Wave 3: Hispanic Millennials and Financial Services

TABLE OF CONTENTS

1.0

Introduction

2.0

Hispanic Millennial Project Overview

3.0

Five Key Themes

4.0

Comparing Hispanic Millennials

5.0

Hispanic Millennial Points of Tension

6.0

Implications for Marketers

7.0

Key Findings and Implications from Previous

Waves of The Hispanic Millennial Project

8.0

What’s Next?

9.0

Contact

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1.0 INTRODUCTION

Executive Summary

The third wave of the Hispanic Millennial Project explores attitudes and opinions among Hispanic Millennials about money, banking, savings, financial well-being and emerging technology for financial services.

Finances, money and relationships with financial institutions are important topics for Hispanic Millennials. Some key findings of the study include:

• Finances are an important means to an end for the Hispanic Millennial and not the end in itself.

• Younger Hispanics have a pragmatic approach to money, so they are more responsible when it comes to spending, particularly compared to their older Hispanic counterparts.

• Hispanic Millennials take a conscientious approach to finances – in line with post-recessionary consumer trends as well as rooted in Hispanic cultural norms.

• The American Dream, particularly in the form of home ownership, is very much alive among Hispanic Millennials, but the method for realizing that dream is less clear.

Background

The Hispanic Millennial Project (HMP) is a joint research study developed by cross-cultural advertising agency Sensis and leading market research firm ThinkNow Research.

The study aims to develop a better understanding of Hispanic Millennials living in the United States and better understand segmentation, points of tension and differences between U.S.-born and foreign-born Hispanic Millennials, as well as with older Hispanics and non-Hispanic white Millennials.

The study was conducted and released in waves in 2014 and early 2015, where each wave focused on a different topic relevant to this demographic.

Objectives

The Hispanic Millennial Project will provide an introduction of potential Hispanic Millennial segments by providing insights:

• How do Hispanic Millennials differ from “mainstream” Millennials and from other Hispanic demographics

Survey Methodology

ThinkNow Research conducted a third nationwide online survey in October 2014. A total of 1,530 questionnaires were completed. Qualified respondents were segmented into the following three groups:

*Non-Hispanic White does not include African-Americans, Asians and other ethnic groups. Respondents in each group were weighted to match U.S. Census population distributions for gender, age and U.S. region.

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Why another Hispanic Millennial Study?

The Hispanic Millennial segment is one of the most important and misunderstood consumer demographics in the U.S. It is deservedly drawing the attention of marketers due to its size and lifetime value. The segment has also received attention from brands and new media ventures because as it presents a challenge to marketers: it exhibits key differences when compared to older Hispanics and the “general market” (non-Hispanic) Millennial counterparts.

While there is a great deal of research being published about Hispanic Millennials, it is only scratching the surface of what we are beginning to understand is one of the most complex groups of consumers in the marketplace. Based on the demographic trends, every organization, brand and marketer needs to understand Hispanic Millennials if it wants to be relevant today in markets such as LA, Miami and Houston, where they represent the majority of all Millennials. Existing research provides a good starting point and baseline of understanding, but we see three fundamental areas where we need to further our understanding and change the paradigm:

• Foreign-born vs. U.S.-born

• Points of Tension

Demographic Trends

Hispanic Millennials make up the second largest Hispanic demographic living in the United States. In 2013, Hispanic Millennials accounted for 25% of all Hispanics. They also account for a sizeable proportion of all Millennials. With Hispanics currently making up 21% of all Millennials, this figure is only expected to rise in the future.

Hispanic Millennials now make up the majority of Millennials in key DMAs.

Generation Z (Hispanic)

2013 Hispanic population by Generation

Generation X (Hispanic) Baby Boomers (Hispanic) Silent Generation (Hispanic) Generation Y (Hispanic millennials)

(Hispanic) Greatest Generation

Source: Geoscape, 2013-2018 State Hispanic Gen Y population American Marketscape DataStream™ 2013 Series 33% 25% 20% 17% 4% 0%

% Hispanic Millennial/Total DMA Millennial Population

Source: Geoscape, 2013-2018 State Hispanic Gen Y population American Marketscape DataStream™ 2013 Series

50% 50% 58% 58% 93% 28% 41% 25% 32% 32% 35% 18% _14% 31% 33% Harlingen-W eslaco-Br ownsville-McAllen

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Over the next five years, we will also begin to see Hispanic Millennials’ rapid growth in markets not traditionally associated with the U.S. Hispanic market.

