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  • What Financial Optimism Among Hispanics Means for Credit Unions

    Posted by on August 13, 2018

    Couple Taking SelfieHispanics are more optimistic about their financial futures than other consumers segments. As multicultural marketing expert Isaac Mizrahi shares in Forbes, in the next 12 months…

    • 9 percent of Hispanics are planning to buy a house, compared to 6 percent of non-Hispanics. This means Hispanics, who represent about 18 percent of the U.S. population, may represent 22 percent of all new home buyers in the next year.
    • 14 percent of Hispanics are planning to buy a new car, compared to 11 percent of non-Hispanics.
    • 11 percent of Hispanics plan to switch jobs, compared to 8 percent of non-Hispanics.

    More than 3 percent of Hispanics plan to make their first financial investment ever, compared to 1.5 percent of non-Hispanics. Hispanics may represent almost a third of all new investors in the market in the next 12 months.

    Not only do Hispanics tend to be more optimistic about finances than other consumer segments, but their optimism appears to be growing. In an April 2018 poll conducted by the Florida Atlantic University Business and Economics Polling Initiative, 69 percent of Hispanics indicated they are financially better off today than a year ago, up 4 points from the previous quarter.

    In addition, 78 percent of Hispanics are optimistic about their financial future, up 7 points from the previous quarter. Finally, 69 percent of Hispanics think it is a good time to purchase big-ticket items for their homes, up 17 points from the last quarter of 2017.

    What’s driving the increased optimism?

    There are likely many factors driving financial optimism among Hispanics – including low unemployment, greater income mobility and economic growth and stability.

    Another important factor is the number of Millennials who make up the Hispanic population. Pew Research Center has found 90 percent of Hispanics below the age of 30 report they expect their finances to get better in the next year, compared to 81 percent of the Hispanic population overall.

    This is important because Millennials make up about 40 percent of the U.S. Hispanic population – about twice the proportion that Millennials make up in the overall U.S. population.

    What does Hispanic optimism mean for credit unions?

    This is all good news for growth-minded credit unions desiring to serve Hispanics in their community. With increased optimism generally comes an increased need for the types of financial services credit unions are uniquely positioned to provide. Below are three areas you may want to review in response to these findings.

    Home mortgages and vehicle loans. Evaluate your loan programs to ensure they are relevant and meaningful to Hispanic consumers. Hispanics are declined for conventional home loans at a rate that’s seven percentage points higher than the national average, according to the 2016 State of Hispanic Homeownership Report. Do your programs offer low down payment options and flexibility in determining qualifying income? By expanding your data sources beyond income and credit scores to evaluate a consumer’s ability-to-repay, you may be able to qualify more good borrowers.

    Savings and investments. With more Hispanics interested in saving and investing their money, it’s a great time to offer culturally relevant education and programs to encourage these important habits. The need is there. According to a 2014 Prudential Research study, 19 percent of Hispanics had individual retirement accounts, compared to 39 percent of the general population. Only 6 percent had investments in individual stocks, bonds and mutual funds, compared to 18 percent of the general population. And 62 percent of Hispanics had a savings account, compared to 81 percent of the general population. Consider how you might grow that number among your Hispanic membership. More savings means a better bottom line for your credit union, allowing you to originate more loans and help more consumers. It’s a true win-win.

    Millennial outreach. The younger consumers learn the importance of building credit, saving and investing, the more prepared they will be for the future. Because Millennial Hispanics tend to be even more financially optimistic than older generations, it’s important that credit unions seek to establish a lifelong relationship with them when they’re young.

    Best of all, the more credit unions do to help Hispanics in their communities, the more financially optimistic they will become. And that’s good news for credit unions and Hispanic consumers alike.

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    Greater Income Mobility among Hispanics Spells Opportunity for Credit Unions

    Posted by on July 16, 2018

    In our last blog post, we shared several stats that reveal how Hispanics in the U.S. are driving America’s economic growth. A recent study by Stanford, Harvard and Census Bureau researchers further confirms this point and signals additional opportunities for credit unions.

    The study shows Hispanics are escaping poverty and climbing the economic ladder at nearly the same pace as their white peers.

