Synovate study finds U.S. Hispanics and African-Americans still have much lower ownership of several financial services and products
CHICAGO — Despite growing use of financial services and products and more targeted communications, U.S. Hispanics and African-Americans continue to be 'unbanked' and 'underbanked' according to Synovate's 2008 U.S. Diversity Markets Report.
To better understand financial behavior among multicultural consumers in the U.S., Synovate recently surveyed a total of 4,000 males and females ages 18+, including 1,000 General Market respondents, 1,000 African-Americans and 2,000 Hispanics.
Bank Accounts and Investments
While the percentage of U.S. Hispanics with any type of bank account is up 7%, from 70% in 2004 to 77% in 2008, this is quite low when compared to General Market and African-American consumers, both of which are at least 90%. Even though African-Americans have increased ownership of checking or savings accounts by 8% since 2004, from 82% to 90%, they and Hispanics still have much lower ownership of several types of investment accounts, including:
IRA or 401k plans: 54% ownership for African-Americans and 32% for Hispanics versus 72% for General Market consumers
Stocks or bonds, individually or as part of a mutual fund: 33% ownership for African-Americans and 18% for Hispanics versus 60% for General Market consumers
Certificates of Deposit (CDs): 25% ownership for African-Americans and 24% for Hispanics versus 36% for General Market consumers
"A substantial number of multicultural consumers don't have jobs with retirement plans," said Denise Marks, Vice President of Diversity research at Synovate. "This is particularly true for Hispanics, almost half of whom are employed in the blue collar industry and don't have the opportunity to participate in these types of investment accounts."
Credit Cards and Mortgages
The financial services gap between multicultural consumers and the General Market is also evident in credit card ownership, with 69% African-Americans and 51% of Hispanics owning cards compared to 87% of General Market consumers. While more than half (54%) of General Market consumers hold a mortgage, the percentage of African-Americans and Hispanics who do is only 47% and 26%, respectively. Also, only about one-quarter of African-Americans and Hispanics have a home equity line of credit (23% each) compared to 35% of the General Market.
Health Insurance and Financial Attitudes
Health insurance is another area in which Hispanics lag compared to General Market and African-American consumers. Just 62% of Hispanics say they have health insurance versus more than 80% of African-American and General Market respondents. As with investment accounts, this lower incidence of coverage is related to having jobs in which employers do not offer health coverage for employees.
Socioeconomic circumstances are certainly a factor in the lower ownership of financial products and related services among multicultural consumers. However, the relationship that Hispanics and African-Americans have with financial institutions is also impacted by cultural differences. While about the same amount of Hispanics and General Market consumers feel that they are treated well by financial institutions (36% and 41%, respectively), only 31% of African-Americans feel this way. When considering Hispanics by acculturation level, almost 40% of more acculturated Hispanics - those with higher incomes that speak English or are bilingual - agree that they are treated well compared to those who are less acculturated (29%), who tend to be foreign-born and rely on Spanish-speaking services.
When asked about their financial outlook, it is not always positive for these consumers. Only 18% of Hispanics and 12% of African-Americans agree that their financial situation has gotten better in the past few years.
"The good news is that multicultural consumers are building trust towards financial institutions and owning more financial products, but there are still gaps that need be addressed," said Elliot Savitzky, Vice President in Synovate's Financial Services group. "This is especially true in the subprime mortgage market, which has hit multicultural consumers particularly hard."
A bright spot for the financial sector is remittance. Sending money to relatives who live outside of the U.S. continues to be an important activity in the lives of U.S. Hispanics, although there are signs that this too has been slowing due to rising unemployment. More than half (54%) of U.S. Hispanics say they send money to family or friends outside of the U.S. Almost three in ten (28%) send money once a month or more and, on average, the amount sent is $230. In addition to traditional remittance companies such as Western Union and Orlandi Valuta, banks such as Bank of America and discount retailers including WalMart have launched their own remittance programs over the past several years to attract this audience. Due to current immigration legislation and higher border security, Hispanics that are undocumented or temporary are tending to remain in the U.S. instead of going home to visit their families in Latin America.
"There are many cases of seasonal workers from Mexico and other Latin American countries not seeing their families in their home countries for several years as it has become more difficult to cross the border," said Marks. "Since it is less risky to send money via remittance, this area is still an opportunity for marketers in spite of the current economy."