Ultimately, Hispanic Millennials will become major contributors to household growth in the U. S. Hispanic households will see a growth of close to 17% over the next five years, driven largely by the formation of households by Hispanic Millennials.

Source: Geoscape, 2013-2018 State Hispanic Gen Y population American Marketscape DataStream™ 2013 Series

Raleigh-Durham (Fayetteville) Charlotte Greensboro-High Point-Winston Salem Wilmington Nashville Charleston, SC Myrtle Beach-Florence Greenville-Spartanburg-Asheville-Anderson Indianapolis Salisbury Minot-Bismarck-Dickinson (Williston) Bend, OR Atlanta Lexington Memphis

Source: Geoscape, 2013 – 2018 State Hispanic Gen Y population American Marketscape DataStream™ 2013 Series

Hispanic Households Asian Households White Households Black Households 2013 – 2018 15.66% 16.79% 3.01% 6.14%

2.0 OVERVIEW AND KEY FINDINGS

Wave 1: Introducing Hispanic Millennials

Hispanic Millennials have grown up in a historic time for the U.S., facing the recession, the war on terror, the unprecedented growth in size and influence of Hispanics, healthcare reform and high unemployment. This evolving landscape has shaped the way this segment views the world around it. In this first wave of research, we wanted to gain a deeper understanding of how these challenges influenced the worldview of Hispanic Millennials and how these perceptions are different from those of older Hispanic segments as well as their non-Hispanic counterparts. By better understanding the mindset of Hispanic Millennials, brands will gain a firmer grasp on how to communicate with and engage them in a more culturally and psychographically relevant way. This wave focused on the following topics with respect to Hispanic Millennials:

• Perception of the direction of the U.S.

• Belief in the American Dream

• Definition of success

• Contribution to the household

KEY FINDINGS

They are more satisfied with the direction of the U.S. compared to non-Hispanic Millennials They are more driven by the “American Dream” compared to non-Hispanic Millennials Hispanic Millennials are more invested in higher education than non-Hispanic Millennials

Hispanic Millennials are contributing more to the household expenses compared to non-Hispanic Millennials

Walmart was seen as the brand that did the best job of communicating with Hispanic Millennials Hispanic Millennials are more attracted to owning their own business than non-Hispanic Millennials Hispanic Millennials identified Apple as the brand that was most associated with success

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Wave 2: Hispanic Millennials and Healthcare

The second wave of research dives into the following topics with respect to Hispanic Millennials:

• Attitudes toward health and wellness

• Beliefs about diet and exercise

• Adoption of health-related technology

• Healthcare insurance knowledge and enrollment

Wave 3: Hispanic Millennials and Financial Services

While a significant percentage of Hispanic Millennials earn below the U.S. median household income, they are remarkably self-supporting, often contributing to household income.

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Overall, the Hispanic Millennial is pragmatic when it comes to finances—perhaps largely in response to having come of age during a recessionary period and due to cultural norms of being stable providers for family. Below are the emerging themes and key insights pertaining to financial services that support the finding that Hispanic Millennials are responsible financially:

3.0 KEY THEMES & INSIGHTS

Attitudes toward wealth

Money is important, but it is not everything

Hispanic Millennials tend to associate wealth with having enough money to guarantee stable living. It is all about fulfilling needs and not connected with abundance (or over spending).

For the Hispanic Millennial, being wealthy is a goal but it’s not the only goal, indicating that they view finances as a means to an end. When surveyed over half of Hispanics that are 35+ tend to disagree with the statement that being “wealthy” is one of the goals in life. Conversely, two-thirds of Hispanic Millennials agree that being “wealthy” is one goal.

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Compared to older Hispanics, Hispanic Millennials don’t associate wealth with intangibles, such as happiness and relationships. Nearly all segments surveyed agree that wealth means material resources and fulfillment of basic, physiological needs. Increasingly, however it appears the notion that money can purchase happiness or relationships is diminishing among Hispanic Millennials.

Approach to finances and savings

Hispanic Millennials are pragmatic and saving for their futures

Hispanic Millennials are pragmatic and less impulsive when it comes to their approach to finances and savings.

Hispanics young and old report that they are cautious or very cautious when it comes to spending money.

Surprisingly, Hispanic Millennials are more effective and resourceful when it comes to saving for their futures compared to older Hispanics and non-Hispanic white Millennials alike.

Only 7% of Hispanic Millennials indicate that they are NOT able to save any money monthly, compared to more than double the rate of non-Hispanic white Millennials and older Hispanics.

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48% of Hispanics Millennials have enough money saved for a rainy day compared to 43% for non-Hispanic Millennial. Similarly, more Hispanic Millennials say that they are actively saving for retirement than non-Hispanic Millennials.

