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THE NEW YORK TIMES
Financial Services Industry Fails to Reach Many Hispanics
by RIVA D. ATLAS
June 20, 2001
[PHOTO: Stephanie Diani for The New York Times]
Wells Fargo redesigned this branch office in South Gate, Calif., to try to attract more business among Hispanics.
Guadalupe Avita has been living in the United States for 10 years, but only recently opened a bank account.
An immigrant from Sinaloa, Mexico, Ms. Avita used to keep thousands of dollars in her home in the Los Angeles area. Without proper documentation for identification like a Social Security number she assumed it would be impossible to open a bank account. After her sister was robbed, Ms. Avita, a single mother, was fearful that she, too, would lose her savings. "I always worried," she said.
Then, three months ago, a local advocate for Hispanics told her she could apply for a taxpayer identification number, which some banks will accept instead of a Social Security number as a form of identification. The Internal Revenue Service does not share data about those who apply for a taxpayer ID with the Immigration and Naturalization Service, a spokesman for the agency said. Using the ID, Ms. Avita was able to open a bank account at a local branch of Washington Mutual.
Increasingly, banks and credit card companies are seeking ways to reach recent immigrants like Ms. Avita, as well as more established middle-class Hispanics, who tend to be less likely to invest than the average American, according to government statistics and other studies.
But many financial institutions' efforts at selling themselves to Hispanics are limited to translating brochures into Spanish, sponsoring the occasional Cinco de Mayo celebration and other half-hearted efforts that have yet to capture the attention of Hispanics.
Few institutions realize that a more subtle approach is required, advocates and marketing experts say. Hispanics are, after all, a diverse group: a pitch that appeals to Mexicans, the largest subgroup, could fall flat with Cuban immigrants. And, advertising and banking executives said, many Hispanics arrive in the United States with a bias against banks, thanks to corruption or instability among financial institutions in their homelands.
It is easy to see why banks are interested in Hispanics. They are the fastest-growing ethnic group in the United States in terms of sheer numbers. The Hispanic population grew 58 percent from 1990 to 2000, while the overall population increased 13 percent, according to the Census Bureau.
Yet relatively few banks or credit card companies have won over Hispanic consumers, advertising and marketing executives say. Fewer than half of all Hispanics have credit cards, according to recent data from MasterCard International, compared with 80 percent for the population over all. A 1997 report by the comptroller of the currency noted that 58 percent of Hispanic households had deposit accounts with banks or brokers, compared with 71 percent of black households and 93 percent of white households.
To a growing number of banks, that gap means opportunity for gain. Wells Fargo demonstrated its commitment to Hispanic customers last month, when it agreed to accept an identity card issued by the Mexican consulate in Austin, Tex., as a valid form of identification. Since the program began on May 2, more than 250 accounts have been opened, a Wells Fargo spokeswoman said.
Citigroup followed up less than two weeks later when it agreed to buy Grupo Financiero Banamex-Accival, Mexico's second-biggest bank, for $12.5 billion. It hopes to knit together a powerful financial institution on both sides of the border.
"The Banamex deal is huge," said Adriana De La Mora, a Chicago stockbroker affiliated with Salomon Smith Barney, a division of Citigroup. "I can't even comprehend how this will all roll out in the months ahead."
Even with Banamex, however, Citigroup faces a challenge. Ms. De La Mora, a 32-year-old native of Guadalajara, Mexico, said she has had a hard time attracting Hispanic brokerage clients, despite her close ties to Mexicans in Chicago.
"When I started in the brokerage business four years ago, I thought it would be easy to get these accounts," she said. Instead, Hispanics amount to fewer than 10 percent of her customers.
One reason for that disappointing performance is that Hispanics were largely left out of last decade's economic boom even as they became more visible. Partly because newer, poorer immigrants dragged down the whole group, the average Hispanic household's net worth actually fell 24 percent from 1995 to 1998 the most recent figures available according to an analysis of Federal Reserve data by the National Council of La Raza, an advocacy group.
To attract more Hispanic savers, banks need to hire professionals in communities where Hispanics tend to live, marketing experts say. "At a time when banks are trying to move away from the branch, Hispanic customers still require a softer touch," said Simon El Hage, director of strategic marketing at Lopez Negrete, a communications firm in Houston that has developed campaigns for Bank of America.
Hispanics generally prefer direct contact, said Mr. El Hage, and new immigrants particularly need a person to explain savings and investment choices to them. "The branch employee is part ambassador, part social worker," he said.
