Hispanic Americans make up 18.7 percent of the U.S. population and are the largest ethnic group in the country, but remain one of the most underserved markets by the financial industry. A recent study conducted by the Government Accountability Office, stated that 14 percent of Hispanics are unbanked, and 30 percent are underbanked (compared to 3 percent of whites who are unbanked and 14 percent who are underbanked).
There are a number of reasons for this discrepancy, from the perception among the Hispanic and Latino community that minimum required deposit amounts are too high; to many consumers falling outside of the traditional credit scoring system; to a large percentage of consumers living in so-called “banking deserts.” Too often, the result is that many Hispanic and Latino consumers are pushed toward predatory lenders.
Traditionally, banks and credit unions have struggled to find a way to responsibly and cost effectively serve this market, but thankfully, that has changed. Today, community financial institutions have greater access to alternative data sets (including rent payments, mobile phone provider payments, and even borrower-permissioned bank statement analysis) that can help them more accurately evaluate a borrower’s true ability to pay.
New technologies like Lokyata’s BankAnalyze platform are enabling financial institutions to automate much of the loan application and decisioning process and improve underwriting performance, positioning them to grow their loan portfolios without growing their risk – and do so at scale.
As banks and credit unions plan for the coming year, they should be considering the diversity, stability and quality of their loan portfolios in anticipation of any future recessionary economic pressures. In evaluating viable market opportunities, America’s Hispanic and Latino community represents a currently under-represented group of consumers that could help institutions fulfill that need while positively impacting their local communities.
Lokyata has proven experience in helping lenders improve their loan decisioning and underwriting. To learn more about how we are helping financial institutions grow and diversify their loan portfolios, book a demo with a member of our team.