Despite the growing sophistication of Hispanic Millennials, they remain more opposed to maintaining debt than their older counterparts, which indicates that further growth and responsibility is warranted.

Consistent with the theme of being responsible, nearly half of Hispanic Millennials (49%) say they pay off credit cards in full each month. All Millennials are concerned with their debts, but they also understand they are not isolated in the problem.

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Banking

Hispanic Millennials trust banks and have an overall favorable image

Despite distrust attributed to financial institutions in light of the financial crisis of the recent decade, Hispanic Millennials have a suprisingly positive image of banks compared to both older Hispanics and non-Hispanic Millennials.

61% of Hispanic Millennials have a very positive, or somewhat positive, image compared to 54% of older Hispanics and 51% of non-Hispanic Millennials.

The importance of close relationships in the Hispanic culture is reflected in the desire for banking relationships. Most Hispanic Millennials (70%) and older Hispanics (76%) indicate they expect a close relationship with banks, which contrasts with non-Hispanic Millennials (65%) who do not have such an expectation.

Hispanic Millennials and their older counterparts see banks as being more trustworthy since the financial crisis, more so than non-Hispanic Millennials.

All segments prioritize excellent customer service, reliability and integrity when they rate banks; however, Hispanic Millennials prize a sense of community and innovation more so than older Hispanics and non-Hispanic Millennials. These additional priorities might be due not only the close community ties among young Hispanics, but also their high degree of participation in social media.

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Similarly, a “bank I can count on” is more important than a reputation for integrity when it comes to choosing a financial institution for all segments. Only 42%, however, of Hispanic Millennials emphasize a bank they can count on versus 52% for non-Hispanic Millennials, further substantiating the claim that Hispanic Millennials are far less suspicious than their non-Hispanic counterparts.

Technology

Hispanic Millennials are open to new forms of banking

Hispanic Millennials are significantly more likely than to embrace non-traditional forms of banking non-Hispanic Millennials.

58% of Hispanic Millennials report being open to non-traditional banks without branches, such as Ally Bank, compared to 47% of non-Hispanic Millennials. Hispanic Millennials are also significantly more open to non-traditional banking companies, such as Amazon, Apple, Google or Facebook, which are encroaching on the banking space. 52% of Hispanic Millennials are even open to “crowdfunding,” compared to 44% of non-Hispanic Millennials. These distinctions reflect a willingness to embrace innovation and technology, but are also likely rooted in a cultural propensity to remain resourceful, flexible and adaptable to various financial circumstances.

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Hispanic Millennials are on par with the general market in their adoption of digital currency;

Homeownership

The American Dream is alive, but Hispanic Millennials need help getting there. Compared to non-Hispanic Millennials, Hispanic Millennials are less likely to say they are planning on getting mortgages in the future.

Hispanic Millennials who are not planning to get a mortgage believe that they cannot afford to do so, suggesting an opportunity for lenders to educate Hispanic Millennials about available options.

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Nearly a third of Hispanic Millennials that are planning on obtaining a mortgage, plan to get one in the next 3 years, which emphasizes the strong interest in upward mobility among Hispanic Millennials.

Hispanic Millennials planning to get a mortgage are saving for a down payment (74%), but need help understanding how much they will need to save (63%).

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4.0 COMPARING HISPANIC MILLENNIALS

To better understand Hispanic Millennials, it is important to compare them with other segments in order to identify nuances in their behaviors and viewpoints. With this knowledge, marketers will be able to tailor their messaging, making them more relevant.

Hispanic Millennials vs. Hispanics 35-64

There are notable differences when comparing Hispanic Millennials and Hispanics 35-64. When it comes to finances, Hispanic Millennials indicate that they need more financial guidance than older Hispanics and would like banks to help educate them. Consistent with the cultural respect for elders, Hispanic Millennials trust older Hispanics when it comes to managing finances. Hispanic Millennials are also more debt averse than older Hispanics.

A significant majority of Hispanic Millennials agree that any kind of debt is bad and tend to pay off credit cards in full each month, compared to about half of older Hispanics.

In contrast with older Hispanics, Hispanic Millennials are more likely to say that they manage their finances similarly to their parents. This indicates a key generational difference in perceptions of the financial savvy of their parents; it is is likely driven by the fact that many more Hispanic Millennials have U.S.-born parents, or parents that have been in the U.S. longer, compared to their older counterparts. 45% of Hispanic Millennials are likely to mirror the way their parents manage/managed finances compared to 36% of older Hispanics.

