Welcome Tech: The Hispanic Consumer and Financial Wellness
As the 2020 census results are gradually released, the growth of the US population over the past decade has been mainly driven by the growth of the population of Latinos; once again. The Latin American or Hispanic population grew to 62.1 million, a 23% growth for this cohort over the past decade. Compared to the non-Hispanic population, this sector only grew by 4.3%.
However, despite its growth, the US Latino community often struggles to achieve a strong credit rating due to a number of factors including, but not limited to, language, traditional banking confidence, and financial literacy. Daniel Ayala is Executive Vice President and Managing Director Financial Services at Welcome technology, the fintech, with the aim of providing immigrants with the resources they need to be successful in a new country.
Here Ayala looks at the various factors affecting the financial opportunities of Latino communities in the United States, and what fintechs and other financial organizations can do to help:
Daniel Ayala, Executive Vice President and Managing Director of Financial Services at Welcome Tech
The Hispanic segment is very diverse in terms of country of origin, race, and degree of acculturation. In the past, traditional financial services companies, through marketing in Spanish, have focused on the Hispanic opportunity to ensure the sales and service channels are linguistically capable and, in some limited cases, to develop and target certain unique service needs to attract and retain this growing population .
Historically, acculturation occurred in many foreign-born churches before the 1980s. Since the mid-1980s, however, large heterogeneous segments, such as Hispanics, have not assimilated into mainstream society as quickly as in earlier waves of migration to the USA. Why? The past three decades have seen an increasing influx of relatively young foreign-born immigrants, often arriving in ever greater concentrations of Hispanic populations located in almost all major metropolitan areas including Los Angeles, Houston, Miami, Chicago, New York and much more. This factor alone is the number one reason why understanding the unique needs and challenges facing the Hispanic community is critical to supporting and enhancing their financial wellbeing.
Here are some key factors influencing the ability of banks and fintechs to effectively connect and engage with this community in order to meet their financial services needs:
While most Hispanics adopt the English language over time to excel in education and to take up employment, a large proportion of Hispanic households remain bilingual or Spanish dominant. In fact, media consumption is often multilingual and in this highly connected world they are often in close contact with friends and relatives back home via social media and messaging apps, which requires the need to keep up to date with their native language.
Latin America has seen the impact of the deep economic crisis on the value of local currencies, and the fragile economies have worked hard to maintain the delicate balance of public policies to support the lower-income strata while maintaining economic and financial policies that support it Enabling countries to maintain acceptable credit ratings / reputations in a highly competitive and demanding global marketplace. Occasionally, political changes or economic forces have adversely affected local currency earning power and / or the overall stability of the banking systems in Latin America. These economies are fragile and, for the most part, are still heavily dependent on FDI and / or bonds in global capital markets. In the past, Argentina, Mexico, Venezuela and Brazil have all faced significant economic challenges. When people migrate to the US, they have greater confidence in the US economy, but they are not as familiar with the US banking system and often distrust traditional banks because of the difficulties they face domestically.
Traditional stationary financial institutions have increased their focus on the segment. In most communities, bankers and service resources are usually easily accessible in the language. Most importantly, the presence of traditional banks in neighborhoods where Latinos are concentrated has increased significantly over the past 20 years, but the ultimate impact of the pandemic on advances in banks’ geographic focus on this segment has yet to be measured. Some major financial institutions have reduced the number of branches due to the recent advance of digital channels, which has resulted in less reliance on physical branches in serving customers.
While the majority of the US population has a bank account, most Latin American countries still have an unbanked population due to economic conditions and the high cost of banking services to lay people in Latin America. The population without a bank account is between 40% and 70% of the population, depending on the country of origin. To serve this customer, one must focus on investing time and resources in both mentoring and training, both proactive and reactive.
Welcome Tech is uniquely positioned to effectively address the above factors as the foundation of its mission is aligned with the needs of the segment and bridges the void often encountered by most traditional financial services institutions.
The primary driving value of Hispanic consumers is always family (collective ethos), and as such, their financial decisions are often based on this core value system. Here are a few observations:
Families will often sacrifice as much as possible to keep their children’s education above other important priorities such as saving for their own retirement. The children, in turn, are often culturally raised to understand that they are committed to their parents and often support or fully meet the needs of their aging parents; Hence, college savings are often more important than retirement savings.
Families often volunteer to support members in need. No loan, but ongoing financial support due to family ties and economic hardship. Consumer remittances are a good example and evidence of this clear commitment. Billions are being transferred between the US and Latin America. Mexico alone now accounts for over $ 26 billion in family remittances. The beneficiaries are often parents, partners, siblings or children. During the housing crisis, many Hispanics employed in the construction sector lost their jobs and turned to lower-paying jobs. In some cases, their families in Mexico and El Salvador provided the extra support needed during this time. It’s a reciprocity understood within the Hispanic ethos.
The Hispanic employee’s work ethic is well known in the United States. The Hispanic perspective is that hard work pays off and, if necessary, any type of work that helps meet financial goals is acceptable. However, due to lack of credit experience and the resulting lack of credit history and limited financial literacy, Hispanics often do not take advantage of credit and / or have limited access to credit. Financial literacy is a key factor here in training Hispanic clients to understand credit and, if necessary, manage it to their advantage.
Welcome Tech’s products and services are effectively aligned with the segment’s unique values and needs, and their focus on educating, empowering, and delivering solutions to meet the unmet needs of the marketplace is critical to the cohort’s success. The solution has to be 360.