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The U.S. Hispanic population has risen 23% in the past 10 years to 62.1 million, according to the Pew Research Center. People of Mexican origin were nearly 62% of the overall Hispanic population as of 2019.
As a result, there is a need for banking services that reach Hispanic communities. The Report on the Economic Well-Being of U.S. Households in 2020 from the Federal Reserve found that 9% of Hispanic adults were unbanked, compared with 3% of white adults. Twenty-one percent of Hispanics were underbanked, but only 9% of white adults were.
Moreover, “Black and Hispanic adults were more likely to report unexpected fees, closed accounts and credit line reductions than the population as a whole,” the report said.
Hispanics may be served by traditional banks in areas of the country where they make up a large part of the population, such as Florida and southern Texas. But online and mobile banks can target these segments in other parts of the U.S., says Rutger van Faassen, head of product and market strategy at Curinos, a data and consulting firm for financial institutions.
“If you solve what seems to be an unfair situation, that creates a lot of goodwill,” he said.
Fintechs that serve Latin American immigrants or expatriates in the U.S., such as Fortú, Tend and Viva First are popping up with features such as Spanish-language apps, peer-to-peer payments and low-cost money transfers across borders.
The trend of serving customers across borders has extended to small businesses as well, with the Mexican lender
“We are seeing cross-border businesses within Latin America, such as from Mexico to Brazil and vice versa,” said Lauren Morton, a partner on the international investments team at the venture capital firm QED Investors who focuses on Latin America. “It only makes sense that the U.S. is the next corridor to be crossed.”
One startup, Tend, is offering its banking products on both sides of the border. The Austin, Texas, company — which has a team in Mexico City — launched its mobile banking platform in the U.S. and Mexico in August. It provides checking, savings and cash-back rewards. Users can earn “Tend Shares,” or payouts for referring members or turning on direct deposit. They can also book travel, find discounts and communicate with other members through an online forum called The Green, where they will also be able to weigh in on future products.
Some features are available in both countries, while others will be rolled out to Mexico or the U.S. at a later date, such as a line of credit. U.S. customers pay $9.95 a month, and Mexican users subscribe for 99 pesos each month, or approximately $4.75 in U.S. dollars. Account holders in both countries will be linked through instant peer-to-peer transfers. Nbkc Bank in Leawood, Kansas, holds deposits for U.S.-based customers, while Invex Banco does the same in Mexico.
Tend targets customers in their 20s and 30s, and the service is intended to be convenient for those with family and friends on both sides of the border. James Dunavant, the CEO of Tend, said that offering twin full-service accounts will make Tend stand out. “This is more broadly about providing a high-quality experience to a broad set of constituents,” he said. “We see both markets equally as our core constituency.” He declined to say how many customers Tend has accumulated so far.
Other challenger banks are focused more exclusively on the Latin American community in the U.S.
Viva First, in Lubbock, Texas, is in beta testing and plans to launch in the first quarter of 2022. It bills itself as a mobile banking app for the Hispanic community and offers a fully bilingual app with fee-free checking, early access to paychecks and automated savings reminders. The company says it has a majority Hispanic staff, incorporated a cultural aesthetic into the brand and uses clear phrasing in both Spanish and English. The waitlist contains more than 5,000 users.
Internal research found that 30% of Hispanics would consider switching banks if an in-language mobile banking experience was available. “Hidden fees, language limitations and a general feeling of being unwelcome have alienated the Latino community from the conveniences of mainstream banking and driven many to rely on high-cost alternative financial services,” the company said in a statement.
Welcome Tech, which builds products and services for immigrant communities in the U.S., has a digital banking service called PODERcard that, like Viva First, is bilingual. It can onboard customers with a Social Security number, individual taxpayer identification number or a type of Mexican identification card issued to citizens who reside outside of Mexico. Banking services are provided by Green Dot Bank in Provo, Utah. The service incorporates financial education with cash rewards.
Something as simple as putting Spanish at the forefront of banking services can make an impact.
“It’s not an afterthought, like we have a service and by the way, we also speak Spanish,” Faassen said. “ ‘We’re a Spanish-speaking organization and oh yes, we also speak English’ — that small nuance might pull people in.”
