Earning the business of underserved groups takes more than flashy marketing campaigns — it takes trust.
To win that trust, card companies are using high-profile personalities and organizations whose bonds with their ethnic groups are strong.
MasterCard Inc. has recruited celebrities from the black and Hispanic communities in campaigns promoting payment cards.
Visa Inc. is using sports stars to promote financial literacy among Hispanics.
Certain groups of people are leery of banks, which means that mainstream marketing will not be effective with them. Historical experiences with financial institutions in immigrant groups' home countries have bred ill will, said Leylha Ahuile, senior multicultural analyst at Mintel Comperemedia.
Hispanics are 40% likelier than non-Hispanics to be uncomfortable entrusting their money to a bank, and more than a third of Hispanics in the U.S. pay bills with cash only, according to Mintel research.
"You have to keep in mind that most Hispanics come from countries where banks could just get shut down overnight and their money is gone. The other thing is that, in Latin America, you had to have certain level of income to even have a bank account," said Ahuile, who has written reports about ethnic groups and their attitudes about financial services.
Further, financial products in the U.S. are complicated to newcomers who do not speak English, Ahuile said.
"I'm fluent in English, and I have a hard time understanding terms and conditions of products here," she said. Mere translation of banking terms does little good for consumers unfamiliar with banking products.
Trust around payment cards is also an issue for the African-American community. Many blacks mistrust the banking industry because of past racism, bad experiences older family members had or the fees charged for services, including overdrafts, Ahuile said.
"Up until the 1960s, African-Americans did not have much access to financial institutions," Ahuile said.
Even today not many banks have branches in black neighborhoods, Ahuile said. And it fuels mistrust any time a parent or a grandparent in the black community has a negative banking experience, she said.
The black and Hispanic communities are viable markets for card issuers, observers say.
Hispanics are the biggest minority group in the U.S., with purchasing power projected to reach more than $1.2 trillion by 2012, according to Mintel research. And many Hispanics do not participate in the U.S. banking system.
To attract customers from the Hispanic community, MasterCard in 2009 began a relationship with the Spanish-language media powerhouse Univision Communications Inc. Univision long has been known as one of the most trusted news and information sources for Hispanic consumers in the U.S., Ahuile said.
As part of that initiative, MasterCard introduced the Univision MasterCard prepaid card, called Tarjeta Univision MasterCard Prepagada, and a MasterCard gift card, called Tarjeta de Regalo Univision.
MasterCard began a more concerted effort to attract Hispanic consumers in 2010 with when it teamed up with Univision's Julie Stav, a Cuban immigrant who overcame financial problems and is now an expert on financial issues. Stav hosts her own shows through Univision and has become part of MasterCard's financial literacy effort, speaking at seminars for its Financial Education program, said Alex Liu, MasterCard's vice president of global prepaid products.
MasterCard acknowledged that building trust with minority groups was not easy.
"Our key barrier was education and getting these consumers to try something new," Liu said. "It's a complicated message and a whole new way of managing money for innately conservative groups."
MasterCard sought to create its grassroots program using live seminars with culturally relevant spokespeople, such as Stav.
"Working with Julie Stav totally makes sense," Ahuile said.
"One thing I talk about in my reports is that banks need to take a more educational approach to their marketing to cultural groups, and Stav is a very trusted source for financial information," Ahuile said. "She's like the Suze Orman of the Hispanic community, because she tells consumers things in terms that they can understand."
Stav's story connects with the Hispanic community, Ahuile said. "There is no one as well known … [who] has been around as long as Julie Stav," she said.
Many Hispanics rely on check cashers and funds-transfer agents, but those who switch to debit cards tend to use them frequently, suggesting they become more inclined to use banking products once they understand them, according to Mintel.
Financial institutions that build long-term relationships will benefit as these clients graduate to higher-revenue banking products, including credit cards, Mintel said.
Mintel said the black community's purchasing power could reach $1.1 trillion by 2014. Roughly 23% of black households account for 45% of the total black buying power, but many of these higher-earning households are still underbanked, according to Mintel.
Younger blacks and black households earning less than $75,000 a year have the deepest mistrust of banks, and younger blacks also are the least interested in acquiring debt, another nod to the demand for prepaid debit products, Mintel said.
Also, this group of black consumers relies on alternative financial services, such as check cashers and payday lenders, and Mintel suggests financial education is crucial to gaining their trust.
To connect with the African-American community in its grassroots financial-education effort, MasterCard picked Chris Gardner, the inspiration behind the movie "The Pursuit of Happyness," to run seminars in black communities around the country.
"Using Chris Gardner is a great strategy to target the black community because, just like the Hispanic community, there needs to be more educational marketing," Ahuile said. She said Gardner's rags-to-riches story — he was homeless — is one many in that community can relate to.
Live education events enable individuals in the black community to talk and ask questions, Ahuile said. "That's the way to go about getting them interested in financial products like credit or prepaid cards," she said. "Just offering a lower fee or interest rate is not going to do the trick."
Visa also offers financial literacy programs but takes a different approach in its use of sports celebrities. On Feb. 12 Visa hosted a session in Phoenix around its FIFA World Cup-branded Financial Soccer educational video game featuring the Mexican soccer star Claudio Suarez to help improve financial literacy.
With the size of these multicultural consumer segments and their potential to move from cash to card products for payments, the strategy to promote financial literacy and use household names to foster trust is a sound one, Ahuile said.
Visa and MasterCard say they plan to continue their financial literacy efforts to cater to multicultural markets, but neither would disclose their plans for 2011.
