Kansas City, Kan. – Banks and financial institutions have come to see the country’s new Latino immigrants as a market with a great upside.
The disposable income of Latinos will exceed $1.08 trillion, or 9.2 percent of total purchasing power nationwide, by 2010, according to the Selig Center for Economic Growth at the University of Georgia.
Latinos also will account for nearly one-third of the homebuying pool in another four years, a Harvard study shows. That’s a sizable component, especially as the housing market slows.
As baby boomers age and their savings leave the financial system, banks see the Latino population’s relative youth as another plus.
“In the 1960s, the more visible issue was urban banks not reaching the urban poor. Now, with immigrants, you’ve got a different demographic and you’ve got to understand that’s part of your customer base,” said Linda Schroeder, a vice president at the Federal Reserve Bank of Kansas City. “We’re better off as a whole if everyone’s participating in the economy.”
Even as Congress debates their legal status, banks are tailoring their products to meet the country’s newest residents where they work and live, installing ATMs in meatpacking plants and creating special mortgage packages that don’t require the traditional documentation.
“If I buy a home here, I want to be 100 percent sure of what I’m buying,” said Victor Cruz, a native of Toluca, Mexico, as he met with financial consultant Maria Carrillo at the Kansas City- based nonprofit El Centro Inc., an outreach group that helps immigrants with things such as English as a second language classes and money matters. After experiencing decades of financial crises and currency devaluations in Latin America, first-generation immigrants often prefer to carry cash than to deposit their money in the bank.
Concerns about the number of immigrants who do not have bank accounts have prompted officials at Federal Reserve banks across the country to encourage lenders to develop alternative means to bring Latino families into the banking system.
One-third of U.S.-born Hispanic residents and over half of all Mexican immigrants lack bank accounts, according to 2000 figures from the U.S. Census Bureau. But there’s no single formula that meets the diverse needs of the Latino market.
“The No. 1 mistake that banks make is to translate their brochures. They think having their information on a pamphlet in Spanish will produce magical numbers for them,” said Laura Castro de Cortes, a consultant at Latino Banking Solutions, based in Omaha, Neb. “For second-generation Latinos, we’re gonna react like the rest of the market and say ‘OK, who has the best price?’ That’s totally different from marketing for the new arrivals, whose biggest problem is that they walk around with rolls of cash.”
Many undocumented Latino immigrants shy away from mainstream lenders for fear that giving over personal identification could result in deportation. The USA Patriot Act requires banks to ask customers opening an account for their name, date of birth, address and taxpayer identification number.
Before Cruz can get a home loan, for instance, he’ll need to provide Carrillo with two years of tax records and employment records, his taxpayer ID number and three credit-reference letters.
One of Carrillo’s clients said thieves jumped him on payday because they knew he would leave the check-cashing business with his pockets full of bills.
How was he to know he could open a bank account in this country, Carrillo said, if he was still struggling to read in Spanish?
“It’s a long road to have people say, ‘I’m just going to hand over the $500 I’ve made in the last two weeks and trust that it will be there,”‘ said Lydia Contreras, marketing officer for Central Bank of Kansas City. “In Latin America, the government just decides to take it.”
