What do you call a person that speaks three languages?
Trilingual, of course.
What do you call a person that speaks two languages?
What do you call a person that speaks one language?
A community banker.
While all financial institutions are competing for that precious small business customer, are community banks missing the boat by not competing for the growing Hispanic segment? Since media updates of the Latino population growth in the U.S. are currently being Trump-ed by the Rosie war, let me use this week to get it back on the front page. Apparently this segment is being courted and won over by the big banks. Why is that? One reason is that the big banks have the revenue to support a bilingual delivery and support infrastructure.
Understand the cost of the strategy
After spending the necessary think-time on a formal strategy to solicit and acquire this important segment, banks should be realistic about the capital it will take to lure and service it. Nothing looks worse than a bank that screams, “Nosotros Hablamos Espanol” but can’t deliver.
Policies, People and Systems
Without getting into the whole illegal immigration debate, it will be necessary to make some pretty tough decisions and modify customer identification program policies and procedures.
What will serve as I.D.? Will anyone without a Social Security number meet with blanket-rejection? Does accepting Mexico’s Matricular Counselor I.D. card carry the possibility of “reputation risk,” which the big banks can afford to shrug off? Look at the “pizza for pesos” fire raging in Texas as an example that garnered national attention. How will not accepting anything except a Social Security card affect a bank’s acquisition target numbers?
On the servicing side, think of all the places where English speaking customers interact with the bank. How will that touch be serviced en Espanol? Hiring bilingual branch employees may seem like a good solution, but is that a real support strategy? Research suggests that Hispanics prefer branches within their own communities that are open later hours than traditional branches. Consider everything that will be involved to staff, train and support a complete Hispanic branch network.
At the most basic level, to have a complete and successful Hispanic banking strategy, all collateral documentation will need to be in Spanish. This includes branch product brochures, account opening forms, loan documents, newspaper advertisements and billboards. What is the cost to duplicate all of these? How do systems know when to generate which flavor? Beyond account acquisition documents, what about statements and notices?
Likewise, the number of bank systems that need a bilingual touch should not be underestimated. Having ATMs operate in bilingual mode is fairly common these days. It is a requirement in this segment strategy. But don’t stop at the ATM. The bank will want to establish a new BIN or otherwise modify the card ordering process to allow a tarjeta de debito that has a different look than its English version debit card. And the same goes for tajeta de credito.
In the call center, there are two strategies. One is to have the interactive voice response (IVR) system deliver the popular option, “Para Espanol, aprieta cinco,” and have that drive a duplicate menu structure with Spanish language prompts. The other is to have the cinco option transfer directly to a Spanish speaking agent. Either direction may exceed the capabilities of many banks’ IVR systems. According to Dallas, Texas based Intervoice, a provider of IVR and speech solutions, bilingual deployments are no longer the exception but the rule. The vendor’s response to this trend is a faster, out-of-the-box deployment of this feature as an integrated piece of its core offerings. Using skill-based routing and enabling an opt-out to land on a Spanish speaking agent’s phone would be considered a best practice. However, to provide the prompts in Spanish is one thing. Being able to perform speech recognition for the answers as opposed to responding to button pushes is another. There is progress being made on this front. All I can say is, thank goodness for quad socket, dual-core, 3.4 Ghz servers. My poorly trained, neophyte ear-brain combination can barely keep up.
So now that all of the Spanish support staff, documents and systems are in place, is free checking with a toaster going to satisfy the product demands of this niche? Not a chance.
A bank without a remittance product that targets this market will not be successful in attracting the business. According to a survey of U.S. to Latin America remittance senders performed by Banorte of Monterrey, Mexico, 47% of all Latinos born outside of the U.S. regularly send money to their home country with Mexico receiving 33% of the total. Most of these remittances are between $200 and $300 USD. The competition will be primarily Western Union, Orlandi Valuta and Moneygram, as they hold 70% of the market according to Inter American Development Bank. But the majority of these remitters do not have bank accounts. Bankers, there’s an opportunity here.
In addition to remittance products, other services heavily used by the Hispanic community are check cashing, bill payments, phone cards and short term credits. Packaging these together with a community outreach to introduce the bank and banking in general, with specifics about home ownership programs, would be a well-received source of financial education as well as earn some CRA points.
The facts point to some severe and expensive challenges for community banks wanting to enter this market. The language and documentation issues are a given. There is also a fear of institutions that have governmental oversight.
However, for a population base that is growing fast, the benefits of meeting their consumer banking needs now could either be a market share windfall or a missed opportunity. The demographics point to bread and butter customers today that will grow into tomorrow’s treasured jewel, much like the growth of today’s small business segment.
Gonzonians would accuse me of not sufficiently supporting my premise if I did not offer at least a few relevant statistics.
If you want more statistics or an in-depth review of the potential this market has, read the excellent resource The U.S. Hispanic Economy in Transition from HispanTelligence®, the research division of Hispanic Business, Inc.
“Hasta la vista, baby.”—Terminator 2
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