Two years ago, a group of respected Latino businessmen in Chicago launched a bank with a simple marketing plan: build it, and they will come. The city's 1.2 million Hispanic residents, they reasoned, would flock to a bank owned by folks who lived in their community and spoke their language.

As it turned out, they were very wrong. In its first year, Pan American Bank attracted a meager $10 million in deposits. So management tried some kitschy-sounding promotions, such as a "psychic fair," featuring fortune tellers in the lobby, to lure potential customers from the check cashing outfits down the street.

Those days are over. Today, the $15.4 million-asset community bank is taking a decidedly more sober approach to drumming up business. In January, it hired James Ruckstaetter, former head of BankAmerica's Chicago real estate group, as its CEO. Now Pan American's loan officers are beating the pavement in this heavily Mexican-American community, soliciting commercial business referrals and conducting seminars on saving and money management in local churches and schools.

New revenue

That a bank with Pan American's connections could have such trouble attracting Latino customers highlights the challenges of tapping into any emerging class of customers. With pressure for profit growth soaring, financial institutions large and small are looking to immigrant groups and other traditionally underserved communities for new revenues.

In Chicago and other urban centers, this has sparked a subtle but growing war for the hearts and wallets of Latino customers. Bankers acknowledge that, as a group, Latinos tend to be less profitable then the general market, but they believe this rapidly growing customer segment is more loyal and profitable in the long term.

The approaches to capturing loyalty vary and bankers readily concede that much of the book on marketing to Hispanics is still being written. "It's still a virgin playing ground, if you will, but one that's poised for tremendous growth," says Maria Alonso, Miami-based national Hispanic marketing manager for NationsBank Corp.

There's no denying the appeal of the market (see chart). Hispanics as a whole are the fastest-growing ethnic group in the country, with a population projected by the Census Bureau to rise from 30.5 million today to 96.5 million by 2050.

More than 75 percent of all U.S. Hispanics are classified as middle class or above, yet more than 50 percent have no banking relationship at all-due to their own suspicions of the industry, and bank reluctance to take on the challenge and expense to capture a market that is viewed as tougher to crack, more labor-intensive, and less-profitable than mainstream America.

That has left the door open for nonbank competitors, including check- cashers and consumer finance companies, to establish strong beachheads in the market. "For the most part, banks have very little interest in this customer base," says Gary Cypres, CEO of Central Financial Acceptance Corp., a Commerce, CA-based consumer finance company specializing in small, unsecured loans to Hispanics in Los Angeles and San Francisco.

Central Financial boasts 150,000 customers, with an average loan of about $600.

The company attracts customers with about 40 locations-including 19 Kmart stores-in low-income areas.

"These are face-to-face customers who demand personal service and a physical presence," Cypres says. "Banks aren't interested in providing those things to this market."

While many bankers admit to being slow off the mark, they claim to be eager to gain stronger footholds in Latino markets. The trick is knowing how.

As a group, Hispanics are more segmented than mainstream America. Many more recent immigrants harbor an inherent distrust of banks. At the same time, second- or third-generation immigrants-and wealthier recent arrivals- often are more comfortable dealing with banks, and may resent being talked down to in marketing efforts.

"Most Americans tend to think of Hispanics as one big group, but that's not the case at all," says Dick Thomas, senior vice president of Strategy Research. Mexican-Americans are as different from Puerto Ricans "as the British or Australians are from Americans," he says.

Segmenting the market effectively can be a tricky and costly task, filled with cultural and linguistic nuances.

NationsBank, BankAmerica Corp. and Banco Popular, are among the institutions blending broad-based national image campaigns in Spanish- language media and universal brochures with local hiring, strategic marketing alliances, advertising, direct-mail and community outreach programs in an effort to lend the more personal feel Hispanic customers demand from their financial relationships.

cultural differences

The task is being made easier with the emergence of new research tools. But Grace Geraghty, a vice president and director of ethnic marketing for BankAmerica, says that many of the "measurements and metrics" used to track and dissect the general market are still in their infancy on the Hispanic marketing front.

So when push comes to shove, banks tend to go with their own information-gathered largely through focus groups conducted in-house or with the help of consultants-to fine-tune their marketing approaches. "That's the only way you're going to really know what the expectations are in the community," says Illinois-based Alberto A. Carrero, Jr., retail banking group manager for Banco Popular, the $19.3 billion-asset Puerto Rican bank. Since 1995, Popular has expanded into five key U.S. markets in pursuit of Hispanic customers.

To create an unified image among Latino consumers nationwide, Popular landed as its spokesman Don Francisco, host of the top-rated Spanish- language variety show that airs each Saturday on Univision.

But it's at the local level that the strategy really plays out. The bank uses focus groups and demographic studies-and mines its own growing database-to help tailor everything from product offerings and direct mailings to parade sponsorships and branch design to local markets.

Such targeting shows how far banks have come in their Hispanic marketing efforts. But rivals such as Cypres say they're not worried about losing customers just yet. "It's a niche market that has higher distribution costs and lower profit potential than the general market," he says, "and that goes against the fundamental trends in the banking industry."

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