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Hispanic Millennials vs. Non-Hispanic Millennials

Hispanic Millennials report that they feel a lot less overwhelmed financially than their non-Hispanic Millennials.

Despite the fact that Hispanic Millennials feel less burdened financially, and perhaps due to a relatively lower income status, Hispanic Millennials are also more likely to apply for student loans and prepaid Visas.

Non-Hispanic Millennials probably have greater access to familial resources or credit as 45% of Hispanic Millennials look to banks when in need of a loan compared to 39% of non-Hispanic Millennials.

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U.S. Born vs. Foreign-born Hispanic Millennials

Few studies conduct research into the notable and vast contrasts between U.S. Born Hispanic Millennials and Foreign-born Hispanic Millennials. In reality, there is a clear difference in terms of attitudes and acculturation as it relates to financial services. Foreign-born Hispanic Millennials adhere more to cultural norms than U.S. Born Hispanic Millennials, who in some cases align with the attitudes of non-Hispanic Millennials.

Foreign-born Hispanic Millennials drive the overall pragmatism toward finances among Hispanic Millennials, especially in terms of how cautious they are about spending money.

However, Foreign-born Hispanic Millennials are more open to non-traditional forms of banking, which highlights both their interest in technology and suggests a cultural willingness to keep money outside of the banking system.

When it does come to interacting with banks, Foreign-born Hispanic Millennials gravitate toward banks that respect their cultural identities and preferences for Spanish communication.

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Male vs. Female Hispanic Millennials

There are also clear disparities between men and women in economic terms. Nearly three-fourths of Hispanic Millennial males tend to be the only ones who contribute to household income, compared to 39% of Hispanic Millennial females.

Nevertheless, 77% of Hispanic Millennial females are likely to be concerned with maintaining a good credit score versus 63% of Hispanic Millennials males. This indicates a willingness to undertake more risky financial behavior and is consistent across ethnic groups. Similarly, 62% of Hispanic Millennial females say that having any kind of debt is bad compared to 55% of Hispanic Millennial males.

51% of male Hispanic Millennials are most likely to turn to banks and 39% are most likely to borrow from credit cards for loans, as opposed to 37% and 26% respectively for Hispanic Millennial females. This further emphasizes the relative risk-averse nature of women as compared to men.

Lastly, Hispanic Millennial males are significantly more open to non-traditional forms of banking, a possible reflection of their riskier behavior and lower credit scores.

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5.0 HISPANIC MILLENNIAL POINTS OF TENSION

One of the most important ways to establish a deeper understanding of Hispanic Millennials is to comprehend the points of tension characterizing their lives. As marketers, we know these points provide powerful opportunities to communicate and connect with consumers.

Among the defining characteristics we see in Hispanic Millennials are the deep cultural and psychographic difficulties they face. As they are caught between vastly different generations, Hispanic Millennials face constant cultural tensions stemming from decisions about money. We identified points of tension as it relates to finances.

Providing for others versus managing personal finances

Hispanic Millennials strongly consider others when making financial decisions.

This point is consistent with the cultural emphasis on providing for a close-knit network of family members.

Yet, 65% report that having enough money for retirement is important to them. This contrast highlights the tension faced by Hispanic Millennials to adhere to cultural norms and conform to the mainstream pressure to manage one’s personal finances.

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Debt vs. financial freedom

However, consistent with the desire to adhere to mainstream notions of financial freedom and upward mobility, Hispanic Millennials strive to be debt free and maintain strong credit profiles.

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Self-sufficiency vs. help becoming financially savvy

Perhaps due to a sense cultural of pride, Hispanic Millennials indicate that they are both self-taught and self-sufficient in terms of finances.

Yet, a clear third would like answers from financial institutions and a better understanding of financial topics.

Traditional relationship-based banking methods versus non-traditional forms

of banking

Hispanic Millennials expect a close and personal relationship with banks, a strong preference in line with their older counterparts:

Hispanic Millennials have embraced technology and exhibit openness to non-traditional forms of banking, counterintuitive to their desire for a relationship with their banks.

The generational preference for innovation and technology trumps conventional notions about being treated with personal attention in a brick and mortar setting.

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6.0 IMPLICATIONS FOR MARKETERS

Financial service marketers evaluating the data presented in the third wave of the Hispanic Millennial Project should begin to identify and leverage points of tension and utilize these insights in their future actions. We have developed the following list of key implications for financial services marketers to consider as a result of the new research.

