By Kim Chen Wiseman
Contributing Writer

More than half of all U.S. retail banking growth in the next 20 years will come from America’s growing Hispanic population, according to the Federal Deposit Insurance Corp.

Reaching out to this vast market, U.S. banks next year are expected to spend as much as $8.5 billion marketing to and servicing the Hispanic consumer.

It’s not surprising given that more than 40 million Hispanics live in America today, representing about 14% of the total U.S. population, according to Census Bureau figures. Growing at an even faster rate than the Hispanic population is the segment’s buying power, which is expected to reach $1 trillion by 2010.

But Jorge Moller, vice president for Hispanic segment strategy at Wachovia Bank, says Hispanics are currently an underserved market in the banking industry. There are a number of reasons Hispanics have traditionally shied from using banks.

“We know that in many Hispanic countries, people see banking institutions as reserved for the elite,” says Moller. “Or they may fear losing their assets. For some, not having the right documentation is a challenge.”

Not having a banking relationship can prove problematic, he says. “Many Hispanics carry a large amount of cash as a result and easily become targets of crime. It also means not having an established credit to buy a home or car if needed.”

The FDIC says 44% of Hispanics living in the United States still do not have a bank account and only less than half of them own a home. But as Hispanics become more acculturated and their incomes rise, experts predict they will become a major source of demand for banking and mortgage products. New York-based Research and Advisory Group projects the number of Hispanic households with checking accounts to grow by 57% and saving accounts holders by 76% over the next six years.

But as more Hispanics today are U.S. born and college educated, households are becoming more affluent and gaining in buying power. This is particularly true in established Hispanic communities such as those in Texas and Florida, where second- and third-generation Hispanics have become working adults. According to census data, the number of affluent Hispanic households earning more than $75,000 nearly tripled in 10 years.

Industry analysts say banks must customize their marketing and services to Hispanics’ needs, which vary greatly by geography and how acculturated the population is. While Hispanic populations continue to grow in well established Hispanic communities, a fast growing wave of immigrants are settling into new suburbs and mid-size cities across the United States Experts say in these new high-growth markets, banks face the challenge of assimilating the growing population into the mainstream use of banking services. In these communities, for example, Hispanic consumers would have a greater need for financial literacy programs, cash remittances and bilingual tellers and loan officers.

Honing in on these needs, Wachovia has launched efforts to provide bilingual employees in branches located in high-concentration and high-growth Hispanic communities as well as provided a call center with bilingual personnel. The company has also created a cash remittance program called “dinero directo,” or direct money, a pre-paid debit card that those working in the United States can send to their families in their home countries. Banking statements also will be available in Spanish next year.

These initiatives are part of a larger rollout program that Wachovia will launch this month called “Cuenta con todo,” which will include free checking accounts, savings accounts with no minimum balance requirements, check cards and Visa points, among other incentives designed to service Hispanic customers.

BB&T unveiled its Hispanic-consumer initiative this month with the seventh installment in its series of Spanish-language educational audiotapes on life in America titled “Bibi,” named after the main character in the tapes. The tapes, which are available for free at any of BB&T’s 1,400 branch offices, cover a range of challenges Hispanics face after immigrating to the U.S., such as employment searches, emergency preparedness, renting and buying a home, communication, health care, education and insurance and banking.

The Carolinas are a relatively new entry market for this ethnic group, where most Hispanics tend to be entry level workers, says Moller. Recent studies by the University of South Carolina and University of Georgia estimate the number of Hispanics living in the greater Charleston area at more than 50,000, representing more than 40% of the total number of Hispanics living in South Carolina.

Other local financial institutions, like the South Carolina Federal Credit Union, are also tuning into this growing opportunity. Senior Vice President for Marketing Beth Jaskiewicz says it’s clear that the Hispanic community represents a viable market in the region.

The credit union is completing its research on the Hispanic marketplace and plans to present its findings to the board of directors by this summer.

“Increasing numbers, rising incomes and a comparatively young population suggest that Hispanics will become a major consumer of financial services in the years ahead,” cites a recent FDIC study. “But this market is still in its infancy. As it continues to mature, large banks and community banks alike will have new opportunities to meet the demands of the Hispanic marketplace by customizing their products to its unique needs.”

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