Latino market offers a $155 billion opportunity for U.S. banks: Report

Sergio Flores/Bloomberg

With the Latino market poised for big growth, U.S. banks have an opportunity to gain market share by attracting an underserved population of both consumers and business owners, according to new research from consulting giant McKinsey.

Revenue generated by providing financial services to Latino consumers and small-business owners living in the United States is projected to increase by 57% over the next decade to $235 billion, the consulting firm found.

And by 2032, those same consumers and small-business owners are expected to make up 8% of the U.S. market for financial services, according to McKinsey.

If banks reached the same market penetration among U.S. customers of Latin American descent that they have among white Americans, they could tap an additional $155 billion in annual revenue, the research found.

“The financial institutions that will be best positioned for growth will be the ones that capitalize on new technologies, manage their balance sheets, and acquire and retain customers from emerging and growing markets,” McKinsey stated in the report.

The opportunities for banks include providing Latino business owners with access to credit, as well as other products and services tailored for the needs of their communities, said Marukel Nunez Maxwell, a senior partner at McKinsey and a co-author of the report. 

Around 25% of Latino-owned small businesses get approved for loans at local banks, compared with 48% for white-owned small businesses, Maxwell said at an event in New York this week where McKinsey presented its research.

For loans of between $50,000 and $100,000, around 40% of Latino-owned small businesses get approved, compared with nearly 79% of white-owned small businesses, Maxwell said.

Maxwell said that some financial-service providers are incentivized to focus on larger businesses.

“But businesses in the Latino population sometimes tend to be smaller,” she added. “How do you create that focus and attention to that customer base?”

The banking industry has been facing public pressure to provide equitable services to minority groups that have historically gone underbanked.

Some banks and credit unions have been seeking to serve the growing Latino population, which reached around 64 million in 2023 and is expected to increase to 111.2 million by 2060. Reaching that audience may involve conducting much more business in Spanish.

The Latino market “promises long-term growth” and can be accessed “efficiently” due to digital technology, McKinsey found.

More than half of Latino consumers are dissatisfied with their current banking products and services, with one in three saying they would switch banks if they were offered broader digital-banking services, according to Maxwell.

“They’re looking for access to the products that have helped drive wealth creation,” added Lucy Pérez, who is also a senior partner at McKinsey and a co-author of the firm’s report.

“That is very much consistent with what you would expect almost any consumer is looking for from their relationship with a banking institution,” Pérez said at the event where McKinsey unveiled its research.

While digital engagement can help attract Latino customers to an extent, Latinos also value relationship banking, Pérez said.

“While, indeed, we’re seeing that this is a population that is quite digitally native and embraces those digital channels, we’re missing opportunities to engage,” Pérez said. “There’s limits to that access and understanding of what is the breadth of financial products and services that are available to those consumers.”

Latino banking customers also “tend to be oriented around more liquid assets,” preferring deposit checking and savings accounts to investment accounts, according to Maxwell.

“When we think about what financial services face at the moment, deposits are a critical part of survival,” Maxwell said. “Attracting this segment creates a very unique opportunity for many financial institutions.”

Also speaking at the McKinsey event was New York City Comptroller Brad Lander. He argued that the racial wealth gap in the United States presents a “systemic risk” to the financial system.

In New York City, white families have a median net worth that is 20 times greater than Latino households and 15 times greater than Black families, Lander said.

“What we’re doing in this country is amplifying inequality for generations,” he said. “It’s not only a moral problem. It’s an economic problem as well.”