Unleashing the Financial Purchasing Power of the Growing U.S. Hispanic Population Part Two

Posted by Elena del Valle on May 19, 2010

Opening the Door with Relevant Products and Services Part Two (Click here to read Part One)

By Ricardo Quayat
Executive Creative Director, Rauxa Roja

Ricardo Quayat, executive creative director, Rauxa Roja

Photo: Rauxa Roja

In Part One of Unleashing the Financial Purchasing Power of the Growing U.S. Hispanic Population, Ricardo Quayat discussed recognizing the huge potential of the vast Hispanic market and how to use data, creative and brand strategies to market to this promising audience in a meaningful and actionable way. Part Two explores cultural differences that affect the Hispanic consumer and how banks and financial institutions can effectively tap into this rapidly growing and financially sound market with relevant messages, products and services.

Culture-Based Banking

In Mexico, and South and Central America, banks employ practices that are unique to their specific regions, capitalizing on how locals save money, buy products and pay bills. Evaluated against standard banking models in the U.S. however, Latinos are turned away in many instances because conventional credit platforms may not reflect the credit worthiness the bank requires, creating a missed opportunity.

For example, payment plans with routine installments are a common purchasing method in Latin American countries, where it is preferred to have a predictable monthly responsibility. These may be personal agreements and traditional credit programs – commonplace in Latin America, but ineffectual in establishing the stability and sound payment records typically verified using traditional credit scoring methods.

ATMs are a common means of paying bills in many Latin American countries as opposed to their primary role as cash or deposit locations in the U.S. Common U.S. banking practices such as direct payroll deposits, or automated savings deductions are unlikely to be recognized as financial benefits to this audience.

Marketing with Cultura

Historically, the banking industry’s very traditional approach has been based on general market best practices, offering Hispanics the same basic slate of financial products directed to the majority of its patrons. For example, existing marketing materials and programs were simply translated from English to Spanish with the assumption that messaging and products meant for all consumers were pertinent to Hispanic consumers.

The reality is that with banking done differently in Latin America, many Latinos’ frame of reference puts them at odds with U.S. banking requirements and programs. These cultural distinctions in banking and financial traditions have in the past forced the Hispanic customer outside of mainstream banking, yet their economic influence cannot be ignored. Winning banks are developing strategies that include products and services specifically designed for this powerful and growing population. Alternative credit scoring, credit and debit cards, community outreach and education to improve financial literacy are just some of the tools banks are employing to connect with this customer.

Finding – and effectively reaching – the under-banked and unbanked consumer who largely works in cash is a tangible challenge for direct marketers. But by using customer information, cultural relevance and behavioral preferences more strategically than ever before, marketers are reaching the most productive prospects first, eliminating wasted effort, increasing each campaign’s ROI, and generally optimizing marketing effectiveness in evoking a measurable and positive response among Latinos.

The financial practices of the growing U.S. Hispanic population present a unique opportunity not only for the financial industry but for businesses across the board. As the economy rebounds, banks making a concerted effort to reach this audience have the ability to build relationships with a group that values loyalty, character and stability – tenets of financial success.

Relevance Gets Results

Financial institutions have much to gain from serving the rapidly growing and powerful Hispanic market. Based on a recent study, Hispanics have stronger brand loyalty than other segments: 38% of Hispanics became customers due to a loyalty program as compared to 27% of the general population.1 And “word of mouth” is especially powerful within this community. Today, 23 million Hispanics are online (52% of the Hispanic population). These online consumers are primarily U.S.-born and bilingual, with English as their dominant language. Also, studies show they are spending more time online than viewing television.2 Many marketers are taking notice by using integrated direct marketing programs to respond to Latinos and their increased participation in social media.

The up-and-coming generation of Hispanic consumers comprises younger, highly acculturated and over-indexing brand influencers. They present a unique opportunity to sway the buying decisions of their peers as well as their families. Companies have an opportunity to make the biggest impact by retaining their customers within their growing multicultural footprint.

According to new government statistics, Hispanic-owned businesses have grown at three times the national average in recent years.3 What’s more, the overall Hispanic market is the fastest-growing segment in the U.S. and represents a great opportunity to expand and develop new markets with small businesses that serve other Hispanics.

Approaching $1 trillion in buying power, the Hispanic market may be likely to weather the storms of a fluctuating economy more than other groups, largely due to immediate and extended family members with a higher proportion of young brand-conscious consumers. Pew Research Hispanic Research Center, reports that more than 80% of undocumented immigrants are Hispanic.4 Many of these Hispanics are disproportionately unbanked by traditional banking services, presenting an opportunity for a growing source of revenue.

The percentage of Hispanics that named direct mail as an acceptable form of follow-up communication from a company they’ve expressed interest in has increased from 48% in 2007 to 55% in 2009. Traditional direct mail has become the preferred marketing channel desired by Hispanics in 2009, once they’ve expressed interest in a product. Runner-up tactics that are also favored include phone calls at 51%, email at 51% and catalog at 50%.6

2 2007, Colloquay demographic study
3 2010, emarketer.com, US Hispanic Media Usage, http://www.emarketer.com/Reports/All/Emarketer_2000520.aspx
4 Vrouvas, Michele. 2009, Business.com, Guide to Hispanic Owned Business
5 Aug., 2007, www.time.com, CN, Profiting from the Unbanked
6 2009, Marden, Scott. Engage: Hispanics, MediaPost Publications. “Salud! Toasting Direct Mail’s Ever-Increasing Effectiveness” [Vertis Communications’ 2009 Customer Focus Opiniones Survey]

Ricardo Quayat has 20 years of experience in creating direct marketing to serve Hispanics and expanding multicultural markets. As leader of Rauxa Direct’s Roja division, Ricardo’s creative and strategic efforts are centered on “marketing with cultura” that builds trust, respect and solid customer relationships.