    THE RESEARCH

    •  Among Hispanics in the U.S. who grew up in the lowest income segment, 45 percent made it to the middle class or even higher, compared to 46 percent of whites.

    •  Of those who grew up in the lower middle class segment, 28 percent made it to the upper middle class or higher, compared to 35 percent of whites.

    •  Nearly half of Hispanic high school graduates, ages 18 to 24, were in college in 2016, up from just under a third in 1999.

    THE CREDIT UNION OPPORTUNITY

    Consider how you can help more Hispanic members become homeowners. As Hispanic income grows, so will the ability to buy homes and make other financial investments. In 2017, more than 167,000 Hispanics purchased a first home, taking the total number of Hispanic homeowners to nearly 7.5 million (46.2 percent of Hispanic households). Hispanics are the only demographic to have increased their rate of homeownership for the last three consecutive years. By offering a variety of home loan options supported by culturally relevant education, credit unions can help more Hispanics realize the dream of homeownership.

    Offer programs to help Hispanic members save for retirement. A recent survey found 71 percent of middle-income Hispanics feel they are behind on preparing for retirement, compared to 63 percent of the general population. At the same time, many have difficulty securing the financial services that can help them address these issues. The survey found 59 percent are unsure who to go to for financial advice and guidance; 53 percent say it’s difficult to find financial services companies that know how to help households like the ones they belong to; and 42 percent believe they have different financial planning needs than the average household. Fortunately, increasing income mobility will allow Hispanics to start saving for retirement sooner. Consider how your credit union can be the financial services provider many Hispanics are looking for to help with their retirement savings needs.

    Partner with high schools and colleges to offer financial education to students. While more Hispanics are attending college, their graduation rates tend to be lower than their white peers. A report by the National Student Clearinghouse Research Center found that 45.8 percent of Hispanic students who entered college in 2010 completed their degree within six years, compared to 62 percent of whites. This disparity could be the result of several different factors, including financial challenges. By offering culturally relevant financial education on topics like budgeting and student loans – as well as encouraging students to establish a relationship with a credit union before or during their college years – you can help more Hispanic students graduate from college and land higher paying jobs.

    While the numbers on Hispanic income mobility are encouraging, there is still work to be done. Who better to do it than credit unions?

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    5 Financial Preferences of Multicultural Consumers

    Posted by on June 4, 2018

    Recent research by CUNA Mutual Group’s TruStage reveals interesting insights about the unique makeup and preferences of Hispanics and other multicultural consumer groups. Below are some of the key findings from the What Matters Now research along with what they mean for credit unions seeking to establish more meaningful relationships with multicultural consumers.

    Multicultural consumers have significant buying power.

    Over the past five years, multicultural consumer groups have accounted for 100 percent of U.S. population growth and 61 percent of credit union growth. The annual spending growth rate for Hispanics is 4.1 percent, compared to 1.4 percent for Whites.

    What it means for credit unions: Credit unions desiring to grow their memberships, assets and loan balances should place a strategic focus on their outreach efforts to Hispanics and other multicultural consumer groups.

    Hispanic appreciation for apps over-indexes other groups.

    Hispanic consumers are almost two times more likely than Whites to research financial products and services using mobile apps. Additionally, 17 percent of Hispanics reported applying for financial accounts and products through an app, compared to only 9 percent of Whites.

    What it means for credit unions: To be relevant to Hispanic and other multicultural consumers, credit unions should be investing in mobile strategies. These cooperatives should ensure their mobile apps have a Spanish language option and the experiences are culturally relevant to Hispanic consumers.

    Business loans are a desired product.

    Hispanics are nine times more likely than Whites to take out a small business loan in the next five years.

    What it means for credit unions: Invest in products and resources to help Hispanic entrepreneurs, such as small business-friendly loans, microloans and small-business financial education. Also, consider partnering with organizations that offer small business assistance, such as local Hispanic chambers of commerce and small business incubators.

    Hispanics prioritize ease of use.

    Twenty-three percent of Hispanics look for convenience in financial products and services, even if it means higher rates or fees, compared to only 9 percent of Whites. Flexible payment schedules and speed of lending are also more important to Hispanics than other groups.

