The Hispanic market, with its 63 million strong populace, is the largest minority cohort in the U.S. and growing rapidly. The 2010 Census concluded that the lion’s share of the market’s expansion was coming from nativity (e.g. U.S. births). And while this phenomenon continues, we are starting to see more and more first-generation Hispanic immigrants enter the U.S.
Today, the first-generation immigrant group comprises 28% of the Hispanic population. More than half of the Hispanic population (55%) represents the 1.5 (foreign-born but came to the U.S. at 10 years or younger) and 2.0 (U.S. born with one foreign-born parent) generations.
There are significant differences across acculturation levels, something financial institutions have failed to recognize, for the most part. There are also important distinctions between the Hispanic immigrant and the average American that’s been in this country for multiple generations. Yes, language is the obvious difference, but culture is of equal import and rarely discussed and/or understood.
If you are still unsure as to whether financial institutions and/or Fintech solutions are failing at attracting this cohort, let the numbers speak for themselves.
Today, 14% of Hispanics remain unbanked and 34% remain underbanked altogether, compared to 3% unbanked and 15% underbanked non-Hispanic Whites. Additionally, 31% of Hispanics have been denied credit and 45% were approved for less than the amount that was requested.
Hispanic households are also more likely to pay higher costs for credit as well. Only 42% of Hispanics indicated a prime credit score, compared with 60% of White respondents. Hispanics are 3.1 times more likely to use payday loans than non-Hispanic White households, and among those with checking accounts, 1.4 times more likely to have overdrafted than White households.
Traditionally, our financial systems and practices have been built for a consumer born and bred in the U.S. or steeped in financial knowledge. Our systems make a lot of assumptions as to what characteristics potential consumers have and don’t have – the language they speak, the cultural ethos they practice, and their financial literacy – for starters – with little room for deviance. Immigrants are outliers.
Traditional banks and financial institutions neglect Hispanic immigrants because their approach is based on a ‘one size fits all’ model. One that is rooted in tradition, lacking innovation, and more often than not, informed by both unconscious bias and discriminatory practices. So why does Fintech fail to reach this audience?
Many Fintech solutions target Spanish language dominant Hispanics exclusively in Spanish language media (typically, radio, television or mobile) but fail to then fulfill the promise of the ad with a holistic brand approach that embraces the consumer and his/her respective journey from genesis to fruition, and then beyond – to advocacy. In order to be successful, every touch point needs to be ‘in-language’ so that the experience is fluid and supported along the way. Toll free numbers in Spanish need to be available and easily visible to the consumer, along with Spanish chat, Spanish landing environment, and Spanish language mobile app. If the consumer interactions aren’t supported in the same language, brands will fail over and over again.
To reach the bilingual/bicultural consumer, a more nuanced approach is required where brands can reach them primarily in English but with Spanish language and/or cultural cues in marketing activities. This consumer is a hybrid, living a duality few discern. Reaching AND touching them is paramount as they tend to be the Sherpas for their foreign-born counterparts: informing brand purchases; translating the language; interpreting the U.S. ethos; and, demystifying new services and technologies.
Many Fintech solutions assume that the Hispanic consumer is at the same financial literacy level as a non-Hispanic American consumer that has been in the U.S. for multiple generations. Assumptions regarding financial literacy abound and are ill-informed. Hispanic consumers, especially first-generation consumers, are more often than not, economic exiles. They lacked economic means in their home country hence the migration to the U.S. Furthermore, they are extremely distrustful of financial institutions that may have been overtly corrupt in their home countries. They have limited financial literacy and a restricted financial lexicon in their native language, Spanish (much less in English). Educating them in language is key.
And while the more acculturated may be more financially acculturated and literate, they too have relied on themselves, schooling and technology for education, since their home environment may have lacked discussion or practices that drive financial literacy. Keep that in mind as well.
Many Fintech solutions assume that when they market to Hispanics the same rule of the general populace applies, e.g. 1:1 marketing. The reality? When you market to Hispanics you need to think 1:many. Hispanics espouse a collective ethos; one where community and family are paramount and override ‘self. Decisions are made collectively, not individually as they are in the U.S. (which espouses a self-reliant ethos). The best marketing employs a multi-generational approach, targeting both the less acculturated, first-generation immigrant, and the bilingual/bicultural adult children (the Sherpa).
In conclusion, failure is tied to misunderstanding the composition of the marketplace, and it’s multi-generational, collective/bicultural bent. In addition, the language, the message and the culture are distinct from the general market so they require creativity and a specialized approach. Since many brands don’t see the Hispanic market’s merit, the aforementioned is too much work and ‘not worth their while’. Until Fintechs truly recognize the market’s value, its loyalty and the financial opportunities to grow user base, drive revenue and spur advocacy – they will continue to fail. By undeserving the immigrant populace we underserve ourselves – as a country. Because we know that financial inclusion and societal inclusion go hand in hand.