Claudio Perez-Korinko: Community Banking and Low-Income Latino Consumers
If you are in the community banking business, I would assume that you know by now that you have Latinos purchasing houses, cars, clothing, groceries and overall working within your community. So, the question that comes to mind is simple, are you opening the doors of your bank for this potential client?
Low-income Latinos do not want to hide their monies under the mattress any more. Actually, they have money to spend, invest and they need to find a place safe to keep it. This is a growing money market worth $800 billion in purchasing power and $1.2 billion in business revenues. Do I need to repeat that? Have I got your attention? In a time when everyone is scrambling for new accounts, how is it that attempts to cultivate business in this segment have lain dormant by community bankers?
Now, here is another trend that should get your attention. In the last 10 years, the US Hispanic market has begun geographically reshaping itself. Millions of Latinos began to migrate from the East and West coast into the Central States. They come for lower cost of living, better-paid jobs, more affordable housing and better schooling for their children. The majority of this Latino segment is un-acculturated and come from small towns in their country of origin. Where they come from, everything from commerce to personal relationships had a flavor of a close community. We call it “el vecindario.”
What does it all mean to the Community Banking sector?
When people move to new places, in a time of change, they look for the comfort of the familiar. As low-income Latinos come from relatively small villages in their countries of origin, they expect to settle in relatively small American communities. The appeal of a small town draws them. They are attracted to a place where they can trust and be trusted by people to build close relationships at both the personal and business level. In essence, they are re-living their experience from home in a small town in the US. Given that, the community banking industry is uniquely equipped to serve this growing market. They hold a strong advantage over large American banking chains which the typical un-acculturated Latino consumer perceives as intimidating and un-welcoming. Opening the doors and welcoming this diverse group of people will increase consumer and business deposit accounts without a doubt.
Building the Advantage
Like any market, you can wait and let them come to you—and risk missing out on a huge opportunity, or you can make an effort to reach out and reap the benefits of a well constructed strategy that could establish a loyal consumer base. In short, the community-banking sector has to get more proactive toward the low-income Latino audience and reaching this market isn’t only about translating your current product material to Spanish. No señor! In order to turn Latino consumers and business owners into an opportunity market, the small banking sector must go beyond the surface strategies and referrals. I mean, understanding where they come from and the issues preventing them for approaching the small banking sector. Consider this when acknowledging Latinos as potential clients. Low-income Latino immigrants lack of information about appropriate products and services that small community banks might offer as opposed to those of nationwide chains, they think banking accounts are expensive to maintain, and they see the lack of state documentation as a barrier for not being able to talk to consumer relationship managers, even more, they do not associate sending money home or check-cashing as bank services, among some other issues. In fact, within the Latino consumer segment, remittance services generates an average of $45 billion annually, money that is sent back to their country of origin through selected nationwide banks and the retail Latino businesses owner as opposed to the community-banking sector.
Being this the case, the community banking sector is in an ideal position to embrace the opportunity by tailoring innovative offerings through programs in which low-income Latinos can be educated on how to open checking accounts and obtain consumer and business loans. And for these programs to succeed, they must be taken to the community in Spanish through local organizations, worksites or consulate outreach activities in order to reach the targeted audience more effectively.
Now, from the product stand point, community banks ought to consider expanding product lines onto products that meet the essential needs of the targeted audience, including as mentioned above, check-cashing and remittance products designed for low cash transfer and supported by an in-culture marketing program and bilingual personnel. If these essential needs are met within the low-income Latino consumer, cross-selling products will be a given in the short-term.
This is a challenge that can be effectively and gradually embraced by developing a customized grassroots program tailored specifically to low-income Latino consumers. If the community-banking sector does not get involved with the low-income Latino consumer in the immediate future, it will be inevitable for this audience not to accept the services of nationwide banks targeting them through localized branches in their own community. As we all know, when a Latino builds brand loyalty with a product, it will be very difficult for him or her to abandon such brand, and this is an opportunity that the community banking industry can not afford to lose.
Written by Claudio Perez-Korinko, May 24, 2010
Claudio has led corporations from adapting to innovating communication strategies to create brand awareness within Latino-targeted audiences in the US and Latin America. Visit www.imintl.net for more information.
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