Wealth matters, but the definition has evolved

Hispanic Millennials have pragmatic attitudes toward finances. They seek comfort, stability and responsibility in terms of how they spend their money. Of course, they will be extravagant or adventurous at times, but not without careful consideration. This measured definition of wealth reflects the historically lower economic status of Hispanics in American society; however, this financial disparity is evolving alongside Hispanics’ attitudes toward wealth.

Building for a future of “we” rather than a future of “I”

Despite growing societal mainstream pressure to focus entirely one’s own financial

circumstances, Hispanic Millennials steadfastly honor the cultural tradition of contributing to familial households. However, they also pride themselves on being self-sufficient and are saving toward their collective futures.

Educate and empower Hispanic Millennials on finances

Hispanic Millennials have basic financial products (e.g. checking and savings) and are seeking to acquire additional, more complex financial products in the future. There is, however, a clear opportunity to provide educational programs that offer solutions to support long-term future success, as well as programs that promote financial wellness and financial freedom.

Clearly define the role of banks in Hispanic Millennials’ lives

Hispanic Millennials view banks favorably, citing standard expectations, such as good customer service and personal attention, but they are also more likely than other segments to value banks that care about the community and innovation. By leveraging these additional key benefits, banks have the potential to cultivate strong emotional bonds with young Hispanics.

Leverage technology and innovation

More and more Hispanic Millennials are turning to technology to access and manage financial services. Hispanic Millennials are more open to non-traditional forms of banking relationships relationships, males being more open than their female counterparts. Hispanic Millennials are also more open to so called digital wallets or digital forms of payment, especially Apple Pay.

The American Dream is still alive

Homeownership continues to be an objective source of pride among Hispanic Millennials. Banks can help Hispanic Millennials realize their dreams of purchasing a home by articulating pathways to ownership and disseminating knowledge about how to save and how much to save.

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7.0

KEY FINDINGS AND IMPLICATIONS FROM PREVIOUS

WAVES OF THE HISPANIC MILLENNIAL PROJECT

The initial wave explored attitudes and perceptions among Hispanic Millennials in the U.S. The second wave focused on Hispanic Millennials and healthcare. This third wave focuses on Hispanic Millennials and financial services. We found consistent themes across all three waves that are relevant for marketing purposes.

Hispanic Millennials continue to believe in and be driven by the American Dream

Hispanic Millennials believe much more in the American Dream than non-Hispanic Millennials. The American Dream is something that Hispanic Millennials strive to achieve in terms of being healthy, wealthy, productive citizens; however, the American Dream is associated more with self-fulfillment than it is with wealth.

Owning a home is important to Hispanic Millennials

Hispanic Millennials are more likely than non-Hispanics to agree that owning a home is a top indicator of success.

Apple is a trusted brand for Hispanic Millennials

Among Hispanic Millennials, Apple is a trusted brand that is most associated with success.

Nuanced definitions of wealth, health and happiness

Hispanic Millennials have nuanced and multi-faceted definitions of concepts such as wealth, health and happiness these are clearly rooted in cultural norms but are also mixed with their experiences as young Americans.

Hispanic Millennials generally report lower levels of stress

Across all three waves, Hispanic millennials consistently indicate lower levels of stress, whether related to their finances, their health or their future in general.

Hispanic Millennials embrace technology – for financial services and health

Hispanic Millennials are undoubtedly on the forefront of adopting innovative technology. They are comfortable not only with new forms of media, but also with the use of health-related apps, digital forms of payment, non-traditional banks and iconic technology brands such as Apple.

Additional Implications for marketing to Hispanic Millennials

• Approach Hispanic Millennials differently than their older counterparts

• Utilize Spanish-language media as it is key to reaching Hispanic Millennials

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8.0 WHAT’S NEXT?

Sensis and ThinkNow Research will continue to focus on topics relevant to the experience of Hispanic Millennials with two more waves of research scheduled for release in 2015:

• _{Wave 4:} Food, Beverages, and Alcohol – Behaviors and Attitudes (April 2015)

• Wave 5: Media Consumption and Digital Behavior (June 2015)

We have expanded the Hispanic Millennial Project

The third wave also surveyed African-American and Asian Millennials. Please contact Sensis for a cross-cultural analysis of Millennials and financial services.

9.0 CONTACT

10.0 SOURCES / REFERENCES

www.HispanicMillennialProject.com …and follow us on Twitter

@HispMillennial

1. Sensis Qualitative Client Research – User Interviews, Field Intercepts, Focus Groups (2013-2014)

2. U.S. Census Bureau, American Community Survey (2013)

3. Experian Simmons Consumer Research, National Hispanic Consumer Study NHCS, Winter 2014