HispanicTrending

Financial institutions are scrambling to learn their Spanish and woo the fast-growing Latino market, which could generate $200 billion in banking business by 2015.

November 28, 2006
By Jennifer Ordoñez

On Saturdays around 6 a.m., there’s a decent chance that Tim Rios, a native of Guadalajara, Mexico, will be working the fields of Northern California. Rios, an executive vice president at San Francisco-based Wells Fargo Bank, sets aside his pinstripes and sets up shop at vineyards and farms, looking to connect with laborers in need of financial services. None of these potential customers make much money, but many welcome the chance to open a checking account, get a quick tutorial on credit scores, or maybe find out how to get a mortgage. The outreach, Rios says, is key to his employer’s efforts to gain a foothold among the Latino population, one of banking’s most promising markets. "It’s great for business," says Rios, who helps lead the company’s Latino community development efforts. "This is as grassroots as you can possibly imagine."

If Rios’ methods seem a little unconventional, it may be smart business. Latinos are the fastest-growing market in the banking industry: The Federal Deposit Insurance Corp. says that by 2015, about half the retail growth at U.S. banks will come from Hispanics, more than 50 percent of whom (about 20 million) don’t yet have checking accounts. By some estimates, all this new business will be worth $200 billion. Banks, especially in the Southwest, are offering myriad enticements to this underserved population. Forget the free toaster oven. Bank of America, based in Charlotte, N.C., is luring Latinos with low- or no-fee remittances to Mexico, after finding that 65 percent of Hispanics who send money back to their native countries do so without bank involvement, mostly at money-transfer stores. Wells Fargo has installed satellite branches in non-traditional mom-and-pop outposts like notary offices. No driver’s license? No problem. Many banks have begun accepting Mexican Consulate identification cards, known as "Matricula Consular," to customers looking to open an account, cash a check or send money.

Historically, Latinos have been skittish about putting their bucks in American banks instead of under the mattress. Many immigrants, with poor English skills, are intimidated. What’s more, Latinos, more so than other populations, can be a fatalistic bunch: According to one study by the Pew Hispanic Center, compared to some other groups, older Latinos in the United States feel they don’t have much control over what happens to them. One upshot of that is that many might see less of a need to map out long-term financial goals. "A good portion of who we deal with are low- to moderate-income families that are trying to navigate the financial world," says Wells Fargo’s Rios. Thankfully for the bankers, second-generation Latinos don’t put quite as much weight on destiny.

To win over the immigrants and their kids, banks are doing back flips to show they are simpatico. In April, Bank of America used "Mexican Mother’s Day"—which it says is the highest remittance holiday of the year—to kick off a summer-long "Fiesta Fridays" promotion, where customers could learn in Spanish or English about the bank’s services. Other components of the bank’s Hispanic outreach program have included hiring an army of bilingual tellers, promoting Spanish-language ATMs and opening banking centers in bodegas, small neighborhood stores with a Latino customer base. The bank likes to think of itself as "culturally relevant and welcoming," and while that may seem like corporate-speak, so-called "cultural relevance" is key to attracting Latino dollars, says Bank of American spokesman Diane Wagner. Latinos opened about 25 percent of the bank’s four million new checking accounts last year, and since September 2005 the B of A has handled more than $126 million in remittances.

Not to be overshadowed by the 500-pound gorillas in the industry, some new commercial banks have emerged that cater almost exclusively Latinos. Promérica Bank opened earlier this month in downtown Los Angeles, and touts itself as "the first majority Latino-owned business bank to form in Los Angeles in 30 years." A week earlier, America’s United Bank set up shop in nearby Glendale, Calif., and declared that it is "believed to be the first Hispanic-owned bank to open in the state of California in over 30 years." Gil Dalmau, president and chief executive of America’s United, says, "The commercial banking industry here hasn’t had top-level Hispanic banking executives for many years, but now we can do this." His institution opened with $30 million in funds. "Over the years there has very gradually been an increase and acculturation in the Hispanic community. Now, the market is huge."

