Payment networks working to steer large numbers of financially underserved U.S. Hispanics from reliance on cash to prepaid debit cards are still searching for the best way to turn such a huge opportunity into substantial numbers of new customers.
Some 50 million Hispanics reside in the U.S., according to the latest U.S. Census Bureau data. That figure represents some 13 million households, 6 million of which either are unbanked or have limited banking relationships, according to survey data the Federal Deposit Insurance Corp. released in December 2009.
Industry observers believe the Hispanic demographic represents some $1 trillion in purchasing power. Payments brands are recognizing the potential to move some of those dollars to prepaid debit cards and have increased their Hispanic marketing as a result.
“The prepaid customer base is diverse, and different [demographics] are going to have different needs” with prepaid debit cards, Rachel Schneider, a director at the Center for Financial Services Innovation, a Chicago-based organization devoted to bringing banking services to unbanked and underbanked consumers, tells PaymentsSource in an interview.
“There is value in targeting the [overall] market and seeing which segments are going to respond to which types of marketing,” she adds.
Historically, financial institutions and the payment brands have had difficulty finding the right connection to Hispanic consumers, Alex Liu, vice president of global prepaid solutions for MasterCard, tells PaymentsSource.
“There are a variety of nuances that we’re constantly learning about,” Liu says. “There are folks who are new to banking and folks who were previously banked,” and each group requires a different marketing method, he adds.
Trust is a key factor when marketing to Hispanic consumers, especially Spanish-speaking ones, and Liu says a key alliance MasterCard forged with Univision Communications Inc. has helped.
That strategic partnership began in 2009 when the companies unveiled a line of cobranded gift and general-purpose prepaid cards (
Univision’s brand awareness with the U.S. Hispanic population is the primary reason MasterCard partnered with the media giant, MasterCard said at the time. Univision is the nation’s largest Spanish-language media company, which includes local television and radio stations in 50 cities with large Hispanic populations.
The companies recently expanded their efforts when they announced Mexican singer and songwriter Paty Cantú would be featured in new MasterCard “Priceless” television commercials that show her using a cobranded Univision card in different situations (
Univision believes the overall marketing campaign is “opening doors for folks,” Scott Scovel, Univision vice president of financial services, tells PaymentsSource. “[Those consumers] are now able to access the financial community.”
U.S. Census Bureau data show even more opportunity that many observers might not have realized existed, Scovel says. “From a [marketing prospective], there are now over 50 million Hispanics in the U.S., and that has caught a lot of people’s attention.”
While MasterCard takes a more focused approach to targeting Hispanic consumers, Visa Inc. is banking on its broad prepaid marketing efforts to reach the Hispanic segment.
The San Francisco-based payment brand is in the midst of a campaign that began in March and will continue through August, Hyung Choi, Visa head of U.S. prepaid products, tells PaymentsSource. To date, Visa’s prepaid Facebook page has over some 68,000 “likes.”
Consumers who “like” the page are eligible for a daily contest that includes prizes such as gift cards to download songs to MP3 players.
“The umbrella message [with the campaign] that we’re trying to get through [to consumers] is to bring the value of prepaid to life,” Choi says. “We’re trying to do that through a broad-based message.”
Choi acknowledges Visa might be missing out on Spanish-speaking consumers with its prepaid marketing approach, but “some 82% of Hispanic households in the U.S. are multilingual.”
Visa eventually intends to deliver Spanish-language advertising, and its partners already are doing so as they distribute and sell prepaid debit cards, he says.
“In terms of broad bases and our national advertising campaign, at this point we haven’t gone there yet,” Choi says.
Visa’s lack of Spanish-language marketing for prepaid cards puzzles at least one observer.
Marketers should construct their messaging in a way that is as pertinent, relevant and as customizable as possible, Ron Shevlin, a senior analyst at Aite Group LLC of Boston, tells PaymentsSource.
“If there is a segment of the market that is more attractive in terms of potential ownership, growth or profitability, wouldn’t you want your messaging or marketing to be more targeted and relevant to that segment?” he adds.
Schneider believes marketing to a particular demographic, as MasterCard does, is beneficial to the whole industry. “But it definitely increases recognition of the specific brands in that market which would be benefiting the most,” she notes.
Regardless of the marketing method, both brands ultimately are attempting to change behavior within a demographic that traditionally has relied on cash and has been wary of banks, observers say.
“When you’re talking about the way people handle and manage their money, they need more education done so that they can manage that leap” from cash to plastic, Scovel says.
It is noteworthy that consumers relying primarily on cash do not show an inability to manage finances responsibly, Choi says.
“They are savvy and know how to manage money and maximize dollars,” Choi says. “To change that mindset from a paper-based environment, it’s taking time.”
MasterCard’s Liu often hears from consumers at the company’s payment-education seminars who do not realize how much they spend at check-cashing establishments.
“When we’re able to educate and show them here’s what you’re doing today and then here is a new tool” in a prepaid card, Liu says, “that drives a lot of them to say ‘I’m really going to consider getting a prepaid card.’”
More Hispanic consumers could find themselves considering the option of a prepaid debit card depending on how banks respond to lost debit card interchange revenue resulting of the Durbin amendment to the Dodd-Frank Act.
The Federal Reserve Board on June 29 issued final rules capping debit interchange at 21 cents, plus extra for fraud costs, up from the 12-cent ceiling originally proposed (
Several large banks already have dropped debit-rewards programs and raised checking account monthly maintenance fees. Some even have discussed adding debit card fees.
Underbanked Hispanics might find themselves unbanked if they find these additional fees to be a burden, some observers believe.
“Some of the people that will be most impacted by [Durbin] will be folks who are more underbanked and get pushed out of the system,” Univision’s Scovel says.
MasterCard and Visa say they would continue to reach out to consumers about prepaid debit regardless of the reason why they need the product.
“Even independent of Durbin, there is a large number of everyday working Americans who aren’t participating in the financial mainstream,” Choi says.
Visa will continue marketing prepaid cards in the same way beyond the current marketing campaign, he says.
MasterCard is set to launch a new campaign in the next month, Lui says. He declined to provide details.
The opportunity to reach new Hispanic consumers with prepaid likely will not dwindle any time soon. But the key will be to establish trust within the demographic.
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