Traditionally, U.S. Hispanics have been under banked, utilizing financial products and services less than the general population. There have long been complaints that few financial firms have shown any willingness, much less eagerness, to address Latinos' needs. That may be changing as some financial firms and technology companies, like dineronet.com, begin spearheading efforts aimed at providing Latinos access to advisors and other tools designed to aid them in making sounder personal finance decisions.
Dineronet.com serves as a financial supermarket for Latinos, offering products and services such as news and educational guides in Spanish from a medley of financial institutions. The site, launched in August, caters to Hispanics who have lived in the U.S. for less than 10 years or who are still unsure of how to manage their personal finances in this country.
"We are not a bank, and we are not an e-broker," explains Pablo Ciano, the company's general manager of U.S. operations. "We're independent, and we don't belong to any financial institutions. Therefore, we can offer products and services from a variety of vendors. So we have almost 30 or 40 different providers offering financial products through our site."
With 20,000 clients, called "unique site visitors," a figure growing by 50% monthly, dineronet.com targets U.S. consumers with yearly incomes between $25,000 and $100,000. A recent goal of the company was to reach 100,000 "unique site visitors" per month by March.
Dineronet.com generates revenue through several routes, including referral fees paid by financial institutions each time a "unique site visitor" buys a product through the site. Such fees vary from country to country and product to product. The company, perfectly positioned to reach the Hispanic market, also courts advertisers. "Since we are targeting a very specific audience and are only dedicated to and specializing in personal finance, we can provide a very high return on investment for advertisers," Ciano says. Additionally, the company offers subscriptions, in the form of fees paid by consumers, for such customized services as bill payment and tax preparation. Lastly, dineronet.com has a business-to- business unit, though it remains principally a Brazilian operation.
For Latinos perhaps the greatest fanfare in the online financial realm comes in online trading. For example, Boca Raton, FL-based iBolsa Inc. has a site in Spanish, Portuguese and English offering online trading, training tools, educational services, and news and analysis. Alvaro Catao, iBolsa's CEO, says his company seeks online clients worldwide whose language preference is either Portuguese or Spanish. That market is growing. By the end of last year he estimated 25 million Portuguese and Spanish speakers were online while predicting that by 2003 the number will grow to 56 million. Catao estimates that of the U.S.'s 33.9 million Hispanics some 8 million are currently online and that about 2.6 million, almost one-third, of those prefer Spanish to English when transacting business.
Since its September launch iBolsa's site has garnered over 5,000 "registered members," individuals who visited the site and filled out a form including name, address and other basic personal information. While the largest numbers of iBolsa's registered members are natives of Brazil, most account holders reside in the U.S.
Individuals can become members of iBolsa at no cost, gaining access to basic sections of the site. In contrast, account holders wishing to trade online pay $19.95 for market orders and up to $24.95 for limit orders. There is a $2,000 minimum to open an online trading account and Catao says average accounts range from $10,000 to $20,000. "A large part of the population is underserved and does not qualify for private banking services," he says. "A large segment does not quite qualify, but is sophisticated, affluent, and well-informed about what goes on in the world."
Not easy so far
IBolsa does not break down its goals regionally, but Catao says the company's global target is 25,000 accounts by September. As part of its growth strategy, iBolsa has a marketing agreement with Terra Networks S.A. allowing them prominent display on Terra's pan-regional finance channel, Invertia. http://usa.invertia.com/
"Our entire raison d'etre is we believe no one has really made it convenient or easy for Latinos to use the U.S. stock market, and language is a big barrier," says Catao. "If you haven't spent your entire career in the U.S. financial markets the jargon is pretty impenetrable. And we are providing easy, safe, comfortable access to the U.S. stock market, the largest and deepest in the world."
IBolsa is not the only firm whose focus is to encourage Latinos in the U.S. to trade online. Another is San Diego-based LatinoBanc.com, an online bank offering online trading, as well as business-to-business ecommerce and other services. Gary Cabello, LatinoBanc.com's president, expects his company's competition may come from Spanish banks attempting inroads into the U.S. market. Two such banks, Banco Bilbao Vizcaya Argentaria (BBVA) and Banco Central Hispano (BSCH), are already on the technological forefront in Latin America. Cabello fears major U.S. banks less. "We're not scared that Citibank will throw up a Spanish site," he says. "Yes, some Hispanics will go to its site, but the majority want a bank run by Latinos."
Other far-flung firms, including Latin American-based companies like Banco Bradesco, Brazil's top bank in assets, and Investshop, a Brazilian online broker, may also vie for a slice of the pie. Cabello says both are extremely well funded with large market shares in Brazil. And, of course, there are the big-hitters of online trading in the U.S. like eTrade, Fidelity, DLJ and Charles Schwab. Cabello says the presence of such popular U.S. companies has yet to be felt in Latin America or among Latinos in this country. "They have not shown a big appetite for the Latin market," he says. "They are probably still trying to defend their market share in the U.S. or they have expanded to Europe or Asia mostly."
Yet, Schwab claims to be aggressively catering to the United States' Hispanic community. In April Schwab opened Centro Latinomericano in San Antonio to offer services for U.S.-residing Latinos. The venture is managed by professionals with knowledge of the idiosyncrasies of natives from each Latin country, says Rosanna Fiske, a spokesperson for Scwab. The Texas branch is Schwab's third that is Latino-centric, joining branches in Miami and Puerto Rico.
In July Schwab also unveiled a Spanish Web-trading capability enabling Latinos to conduct business in their native language.