Of course, the retail banking industry isn’t just interested in offering checking and savings accounts to Latinos. Most of the major banks are also vigorously promoting credit cards. And because Latinos earn on average less than whites, and may not have a credit history in the United States, they are not always eligible for the most attractive interest rates and lending terms. At a time when the average American family owes more than $9,000 in credit-card debt and is paying an increasingly large percentage of their income to service that debt, adopting the American way of personal finance may have a downside.

Bankers are also wooing commercial accounts among the growing number of Latino small businesses. Wells Fargo seeks to grant $5 billion in loans to Latino businesses by 2010, and it’s ahead of schedule, with nearly $4 billion on the books. With a loan from America’s United, Silvio Delgado hopes to grow his own collection of companies. A Cuban immigrant, Delgado, 68, settled in southern California in 1968 and eventually opened several small businesses—an insurance brokerage, a real estate sales company and an income tax and accounting firm—which he operates in North Hollywood. He’s looking to expand, and he needed some cash. A longtime acquaintance of some of America’s United network of Latino investors, he readily got what he needed. "There was no shopping around. I’ve known them for a very long time and that is what’s important. I recommend it to all the Spanish-speaking people I know—that they can trust these guys," he says.

Trust and loyalty can’t be underestimated when it comes to attracting—and retaining—Latino customers, bankers say. "They tell their family members and their neighbors, and they’re going to remember what bank gave them their first account," says Wells Fargo’s Rios. Money may not grow on trees, but as Rios combs the fields for new accounts, he knows that proper attention can yield a bumper crop.

Source: NewsWeek

From bilingual ATM options to Spanish-speaking tellers, banks reach out to growing Hispanic community

November 26, 2006
By Mary Judice

It’s hard to miss the Hispanic influences at Chase’s Kenner branch.

The branch has hired six bilingual bankers since July. And signs and banking literature will soon be available in Spanish, spokesman Chris Spencer said.

But bankers and advocates say signage and staffing is only the first step.

Bilingual options on ATM machines, Spanish-speaking tellers and other measures that in some cases were in place long before Hurricane Katrina are not enough to serve the depth of banking services now needed by the area’s burgeoning Hispanic population.

"We recognize that a significant population of Mexican workers has entered the market," said Peter Gwaltney, chief executive officer of the Louisiana Bankers Association. "We want to reach out to serve them and typically they don’t migrate naturally to U.S. banks to do business."

According to a U.S. Census Bureau survey, almost 100,000 Hispanics moved into the metro area in the four months after Katrina; the group now account for 6 percent of the local population.

And this population is expected to grow as rebuilding continues. Many of the immigrants working as part of the rebuilding effort will put down roots and stay, said Donald Zornman, New Orleans president of Hancock Bank Louisiana.

The influx of Hispanics could open up new opportunities for banks. Many Hispanics are interested in wiring money to family members in another country, a service most banks can provide. Others simply need a checking account to facilitate transactions in this country. And those making a long-term commitment to the area may eventually need mortgages.

But serving the rapidly growing Hispanic community opens up a new set of challenges for local banks.

Cultural differences

One of the biggest obstacles involves overcoming cultural differences, said Fritz Elmendorf, vice president of communications for the Consumer Bankers Association in Washington, D.C.

The Hispanic culture is generally distrustful of financial institutions. In Mexico and in other Latin American countries, banking is viewed as a service for the wealthy, not the middle class or the poor, Elmendorf said. And frequent currency devaluations in those countries has left the Hispanic community uncertain about banks.

As a result, Hispanic workers in America tend to either keep the money they’ve saved in their homes or carry it with them, setting themselves up as criminal targets, said Juan Sanchez, community affairs officer for the Federal Reserve Bank of Atlanta.

And even though the American banking system offers a "safe and seamless method of saving money and submitting it overseas" to family members, Sanchez said many Hispanics in this country instead use transfer systems that carry high fees.

It’s not always easy for Hispanic workers to access American banks. Many lack the credit history and the identification needed to open accounts and cash checks.

Guy Williams, president of Gulf Coast Bank & Trust, said government restrictions prevent banks from opening accounts for consumers without identification. Bank customers must show a Louisiana drivers license or passport to open an account. The bank also honors an identification card issued by consulate offices to foreign workers called a matricula consular card. The card is issued regardless of residency status and doesn’t require the establishment of citizenship.

