CHICAGO — Although there is growing use of financial services and products, a greater percentage of U.S. Hispanics and African-Americans continue to be ‘unbanked’ and ‘underbanked’ according to a new U.S. Diversity Markets Report.    

Synovate, a global research company, recently surveyed a total of 4,000 males and females ages 18+, including 1,000 General Market respondents, 1,000 African-Americans and 2,000 Hispanics.

While the percentage of U.S. Hispanics with any type of bank account is up 7 percent, from 70 percent in 2004 to 77 percent in 2008, this is quite low when compared to General Market and African-American consumers, both of which are at least 90 percent. Even though African-Americans have increased ownership of checking or savings accounts by 8 percent since 2004, from 82 percent to 90 percent, they and Hispanics still have much lower ownership of several types of investment accounts, including:

IRA or 401k plans: 54 percent ownership for African-Americans and 32 percent for Hispanics versus 72 percent for General Market consumers

Stocks or bonds, individually or as part of a mutual fund: 33 percent ownership for African-Americans and 18 percent for Hispanics versus 60 percent for General Market consumers

Certificates of Deposit (CDs): 25 percent ownership for African-Americans and 24 percent for Hispanics versus 36 percent for General Market consumers

“A substantial number of multicultural consumers don’t have jobs with retirement plans,” said Denise Marks, Vice President of Diversity research at Synovate. “This is particularly true for Hispanics, almost half of whom are employed in the blue collar industry and don’t have the opportunity to participate in these types of investment accounts.”

Credit Cards and Mortgages

The financial services gap between multicultural consumers and the General Market is also evident in credit card ownership, with 69 percent of African-Americans and 51 percent of Hispanics owning cards compared with 87 percent of General Market consumers. While more than half (54 percent) of General Market consumers hold a mortgage, the percentage of African-Americans and Hispanics who do is 47 percent and 26 percent, respectively. Also, only about one-quarter of African-Americans and Hispanics have a home equity line of credit (23 percent) compared to 35 percent of the General Market.

Health Insurance and Financial Attitudes

Health insurance is another area in which Hispanics lag compared to General Market and African-American consumers. Just 62 percent of Hispanics say they have health insurance versus more than 80 percent of African-American and General Market respondents. As with investment accounts, this lower incidence of coverage is related to having jobs in which employers do not offer health coverage for employees.

Socioeconomic circumstances are certainly a factor in the lower ownership of financial products and related services among multicultural consumers. However, the relationship that Hispanics and African-Americans have with financial institutions is also impacted by cultural differences. While nearly the same percentage of Hispanics and General Market consumers feel that they are treated well by financial institutions (36 percent and 41 percent, respectively), only 31 percent of African-Americans feel this way.     When considering Hispanics by acculturation level, almost 40 percent of more acculturated Hispanics - those with higher incomes that speak English or are bilingual - agree that they are treated well compared to those who are less acculturated (29 percent), who tend to be foreign-born and rely on Spanish-speaking services.

When asked about their financial outlook, it is not always positive for these consumers. Only 18 percent of Hispanics and 12 percent of African-Americans agree that their financial situation has gotten better in the past few years.

“The good news is that multicultural consumers are building trust towards financial institutions and owning more financial products, but there are still gaps that need be addressed,” said Elliot Savitzky, Vice President in Synovate’s Financial Services group. “This is especially true in the sub prime mortgage market, which has hit multicultural consumers particularly hard.”

Global Financial Markets

U.S. Hispanics are utilizing the financial sector by sending money to relatives who live outside of the United States. More than half (54 percent) of U.S. Hispanics say they send money to family or friends outside of the country.  Almost three in ten (28 percent) send money once a month or more and, on average, the amount sent is $230. In addition to traditional remittance companies such as Western Union and Orlandi Valuta, banks such as Bank of America and discount retailers including Wal-Mart have launched their own programs to handle these transfers, or remittance. Due to current immigration legislation and higher border security, Hispanics that are undocumented or temporary are tending to remain in the U.S. instead of going home to visit their families in Latin America.

“There are many cases of seasonal workers from Mexico and other Latin American countries not seeing their families in their home countries for several years as it has become more difficult to cross the border,” said Marks. “Since it is less risky to send money via remittance, this area is still an opportunity for marketers in spite of the current economy.”

(Source: Synovate, a global research company)