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BOSTON – Ethnic minorities are a fast-growing economic force in America, and their natural inclination to stick together could make them a natural fit for credit unions willing and able to market to them. And a great tool for doing just that is the Web, according to a new report that aims to show how big the potential market can be and how underserved it now is. “Recent surveys have shown increasing use of the Internet among ethnic minorities and growth in the use of online financial services,” said the Celent Communications report titled “Ethnic Minorities, Financial Services and the Web.” “The ethnic minority markets, especially the U.S. Hispanic and Chinese-American markets, are becoming increasingly important to financial services firms,” wrote the report’s authors, Matthew Josefowicz and Sang Lee. “As more firms compete for these lucrative market segments, competitive necessity will dictate that firms extend their in-language offline services to the online channel,” the report said. While the market is growing, it does tend to be concentrated in specific geographic areas, and because many show a marked preference to use their native languages, ethnic consumers are fairly easy to target precisely and economically, the Celent analysts said. That, and “the impressive predicted growth rates and increasing affluence of these groups, combined with the lack of entrenched competition, makes them highly attractive,” they wrote. The analysts based their findings on studies of how more than 40 major financial institutions are addressing the growing ethnic market in the United States, and on the demographics that show just how potent that market is. For instance, right now there are approximately 290 million people in the United States and well over 30% of them consider themselves to be ethnic minorities. The largest group is the African-American community at 13%. Fast forward to 2050 and Hispanic-Americans will account for more than 20% of the population and Asian-Americans about 10%, up from 4% now. In terms of purchasing power, it’s happening even faster, the Celent analysts note. Among minority groups, Hispanic-Americans will soon overtake African-American consumers in terms of purchasing power, moving from the current $581 billion to well over $900 billion by 2007, exhibiting a seven-year growth rate of 89%, the report said. Asian-American consumers, meanwhile, will grow from their current level of $296 billion in purchasing power to $455 billion by 2007, a seven-year growth rate of 80%, the Celent report predicted. Meanwhile, these groups also are going online in increasing numbers, just like other Americans. In fact, the Asian-American household adoption rate of more than 60% at the end of 2001 was the highest of all ethnic groups, and while the Hispanic-American rate of 32% lagged the national average of 54%, that group was growing at a very fast rate. So was the online rate of black Americans, which stood at 40% in that study. While Asian-American households on average have higher incomes than other ethnic groups, the average for all groups is rising. That and their rising online use makes Internet marketing something all financial institutions need to consider, the Celent analysts wrote. “Although the traditional elements of targeted marketing – the three R’s of recruiting, `riting and real estate – are of primary importance when devising an ethnic marketing strategy, the Web is poised to become an increasingly important part of that mix,” wrote Josefowicz and Lee. “In-language online offerings will become as critical a part of targeted ethnic marketing as English online offerings are for marketing to the broader population,” the analysts wrote. “Just like phone support and ATM’s, previously available only in English, the Web should be added to the ethnic marketing toolbox,” they wrote. In other words, don’t develop printed marketing collateral in a targeted language without doing the same for the Web. The language factor probably shouldn’t be underestimated, if U.S. Census figures are to be believed. The latest show that 60% of Hispanic-Americans prefer speaking Spanish to English, compared with only 21% who prefer English. The number comfortable with both is 39%. “Given the enormous size of the U.S. Hispanic population, their preference for using Spanish cannot be taken lightly by financial institutions,” the Celent analysts said. And, the authors said, “Simply translating a general marketing message is not enough. When providing transactional capabilities in-language, it is best to create a consistent and pleasant customer experience that will yield benefits in customer acquisition and retention.” A “consistent and pleasant” experience, of course, is something that credit unions can be expected to market hard in competition with banks, and the opportunity is now, while budgets are tight for everyone. “While lack of funding and incompatible priorities between ethnic marketing groups and e-business groups have delayed the launch of in-language online services, Celent believes that firms who move quickly will gain a competitive advantage and reap rewards in improved customer acquisition among ethnic customers,” Josefowicz and Lee wrote. The alternative could be to become irrelevant. “During the next decade, the U.S. population is expected to undergo sweeping demographic changes,” the report said. “Financial institutions that fail to adjust may find that they have suddenly become the `minority’ in what is expected to be a highly competitive marketplace.” -

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