How banks and credit unions are serving the growing Latino market

Some banks and credit unions once served the Latino market primarily to pacify regulators or to show support for the communities in which they operate. But as the Latino population grows, so does the business case for catering to it.

The U.S. Latino population reached 62.5 million in 2021, or 19% of the country’s total population — up from 13% in 2000. By 2060, it’s projected to increase to 111.2 million people, or 28% of all residents, according to the UCLA Latino Policy & Politics Institute.

“As a Texas-based institution, we’d have to be crazy to ignore the growing potential of the Latino market,” said Stacy Armijo, chief experience officer for Amplify Credit Union in Austin.
The ongoing transformation from brick and mortar with reams of paper files to more streamlined institutions that offer a consumer-friendly digital…

In an interview, Armijo said the strategy for serving Latinos is multifaceted and includes cultivating long-term mortgage demand and supporting steady interchange income.

Mortgage loans are the bulk of the $1.5 billion-asset Amplify Credit Union’s loan portfolio today, and Armijo said the company expects mortgages to drive the most growth in the future.

According to the National Association of Hispanic Real Estate Professionals’ 2022 State of Hispanic Homeownership Report, demand and readiness for homeownership among Latinos is rising in spite of homes being less affordable.

“Since we must always skate to where the puck will be, prioritizing Latinos among the homeowners we want to serve long-term only makes sense for driving income through our core product,” Armijo said.

But there are challenges.

For instance, Armijo said Amplify has limited Spanish-language capabilities. The credit union has Spanish-speaking team members who can provide assistance to those members, but the documentation is all still in English.

“That being the case, we don’t market in Spanish … because we wouldn’t see it as fair to solicit interest in one language then require switching to another for fulfillment,” Armijo said.

Setting an expectation that the customer would be fully served in a particular language — and then failing to do so — could be viewed as an unfair, deceptive, or abusive act or practice in the eyes of authorities, Armijo said.

Chris Nichols, director of capital markets at the $45 billion-asset SouthState Bank in Winter Haven, Florida, said banks of all sizes have taken notice of the increasing prominence of Latino populations.

But more banks could get better at outreach to the demographic in terms of financial education and communication in general, he said in an interview.

This may involve conducting much more business in Spanish, given that it is the first language for Latinos new to the country, he said. This means hiring Spanish-speaking bankers who not only know the language but are familiar with cultural norms. It also may mean providing Spanish versions of websites, automated-teller-machine greetings, customer letters and other communications.

“It’s also a reminder that a lot of banks need to do a better job with financial education across the board,” Nichols said. “Part of that may mean communicating in native languages, but part of it is recognizing that whether you are trying to reach the underbanked or the wealthy — regardless of demographic — we need to help people understand their options.”

This, Nichols added, “is important for everything from small-business formation to payments products to investing for retirement. Bankers can help with all of that and more, but we need to connect with people to make it happen.”

During the National Association of State Credit Union Supervisors’ annual summit in Nashville, Tennessee, last week, one panel discussion revolved around serving the Latino community.

A panel during the NASCUS Summit discusses opportunities and challenges of serving the Latino market. From left: Jose Gonzalez, Diego Eguiarte, Martha Silva and Mario Avila.

The panelists said financial institutions need to pay attention because Latinos are the fastest-growing demographic market in the nation.

From 1996 to 2020, the percentage of entrepreneurs in the U.S. who are Latino more than doubled, from 10% to 22%, said Mario Avila, chairman of the $49 million-asset Vanderbilt Credit Union in Nashville.

Before the pandemic only about 3% of Latino consumers were using digital cards to make payments, but that number has “risen drastically,” Avila said. “So as we as credit unions are thinking about reducing costs and trying to move away from the brick-and-mortar model, it’s an interesting demographic to look at.”

Amplify’s CEO Kendall Garrison said the credit union is actively working to improve its offerings to Latinos by deploying community bankers and lenders “who basically have the responsibility of taking our products and services to underserved communities, as opposed to requiring people to come to us.”

Some might say it’s unwise to chase the Latino segment because its average deposit balances are lower than other groups — but those critics are missing a key part of the picture, according to Armijo from Amplify.

Courtesy of Ken McCarthy Jim Dobbs, American Banker