Financial Institutions Are Missing on $240 Billion by Underserving Latino Savers, Report Shows

Latinos represent a growing economic force in the United States, yet they remain underserved by the financial services sector. Financial institutions that tailor their services to meet the unique needs of Latinos could tap into an estimated $240 billion in potential revenue by 2030 - an increase of more than 50% compared to the $155 billion generated in banking, insurance, and wealth management in 2022, according to McKinsey's report "The Economic State of Latinos in America: Advancing Financial Growth.

Latinos now account for about 20% of the U.S. population, projected to grow to 25% by 2050. Yet, a significant wealth gap persists between Latinos and their non-Latino counterparts. Latinos hold only one-fifth of the wealth of non-Latino White households, and in 2021, one-third of Latinos were unbanked or underbanked. Financial services could play a crucial role in closing these disparities, while also offering lucrative opportunities for financial institutions, as outlined by the McKinsey researchers.

Notably, Latino savers are the fastest-growing segment of the U.S. population, with an income growth rate of 4.7% per year from 2013 to 2023—more than double that of the general population, which grew at 1.9% annually. Latino spending on financial services from 2012 to 2022 grew twice as fast as that of their non-Latino White counterparts, a trend projected to continue until 2030.

Banks could generate significant revenue by expanding their offerings to Latino business owners and savers, McKinsey's analysis suggests. Latino-owned small and medium-sized businesses (SMBs) represent an estimated $25 billion in annual revenue for financial institutions. However, Latino business owners face considerable challenges, including a $200 billion lending gap compared to their non-Latino peers. These businesses are more likely to be denied loans or offered smaller amounts when approved. Addressing these barriers could enable the creation of an additional 700,000 SMBs by 2030.

The digital shift in banking presents an opportunity to better serve Latinos, who tend to adopt new technology at a higher rate than other groups. Latinos have a strong preference for digital banking and financial tools, and banks that leverage digital platforms to provide customized, culturally relevant services could gain a competitive advantage.

The report highlights the potential for inclusive growth by offering more accessible financial products. Latino customers are willing to pay more for services that meet their needs—around $95 billion could be earned from Latino customers switching to better offerings. As McKinsey notes, the research "shows Latino customers would be willing to pay 10% more for better products and services". McKinsey's research also shows that if Latino usage of financial services reached parity with their White counterparts, the financial-services sector could capture an additional $160 billion in annual revenue, nearly double the current total.

For financial institutions, the benefits of catering to Latino customers go beyond profit. As banks face growing pressure to align with environmental, social, and governance (ESG) priorities, improving access to financial services for Latinos would fulfill both commercial and social goals. McKinsey stresses that developing long-term relationships with Latino customers—who have a median age of 30, compared with 41 for the overall US population, and are rapidly increasing their income levels—could foster enduring customer loyalty.

Some financial institutions have already begun making progress, but the report warns that slow action or complacency could mean missed opportunities. Barriers persist, including the lack of access to credit for Latino business owners, the higher rates of loan denials, and limited availability of culturally relevant financial products.

A significant portion of the Latino community remains unbanked or underbanked, with many living in banking deserts. Additionally, trust issues and insufficient Spanish-language services further hinder Latino engagement with financial institutions.

To overcome these challenges, institutions must offer tailored services that meet the specific needs of Latino customers, improving access to digital and physical banking services, and create more inclusive credit scoring practices, according to the study.