Innovative approaches to the Hispanic Retail Banking Market.

In 2004, recognizing the growing importance of the Hispanic market, CMG Partners released an in-depth analysis of the Hispanic market for financial services. We concluded that though Hispanics are one of the strongest growth engines for the financial services industry, the Hispanic market might not be a relevant market opportunity to all firms in the short term. We recommended that firms go beyond stereotypes and generalizations to perform a thorough evaluation of the portions of the market relevant to their institution to better understand whether there were relevant segments worth investing in immediately.

Since the release of our first analysis, the Hispanic market has not only become more important as a growth segment, but it has also become a much more competitive arena within the financial services market. As was the case in 2004, numerous indicators continue to serve as the fuel for the increased influence Hispanics are playing within mainstream America, including:

– Rapid Population Growth: The Hispanic population is growing 4 times faster than the overall U.S. population; projections expect one in four Americans will be Hispanic by 2050.

– Favorable Acculturation Trends: Hispanics are more likely to speak English or a combination of Spanish and English. By 2020, two-thirds of all Hispanics will be U.S.-born.

– Robust Economic Power: From 2000 to 2006, Hispanic households making more than $50,000 per year outpaced the general market growth rate by 4 to 1. By 2011, Hispanics will represent almost 10% of U.S. buying power.

The continued growth of the segment has not gone unnoticed or unanswered. Banks and other financial institutions of varying size and reach have targeted Hispanics, creating an intensified competitive environment. New entrants include a greater number of mid-tier, regional banks that previously were not involved in the market as well as smaller community banks and non-traditional entrants like Wal-Mart, H&R Block, and 7-Eleven. A more crowded competitive space and complex market has also moved marketing effectiveness to the forefront given that economics and ROI is more challenging than before.

The landscape of the Hispanic market is evolving rapidly and with it, the implications for the best opportunities.

The majority of growth is now being driven by U.S.-born Hispanics who are more likely to be acculturated and more likely to acquire financial services. Not only is the market changing due to demographic and cultural changes, but also geographic shifts. What once was a concentrated market is now much more geographically dispersed with states like Georgia and North Carolina, that are experiencing explosive growth, emerging to become significant Hispanic markets in their own right.

More than ever, the complexity of the Hispanic market is requiring banks to go beyond Spanish-language capabilities to gain an intimate cultural knowledge of its sub-segments. The emphasis of most targeted initiatives continues to be the largest segments of the market, the un-banked and under-banked, but other new and potentially more profitable Hispanic sub-segments such as business owners and the mass-affluent are expanding.

Those institutions that are succeeding are going beyond simply launching cookie-cutter initiatives and checking off the appropriate boxes. They’re approaching the development of tailored initiatives through a holistic process, aligning internal resources and stakeholders with a distinct strategy for each target segment.

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