Fiske says Schwab is combining technology with a strong bricks-and- mortar presence in its push for Latino business, noting how this ethnic group expects human contact after arriving in the U.S. from a region where business is traditionally conducted more personally. "What makes us unique is we offer clients both service in their own language and culture at the branch and a Web presence in their own language and culture," says Fiske. "Other brokerage-dealers many times have the client service in Spanish, but don't have the Web presence in Spanish. We did that particularly because there are cultural and language sensitivities to Latinos compared to non- Hispanics."
Helping spark Schwab's drive is research from 1997 indicating that about 17% of Latinos then had brokerage accounts. "So we saw a huge opportunity because Latinos are the fastest growing ethnic segment in the U.S. You have to respond to this market and you have to do it now," says Fiske. As Latinos become more affluent, they are expected to save more and invest more while planning their financial future, she said. Fiske is surprised so few financial institutions are exploiting the available opportunities. "This market has grown so quickly that not a lot of companies were prepared," she said. "All market strategists said this was going to happen, but it didn't sink in."
The Internet is only one of the ways banks have been targeting U.S.- residing Latinos. For example, Wells Fargo has a program called Latino Loan that helps Latino business owners. "The program recognizes the needs of Latino small business owners, who have usually had to go to their families and friends to get loans because they have had a higher rate of loan rejection from banks," says Manny Ruiz, CEO of Hispanic PR Wire Inc., a Hispanic-related news distribution service.
Another clear indication of a Latino-sensitive strategy are ATMs, now often bilingual in the U.S.'s major Latino markets. "Yet still, technologically banks haven't gone all out," says Ruiz. "Even online banking is fairly new for the so-called 'general market,' so the Latino part of these technology rollouts always has a period-a time delay-of rolling out the programs in different languages."
Complex culture, complex marketing
It would be simplistic to say financial firms have been nothing but flatfooted while the Latino market has grown. For example, dineronet.com's Ciano notes that it is very difficult to know how to uncover the United States' Hispanic population online. "There are no concentrations in the U.S. of (wired) Latinos like in some Latin countries where you can just reach them through the main ISPs or the largest newspapers on the Internet," he explains.
IBolsa's Catao says Latino culture's heterogeneity makes for a complex business strategy. "It is a market that requires a multidimensional approach, because we group people of different nationalities and even ethnic origin under the term Hispanic," he says. "You have populations that are of Mexican origin, of Cuban origin in South Florida, Puerto Ricans in the New York area, another large contingent of Mexicans in the Chicago area. So as a part of our marketing campaign we will segment."
An additional hurdle is that the Latino community remains largely unwired. In early 2000, when the most recent figures from Strategy Research were available, approximately 28% of Hispanic households had a personal computer, while only 19% had home Internet access. Contrast that to the approximately 40% of the United States' non-Hispanic white population who had home Internet access at that time. These figures should be significantly higher today, says Dick Thomas, senior vice president of Strategy Research, and should rise further when Internet access at work and school is factored in.
One reason financial institutions have found little impetus to target Latinos is because their incomes remain relatively low. In 1998, the most recent year U.S. Census Bureau figures are available, the median average household income for Hispanics in the U.S. was $28,330, well below the national median of $38,885, and still farther below the non-Hispanic white household median income of $40,912. Compared to other ethnic groups, fewer Latinos bank in the U.S. as they continue to harbor fears of financial institutions that are prevalent in their native lands. "In Latin America it is almost playing Russian roulette to put money into banks because of major (currency) devaluations," explains Ruiz.
Moreover, consumers' perceptions of Latino dotcoms must change. Only in mid-2000 did high-quality Spanish-speaking sites arrive in the U.S. "Most Hispanics-while they had Spanish as their preferred language-were accessing and surfing English sites because there were no offerings in Spanish," says Ruiz. "So Spanish sites were perceived as low quality. Financial services require a lot of trust in the provider-in the site-and we had to overcome that barrier."
Last, but not least, the business Internet needs a sustained rally in order to inspire smaller, entrepreneurial companies. LatinoBanc.com is a case in point. The online bank planned to roll out operations in December, creating an online trading hub targeted at the estimated 1.3 million Latino-owned businesses in the U.S. (See November 2000 BTN). However, roll out was pushed back due to roiling financial markets. "We are now concentrating on capital raising," says Cabello. "We don't want to come out and last one month."
Surge in optimism
Yet, for those such as Cabello, the glass remains half-full. LatinoBanc.com successfully began operations in Latin America in October and expects to eventually find a robust market in the U.S. Among LatinoBanc.com's Internet sites is Calle Wall (or "Wall Street"), a broker- dealer site including tutorials teaching navigation and trading on the Internet.
Why the hearty expectations? "Latinos in the U.S. are undereducated on U.S. financial instruments," says Cabello. "They are not too familiar with mutual funds, for example, and they just basically know CDs."
Further, as Spanish-language sites become more commonplace, they will be taken more seriously. And the number of Spanish-language sites continues to grow. In 1998, 90% of Web content was in English, according to Schwab's Fiske, but by 1999 the figure had dropped to 75%, with Spanish-language sites a growing presence. No one denies the market's size or the concomitant opportunities waiting in a world where, according to Strategy Research, Latinos in the U.S. will number 42.2 million by 2005 and 51.9 million by 2010.
Such growth could lead to a flurry of initiatives and one of the hottest new areas could be in fund transfers. A source requesting anonymity at Mexico's Banorte confirmed that the bank "is developing" a service to enable Mexican expatriates in the U.S. to electronically transfer funds to Mexico.
Meanwhile, according to Cabello,
LatinoBanc.com hopes to exploit this market, given the large number of Mexicans living in this country. He says technology could be used to provide services significantly less expensively than those now offered by Western Union, a prime provider of fund transfers between the two countries. With Mexicans sending $10 billion annually back to Mexico from the U.S., a figure that grows by 12% annually, according to LatinoBanc.com, the profitability in providing high-tech fund transfers is evident.