But "if they do not have a government-issued photo identification, they are out of luck," Williams said. The exception is that the bank will cash a check if it is drawn on a Gulf Coast account.

Darlene Kattan, executive director of the Hispanic Chamber of Commerce of Louisiana, said check cashing is very problematic and that Hispanics often are not allowed to open a savings account unless they have good credit.

"I think that’s ludicrous," she said. "They have to have a place to put their money so they don’t get mugged."

Kattan called on banks to hire more bilingual personnel and to do whatever else they can to serve the growing Hispanic population.

"This is not ordinary daily life as in the rest of the United States," Kattan said. "We are in very unique circumstances and drastic measures call for drastic solutions."

Gwaltney said members of the Louisiana Bankers Association have tried to hire Hispanics, not just those who can speak Spanish, to gain the trust of the community. And in a "small step," the association has furnished bankers with a 36-page Spanish phrase book tailored to banking and financial services, he said.

Sending money home

Among the bank services in great demand is a remittance system that allows Hispanics to send money home to their families.

The Inter-American Development Bank said the amount of money remitted by immigrants has grown faster in Louisiana than in most other areas in the recent past. Since 2004, there has been a 240 percent increase from $61 million remitted from Louisiana to other countries to an estimated $208 million this year. These figures include the amount remitted through banks and courier services.

The Federal Reserve has established a program that transfers funds from the U.S. to an immigrant’s home country. The process is similar to the way that checks are cleared between U.S. banks. The Fed charges banks less than a dollar per transfer, and even though banks often add their own fee, the transfer is still generally less costly than those done through wire companies, Sanchez said.

The Fed is also working with banks so that they can accept alternative forms of consumer identification when accounts are opened, he said.

But that doesn’t work if the family on the receiving end of funds does not have a bank account or access to an ATM, said David Frady, executive vice president of commercial banking at Capital One Bank .

He said banks have looked at ATM networks and cross border clearing houses as the answer to help workers remit money to their families.

"While a lot of this sounds great, the products were way ahead of their times," he said. "There was not enough critical mass to make it worth while."

Frady said banks are used to moving money to another institution for a customer. "If the person in Mexico or Honduras does not have a bank account or access to an ATM, they are very restricted in how they can receive money," he said.

The Federal Deposit Insurance Corp., which insures bank deposits, has undertaken an initiative of its own to address Hispanic needs. Recently it appointed a committee to make recommendations on banking "underserved populations." Alden McDonald, president and chief executive of New Orleans-based Liberty Bank and Trust Co., serves on the committee.

In addition to the federal initiatives, banks are working on their own to develop products to better serve Hispanics. Chase has designed a new product to help customers send money back to their families.

In a pilot program being tested in El Paso, Texas, Chase offers customers a service to remit money back to Mexico that is linked to a free checking account. Customers have two automated teller machine cards that allows for deposits on one end and withdrawals on the other. They are allowed three transfers per month to Banorte, the Mexican bank, free of charge.

Whitney National Bank offers a pay card, which businesses can use to pay employees who do not have bank accounts. The employer loads the card with the employee’s pay and the employee accesses the funds at ATM sites and by debit transactions.

Capital One has placed bilingual bankers in some of its branches, including Kenner, and has added a Spanish phone queue for customers on its service line in addition to offering a Spanish option on its computer screens at ATM sites. Progress at foreign banks will also make it easier for Hispanics in this country to complete money transfers.

Elizabeth Fussell, a Tulane University sociologist, said banks in Central America and Mexico are being urged to join automated teller machine networks that would allow withdrawals to be made across borders. Such a system would replace courier services and informal arrangements where individuals drive the money across borders.

"It cuts out a huge percentage that couriers charge," she said. "It would be a great advantage to migrants to preserve the full value of their earnings."

Mortgage programs must also be tailored for the Hispanic population, said Elmendor of the Consumer Bankers Association. He said some banks have adopted a new program that bases loans on rental payments and utility payments in lieu of a more established banking history and credit payments.

Source: Times Picayune