As we celebrate National Hispanic Heritage month, credit unions would do well to consider how to better reach and serve the Hispanic/Latinx community.
More than half of total U.S. population growth since 2010 has come from Hispanic/Latinx people, according to the Pew Research Center.
In 2019, the Hispanic/Latinx population reached a record 60.6 million, representing 18% of the U.S. population. By 2040, this group is expected to reach more than 87 million, according to the U.S. Census Bureau.
While Hispanic/Latinx people are often stereotyped as immigrants, the share of this population who are immigrants has declined to 33% today from 37% in 2010. In 2018, 71% of Hispanic/Latinx people over age five spoke English proficiently, up from 59% in 2000, Pew reports.
Click to enlarge. The Credit Union Opportunity.
According to the Selig Center for Economic Growth at the University of Georgia, Hispanic/Latinx consumers in the U.S. command $1.5 trillion in buying power, higher than any other racial or ethnic group of color. Their buying power has grown 212% this decade.
Of note, Hispanic/Latinx are comparatively younger than any other racial or ethnic group, with a median age of 28. Their relative youth means their income and spending power is set to grow for many years to come.
While frequently lumped together, Hispanic/Latinx in the U.S. are not a monolithic group. They are composed of more than 15 different origin groups (e.g., Mexicans, Puerto Ricans, Cubans, Salvadorans, Dominicans, Guatemalans, Colombians, Hondurans, Ecuadorians, Peruvians, Nicaraguans, Venezuelans, Argentines, and Panamanians).
Those who self-identify as Mexican represent the largest origin group (nearly two-thirds of all Hispanic/Latinx in the U.S.). Furthermore, the demographic makeup of the Hispanic/Latinx population varies widely across the U.S.
According to Pew, the economic situation and median education level of Hispanic/Latinx can vary significantly depending on their origin group. It follows that the financial profiles, needs, challenges, and goals of this population will differ based on various factors, including subgroup, education and income level, and age.
Despite their enormous and fast-growing spending power, financial inclusion is generally an issue for Hispanic/Latinx people. Approximately half are unbanked or underbanked compared to one-third of whites.
‘Membership diversification leads to better performance.’
Research by CUNA analyzing recent Federal Reserve data shows that, despite field-of-membership restrictions, credit unions are doing a comparatively good job serving Black households (16% of credit union members are Black vs. 13% of bank members, the Fed reports).
That is not the case with Hispanic/Latinx populations. Only 6% of credit union members are Hispanic/Latinx compared to 10% at banks.
This represents an opportunity to grow credit union membership and offer the Hispanic/Latinx community a financial partner with their best interests at heart.
To effectively reach and serve this community, credit unions need to begin by understanding Hispanic/Latinx consumers, including their financial profile, financial needs, and barriers to financial service, and then develop responsive products and services.
Coopera’s Hispanic Outreach Program and Inclusiv’s Juntos Avanzamos (“together we advance”) designation are complementary and help credit unions understand the differences among Hispanic/Latinx people, and provide guidance and identify best practices on how credit unions can better reach and serve this population.
Specifically, Coopera’s Hispanic Outreach Program provides demographic analytics, consulting services, and training to help credit unions with outreach and service to the Hispanic/Latinx market while Juntos Avanzamos offers a designation to credit unions that demonstrate a commitment to best practices in reaching and serving the Hispanic/Latinx community.
Significantly, the research finds DEI improves organizations’ competitive advantage, boosts profits and earnings, spurs innovation, reduces risk, enhances employee and customer satisfaction, attracts talent, and improves employee retention.
Recent research confirms these findings hold for credit unions. A 2018 study by the Filene Research Institute that examined the impact of Individual Taxpayer Identification Number (ITIN) lending on credit unions’ profitability finds that the average return on assets (ROA) for ITIN loans was 3.81%.
This is much higher than the credit union system’s average overall ROA of 0.93% in 2019, CUNA reports.
Credit Union Magazine’s Winter 2022 issue highlights data-driven marketing, the board’s role in cybersecurity, elder abuse scams, credit unions’ auto lending advantage, and more.