To try to meet that preference for the personal service available through branch banking, one bank that caters to Hispanics, Banco Popular, has expanded to 96 branches from just 10 branches in 1989. Banco Popular, which is based in Puerto Rico, operates in six states with large Hispanic populations California, Florida, Illinois, New Jersey, New York and Texas.
"Many Latinos say they do everything on the Internet. But in greater proportions to the population over all, they like to go to the branch," said Jorge A. Junquera, president of the bank's North American operations.
Even established middle-class Hispanics are often wary of banks. Those whose families have moved to the United States relatively recently have memories of a precarious banking industry in their home countries.
In Mexico, for example, banks were nationalized by the government in 1982, and then privatized as part of a $100 billion bailout just over a decade later. That spawned widespread uncertainty. "Anything connected with the government was not to be trusted," said Silvia Malo, an account director with Reynardus & Moya, an ad agency that specializes in pitching to Hispanics.
Ms. Malo, who arrived in the United States three and a half years ago from Mexico City, has been working on a campaign for the LaSalle Bank of Chicago, a subsidiary of ABM Amro of the Netherlands. "More important than translating deposit forms into Spanish is developing a sense of trust," she said.
The biggest challenge for banks, Hispanic advocates say, is to attract the huge number of illegal immigrants who do not have bank accounts.
"Money is money, whether it comes from an immigrant or not," said Felipe Kofman, a Los Angeles advocate who has helped hundreds of immigrants, including Ms. Avita, open bank accounts.
Immigration officials estimates that there are five million illegal immigrants in this country, but the number may be far higher, according to Luis Plascencia, associate director of the Texas office of the Tomas Rivera Policy Institute, a nonprofit policy and research organization.
Illegal immigrants are often singled out by criminals, who know they are likely to have cash on hand because they do not use banks and are unlikely to go to the police for fear of being deported. In Austin last year, for example, nearly half of all reported robbery victims were Hispanic, the police said, far above their share of the population.
Credit card companies have their own hurdles in marketing to Hispanic consumers: many lack credit histories.
Those who do have such histories are ideal candidates because they typically are quicker to pay their debts than the average American, said Michele Turkel, a credit card industry consultant in Scarsdale, N.Y. And their ratio of delinquent loans to total debt outstanding is half that of borrowers generally, she said.
For Hispanics without a credit history, banks are offering secured credit cards, which are backed by a set amount that the customer deposits in a bank. If the customer fails to pay his bill in 60 days, the bank can use the money to pay the outstanding debts.
"After these customers prove themselves, we graduate them to regular unsecured cards," said Joseph Hoffman, head of marketing at the Metris Companies, a financial services company in Minnetonka, Minn.
Metris, which decided three years ago to focus on the Hispanic market, has worked carefully to win consumers' loyalty. It started out offering a credit card to customers at La Curacao, a Los Angeles home furnishings and electronics retailer that caters to the Hispanic market.
Last year, Metris bought the credit card portfolio of Banco Popular. "The next step is to build our own brand from scratch," Mr. Hoffman said.
Metris is working with MasterCard, the most aggressive marketer to Hispanics among the major credit card operations. Last December, MasterCard introduced a Spanish- language Web site and is trying to have other companies like Metris market to Hispanic consumers through the site.
Both banks and credit card companies need to be mindful of cultural or linguistic differences among Hispanic groups. Financial institutions, for example, have learned not to hire telephone representatives with Cuban accents to call Mexican-Americans. "We use a Walter Cronkite-type accent," said William Bralye, who runs Hispanic marketing at Wells Fargo.
And Spanish words can take on different meanings from country to country. Astrid Rial, president of Arial International, a consulting firm in University Place, Wash., focuses on teaching companies what she calls "business Spanish."
"We try to teach people to speak neutral Spanish," she said. "The accent is not as big a concern as using the right words."
Of course, Hispanics might respond better to the banks' pitches if there were more Hispanics employed by the financial services industry, some executives said. A survey by the Securities Industry Association estimated that just 3 percent of Wall Street professionals are Hispanic. Ms. De La Mora, the Smith Barney broker, said fewer than 1 percent of her colleagues at Salomon Smith Barney were Hispanic.
"The financial services industry has to develop a Hispanic hiring initiative," said Mr. El Hage, the Houston ad executive. "You can have dozens of branches, but if the staff can't relate to their customers, it's useless."