One of the main tenets of Hispanic outreach is knowledge. Whether it’s a local credit union or a national food chain, any organization hoping to increase its reach within the country’s large, fast growing and influential Hispanic market must first better understand its target. As with any nationality represented in our diverse population, understanding Hispanic behaviors and values is colored by the influences of preconception and stereotype.
This article addresses five of the more common misconceptions held by business leaders that could hinder progress for Hispanics and the businesses looking to serve them. Those businesses should include credit unions.
Myth #1: All Hispanics are undocumented.
Many people are surprised to learn that, of the country’s more than 52 million Hispanics, most are native-born Americans and nearly three in four are U.S. citizens. As of 2009, more than 62 percent of all Hispanics were native-born Americans and 11 percent were naturalized U.S. citizens. Hispanic children under age 18 are likely to have been born in the U.S., 92 percent of those children are native-born Americans and 93 percent are U.S. citizens.
Although the second generation does not outnumber the first, analysts expect that to change by 2040. Many second-generation Hispanics consider themselves “typical Americans.” This does not mean that these individuals are interested in denying their heritage. In fact, the opposite is true: When asked which term they generally use first to describe themselves, young Hispanics show a strong preference for their family’s country of origin over “American” or terms, like “Hispanic” or “Latino.” This underscores the need for credit unions to acknowledge a prospective member’s culture and to adapt their programs and services to the specific preferences of these consumers.
It is also important to recognize that the 11 million undocumented immigrants living and working in the U.S. represent another powerful target market. Approximately 9 million members of this potential market are Hispanic. Undoubtedly citizenship is a goal for those in this group and credit unions are in an ideal position to make that dream become a reality. Plenty of opportunity to pursue business with this population already exists, but as immigration reform is being hotly debated by legislators, the industry may have an even greater incentive to develop financial relationships with these goal-oriented immigrant consumers in the near future. The proposed path to citizenship, which is a major feature of much of the reform under discussion, could mean an opening of the floodgates for new credit union members, particularly from among the fast-growing Hispanic community.
Whether already a citizen or in pursuit of citizenship, a Hispanic consumer can be an influential addition to a credit union’s membership base. As part of the youngest, largest and fastest-growing minority group in America today, he or she can plant the seeds of trust within the larger local community, in essence acting as one of the most important grassroots advocates a credit union can have.
Myth #2: Hispanic foreign nationals cannot be credit union members.
Even before immigrants become citizens credit unions can—and should—serve them. It’s not nearly as complicated as you might suspect and regulations exist that supports such action. The Equal Credit Opportunity Act pushes financial institutions and other organizations to “encourage members of traditionally disadvantaged groups to apply for credit, especially groups that might not normally seek credit from that creditor.” Immigrants, who may carry fears about the trustworthiness of financial institutions, certainly fit this bill. You might wonder how credit unions can serve individuals without traditional forms of identification, but many financial institutions, including credit unions, already accept alternative forms of identification and, in doing so, are fully compliant with Patriot Act and Customer Identification Program (CIP) rules. Legitimate alternative forms of identification include the matrícula consular, cédulas, passports and Individual Taxpayer Identification Numbers (ITINs).
Myth #3: A massive Spanish translation effort could take years.
Another prevailing misconception among credit union leaders interested in adapting their programs for Hispanic consumers is that they will have to translate every piece of their credit union’s communication into Spanish, including forms and disclosures. Thankfully, this is not the case. While the state of California and some cities such as San Antonio, TX have specific legislation stipulating translation requirements for consumer loans and leases, this is not true across the nation and doesn’t mean that if you translate one document into Spanish you have to translate all.
It’s important that you develop a strategic Hispanic member growth plan, which should begin by identifying the specific needs of the target market your credit union is trying to reach and tailoring products and services that fulfill those needs. For example, not all Hispanics prefer to speak Spanish, although first generation Hispanics are more likely to prefer Spanish. Credit unions that ask Hispanics to adapt to them rather than adapting to the needs of the Hispanic population they are trying to attract are not nearly as successful in building long-term relationships. Therefore, you should anticipate creating Spanish-language materials (or better yet bilingual materials) for at least those products and services identified in your strategic plan.
Because of the daunting misconception that an institution-wide translation effort is required, credit union leaders will often opt to move in what they perceive as an easier strategic direction by targeting only English-speaking Hispanics. And this might seem like a viable approach considering that more than half (59 percent) of the adult Hispanic population in the U.S. speaks English proficiently. However, as you’ll see in the next section, there is a strong interdependence between different segments of the Hispanic community, which makes limiting your outreach to only English-speaking Hispanics, a somewhat shortsighted and potentially harmful strategy.
