10%, and online payment tools up 14%. This trend is expected to continue, according to the pundits.
Cash has been the surefire way for some Hispanics to manage their finances. Yet lower-income Hispanics have been adopting new payment methods during the pandemic -- particularly during lockdowns -- allowing them up-to-the-minute cash flow management and the added security of not carrying cash.
This trend will have a huge impact on the bottom lines of traditional banks, as Hispanic consumers can find a variety of fintech solutions regardless of income. They’re also not hampered by the lack of brick-and-mortar banks in their neighborhoods.
The loyalty equation for Hispanic consumers is also lower among those with only one or two accounts with a traditional bank. Given that interest rates are so low and probably will stay low for the foreseeable future, traditional banks will have to look for alternate revenue streams.
Banks need to do something different. The ones that are smart will offer competitive banking solutions to compete with pure fintech solutions. This includes mortgage products and insurance bundles as well as financial education. Gen Z, in particular, wants to increase its financial literacy about investing and credit scores. This will require better marketing, customer service, and client relationship-building for a group of consumers who have diverse financial needs and literacy.
Traditional banks must get this right for Hispanic consumers, given their huge population growth that we’ve seen throughout the country reflected in the latest Census. These customers could spell the difference between success and failure.
The Census also revealed rising Hispanic incomes as well as increases in educational attainment. All these key trends point to the importance of the Hispanic market for banks and financial services in general.
Banks are going to have to be more inclusive of newly banked and unbanked Hispanic consumers. As unbanked Hispanics embrace more fintech solutions, there is a new generation of financial service users whom banks need to catch up to and target with more customer service solutions. Among those already banked, companies need to keep them as customers and encourage them to add depth of services which will be key to the banks’ success.
While the pandemic has helped drive these new money trends, for Hispanic consumers they are habits now.