    What it means for credit unions: No two consumers are exactly alike. Providing a range of product options and fee structures will help you be relevant to a wider range of consumer segments. Offering instant online loan approvals is one way to meet a need for many Hispanic consumers.

    Hispanic consumers tend to worry about finances.

    Every expense category studied by CUNA Mutual causes Hispanic consumers concern — sometimes up to 20 percent more than other consumer groups. At the same time, Hispanics tend to have a stronger sense of generosity and community than other consumer groups.

    What it means for credit unions: Think about ways to help relieve concerns for Hispanic consumers through relevant financial education and resources. Also, be sure to educate local consumers on the credit union philosophy of “people helping people,” and share stories of how your credit union and members are improving the lives of individuals and families in your community.

    As you apply these findings to your credit union’s Hispanic outreach strategies, be careful not to over-simplify the data. “When examining the research findings, it’s important to remember a person is made up of many unique cultural aspects,” said Opal Tomashevska, manager, multicultural business strategy, CUNA Mutual Group. “Be careful not to over-generalize or create stereotypes from this information and apply it to all members of a certain group. The data shows trends and significant differences but does not attempt to speak for every individual.”

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    What Credit Unions Need to Know about Debt Aversion in the Hispanic Culture

    Posted by on September 28, 2017

    Over the next few months, we will write on a series of financial inclusion topics as they relate to the Hispanic culture. This first one focuses on an aversion to debt that exists within many segments of the Hispanic population. It also offers ideas for credit unions on how to provide education and value in this area.

    Why do Hispanic consumers tend to avoid debt?

    Although there’s no one right answer to this question, it’s important to remember conventional banking as we know it in the U.S. may not be part of the traditional Hispanic upbringing. As Glenn Llopis, founder of the Center for Hispanic Leadership, wrote in a HuffPost blog post, “This has led to a general mistrust of banks and, when coupled with a natural skepticism, would account for the $53 billion attributed to ‘unbanked’ Latino households (according to a research arm of the University of Virginia’s Darden School of Business).”

    We see the effects of debt aversion in higher education, as well. According to Hilda Hernandez-Gravelle, senior research fellow for the Institute for College Access & Success, several cultural factors contribute to the difficulty Hispanic students often experience when it comes to securing financial aid for college. These include fear of debt, mistrust of lenders and conflict between family obligations and educational aspirations. “While Latinos generally have a strong commitment to education, many believe that if you can’t afford to pay for it up front, you can’t attend,” Hernandez-Gravelle writes.

    How can credit unions help?

    Avoid a one-size-fits-all approach to financial education.

    It’s important to remember different cultures and financial classes have different perspectives on money and financial services providers. For example, as psychologist Miquela Rivera, PH.D., points out, for first-generation, low-income Hispanics, accumulation of money might be, at first, the main goal. Later, they may realize money in itself is not a satisfier, but that satisfaction comes from doing what they want in life, without excessive financial worry.

    “Latino students who are financially literate must view money as a means, tool or resource for getting things done, not an end in itself,” Rivera writes. When credit unions help their Hispanic members achieve this mindset, those members begin to see more clearly the importance of establishing credit and that debt, when managed responsibly, can actually be beneficial.

    Focus on cultural needs vs. language barriers.

    Rather than focusing on literacy and word-for-word translations, Principal’s Hispanic Market Program focuses on context and cultural needs to engage Hispanics in retirement savings. The program promotes a “transcreate vs. translate” ideology, focusing on context in written educational materials rather than the word-for-word translation. Also built in is incorporating simplicity in presentations and correcting misinformation, such as the kind that leads to distrust in financial institutions.

    Credit unions should take a similar approach to educating Hispanic members and prospective members about debt and creditworthiness.

    Build trust and credibility.

    Llopis recommends offering culturally relevant and language-appropriate products and services backed by bilingual staff. He adds it’s also important to show genuine concern for the community – for example, by active involvement in Hispanic issues and sponsorship of local events. The community will be more likely to trust the education a credit union offers if it’s playing an active role in the betterment of their daily lives.

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