Myth #4: Only second-generation Hispanics are open to a traditional banking relationship.
Targeting only second-generation immigrants or children of Hispanic immigrants is an attractive strategy for credit union leaders who want to introduce their cooperative to the next generation of financial-service consumers. In addition to youth, the older members of this second-generation Hispanic market have higher incomes, more degrees and own more homes than their parents, which make them attractive financial clients. However, they are still a very young market compared to their parents, who are still the higher income earners overall.
The fact that younger Hispanics might have less fear and mistrust in financial institutions than their parents is also a powerful draw. Many financial professionals still believe that this fear and mistrust is insurmountable, which can serve as a major roadblock for credit union leaders looking to develop a strategic growth plan and senior management buy-in.
Children of all ethnicities learn financial behaviors from their parents and family and community ties are especially strong among Hispanics. This means that young Hispanics will often do business with the same organizations that have treated friends and relatives well and are more likely to walk through the credit union door that their parents have already passed through.
Understanding this generational interdependence helps inform how credit unions should structure their communication and design outreach plans. Earning the loyalty of parents often results in getting the business of their children, just as the reverse can prove equally effective. Some Hispanic parents rely on their U.S. born children for information and even advice where financial matters are concerned, especially as they get older. One Coopera credit union client tells a story that illustrates an extreme example of this generational interdependence: An Hispanic couple walked into the credit union to ask about membership and brought their 7-year-old daughter to act as interpreter. I’ve been there many times myself. As a young person, I was frequently asked to help my parents fill out forms and make appointments.
Keeping anecdotes like this in mind as you draft a marketing plan can help you avoid the tendency to target just one generation simply because it seems like the easiest strategy.
Myth #5: Hispanics only want transaction-based products.
One of the things we hear a lot when we’re on the road talking with credit unions about the importance of investing in Hispanic membership growth is that Hispanics are only interested in check cashing and remittance transfers, which doesn’t allow CUs to build long-term relationships.
And we love hearing this because it provides us with the perfect opportunity to demonstrate—using data we’ve accumulated over many years of consulting with credit unions—that, in fact, long-term relationships are being built.
In 2013, Coopera’s credit union clients’ Hispanic members were as likely or more likely to have checking accounts and loans than non-Hispanic members, debunking the myth that Hispanic members only use transaction-based products. Among Coopera clients, the median Hispanic checking penetration rate is 51.3 percent, which is slightly higher than the 49.9 percent median for non-Hispanics. In addition, median Hispanic loan penetration in 2013 was 34.7 percent for Hispanics versus 34.1 percent for non-Hispanics.
These rates not only indicate that Hispanic members are using checking accounts and taking out loans, they also show that the number of services per member is about the same. Number of services is generally defined as the number of loan accounts plus the number of deposit accounts. Among Coopera’s credit unions, the median services per member for Hispanics is 2.2 compared with a median of 2.4 for non-Hispanic members.
Our research also indicates that product penetration is increasing at a faster rate among Hispanic members than non-Hispanic members. An analysis of the median annualized product and service growth rates of Hispanic vs. non-Hispanic members for a group of Coopera credit union clients revealed:
- Checking penetration: The 5.5 percent median growth rate for Hispanics was more than three times the 1.7 percent median growth rate for non-Hispanics.
- Loan penetration: The 4.0 percent median growth rate for Hispanics was higher than the 3.4 percent median growth rate for non-Hispanics.
- Services per member: The 1.5 percent median growth rate for the Hispanic segment was almost twice the 0.8 percent median growth rate in the non-Hispanic segment.
Arguably, credit unions know their members better than any other type of financial institution and strive to build lifelong relationships with today’s consumers. However consumer profiles are in a constant state of flux and right now the influence of Hispanic culture is having a real impact on traditional marketing methods. To grow organically and within new consumer segments, credit unions must make a strategic effort to overcome misconceptions, dig deep into the data and understand how building relationships with their local Hispanic communities creates bona fide win-wins.
Miriam De Dios is CEO of Coopera. Coopera (ko-pair-a) is a full-service Hispanic market solutions company with specific focus on credit unions nationwide. Coopera’s dedicated bicultural and bilingual personnel work closely with clients to assess their needs and create growth strategies designed to increase Hispanic membership, revenue growth and loan volume. Coopera specializes in developing long-term partnerships with clients as they transition from the early stages of discovery to a best practice credit union. Founded by the late Hispanic community activist Warren Morrow, Coopera is owned by Affiliates Management Company, the holding company of the Iowa Credit Union League and is an exclusive strategic alliance partner of the Credit Union National Association. For more information, visit www.CooperaConsulting.com.