Acculturation, microculture and banking: an analysis of Hispanic consumers in the USA

Tilnessa Gail Perry

Department of Marketing, George Washington University Schoo! of Business, Washington, DC, USA

Abstract

Purpose - The purpose of this paper is to show that having a bank account is an important precursor to participating in the US financial mainstream. However, about 24 percent of Hispanic households in the USA are unbanked, This study seeks to examine whether the use of banks among Hispanic consumers can be explained by acculturation and microcultural factors.

Designimethodology/approach - The model proposes that having a checking or savings account is a function of acculturation, microculture, and demographics. Acculturation is measured in terms of length of time in the USA; plans to remain in the USA temporarily versus permanently; Spanish language use; and citizenship status. Microculture is measured by country of origin. Data used for this analysis were collected in a survey sponsored by a start-up financial institution interested in targeting the Hispanic market. These data were collected in 2004 during telephone interviews with 1,000 Hispanic renters in major markets across the USA.

Findings - More acculturated Hispanic consumers are more likely to have a bank account, reqardless of income, and level of education. In addition, the propensity to have a bank account varies by country of origin.

Practical implications - Marketers and polkymakers should target less acculturated immigrants who view themselves as temporary us residents, and those who use Spanish primarily for communicating outside the home. Marketers should emphasize the safety and soundness of the US banking system and should accommodate needs for international funds transfers.

Originality/value - The findings can help financial service providers and public policy makers to target a growing market segment.

Paper type Research paper

Keywords Hispanics, Acculturation, Banking, Financial services, United States of America

An executive SUInII1ary for rnanagers and executive readers can he found at the end of this article.

Having a bank account is an important precursor to participating in the US financial mainstream. However, according the Federal Reserve's Survey of Consumer Finances, about 25 percent of Hispanics, the largest minority group in the USA, do not have a checking or savings account, compared to 11 percent of the total population (Aizcorbe et al., 2003). This represents a substantial market segment, since the US Census Bureau (2003) reports that there were 41 million Hispanics in the USA in 2005, and that this segment is growing more than three times faster than the overall population (Associated Press, 2005).

Bank accounts provide several important benefits. First, bank accounts provide a safe and secure place to store funds. Having a bank account also facilitates the efficient and secure receipt of paychecks. Bank accounts provide a host of convenient ways to access funds, including checks, A'TMs, and debit cards. In addition, a bank account provides a mechanism for saving and earning interest. Finally, having a checking or savings account helps consumers establish

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familiarity and expertise with financial concepts, and most importantly, banking relationships enable access to credit products and the credit reporting system (Seidman and Tescher, 20(4).

A recent article in the TWIll Street Journal citing an InterAmerican Development Bank study of immigrants who send funds home estimates that half of immigrant remitters are unbanked, and about 90 percent of those receiving their funds are unbanked. Thus, cc ••• both sender and receiver populations are ripe targets for banking services (Perez, 2003)."

The purpose of this study is to examine the effects of acculturation among Hispanic immigrants on participation in the banking system. In particular, we examine whether bank account possession among Hispanic consumers can be explained by acculturation and microculture. Acculturation includes length of time in the lJSA, plans to return home, the use of Spanish versus English, citizenship status, while microculture refer to country of origin. Members of microcultures can represent distinct target markets since members of these groups often buy the same brands and products and shop in the same kinds of stores (Kara and Kara, 1996).

literature review

Hispanic acculturation

Acculturation occurs when an immigrant adds elements of the mainstream culture to their native culture. A particular level

Received: March 2006 Revised: August 2006 Accepted: October 2006

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of acculturation is a point on a continuum between an unacculturated extreme and an acculturated extreme (Ogden et al., 2004). The focus of this study is acculturation rather than assimilation, because assimilation refers to the adoption of mainstream values in place of an individual's or group's cultural heritage. Acculturation includes assimilation in addition to maintenance of the old culture (Penaloza and Gilly, 1999). Traditionally, immigrant groups have tried to become American through assimilation as soon as possible. In contrast, many Hispanic and Latino immigrants retain their native culture - even among the children of these immigrants (Grow et al., 2004).

In recent Years, researchers and policymakers have noted that members of Hispanic immigrant groups are more likely to acculturate than assimilate, or replace their culture with the American mainstream (Grow et al., 2004), Similarly, Korzenny (1999) found more evidence of acculturation by Hispanics than assimilation. According to Berry (1980), in addition to assimilation and integration, individuals can choose not to accept the new culture, and in some cases, develop a negative attitude towards the new culture. Thus, acculturation is prevalent among Hispanic immigrants. There is also evidence that acculturation is important to understanding consumer behavior. For example, Kara and Kara (1996) found that the degree of acculturation is a key determinant of product attribute evaluations in both high and low involvement consumption decisions.

This study addresses three gaps identified by Ogden et at. (2004). The first is the lack of product category breadth in current research on ethnicity and consumption. In particular, these authors argue that current research over-emphasizes the consumption of value-expressive products across cultures, which may erroneously suggest that members of these groups cc .•• are more ego-invested in consumption decisions than the dominant culture" (Ogden et al.; 2004). In contrast, the category of interest in this study is banking, which is utilitarian, and primarily purchased for functional purposes, The second gap is the lack of intra-microcultural research. Ogden et al. (2004) point out that individuals from different countries often differ significantly in experiences, demographic, psychographic, and other characteristics. In this study, we compare the possession of bank accounts among Hispanic consumers from different countries of origin. The third gap identified by Ogden et at. (2004) is the lack of integrative approaches to measuring acculturation. In this study, we use several measures, including length of time in USA, use of Spanish language in communications and media consumption, as well as citizenship status simultaneously to operationalize acculturation.

The unbanked

"Unbanked" consumers pose a major challenge for policymakers, regulators, and consumer advocates, These consumers use cash in an increasingly cashless economy, resulting in excessive fees for basic financial services. The unbanked are also susceptible to high-cost predatory lenders, and can have difficulties buying a home or otherwise acquiring assets.

According to a 2001 survey, 44 percent of all Latin American immigrants have no bank account (Turner et al., 20(3). In another estimate, the Inter-American Development Bank reports that nearly half of Hispanic consumers have no formal account relationships with mainstream financial

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institutions (Perez, 2003). Using the household as the unit of analysis, The Federal Reserve estimates that 24 percent of Hispanic households are unbanked (Aizcorbe et al., 2(03).

Several studies have offered explanations for the low reliance on banks among Hispanic consumers, and have found that many Hispanic or Latino immigrants do not trust banks, or do not feel that they need the services provided by banks (Hogarth and O'Donnell, 1999). According to a recent Federal Reserve study, the major reasons for not using banks included not only "do not have enough money", "do not write enough checks", and "dislike dealing with banks" (Aizcorbe et al., 2003; Caskey, 2002). A recent segmentation study sponsored by Fannie Mae found that many Hispanics who use Spanish heavily do not fully understand or participate in the US financial and credit systems (i.e. no credit, savings, investments, etc.) because they have little confidence in banking systems in their home countries, and that credit markets operate differently in these countries (Fannie Mae National Housing Survey, 2003).

Several Latin American countries have had a history of unstable currencies and widespread inflation, which may explain the lack of confidence in bank accounts. For example, in the case of the "Tequila Crisis of 1994" the Mexican government, with the help of Mexican taxpayers, funded a $55 billion dollar rescue of the banking system (Taparia, 2005).

Another potential problem is that opening a bank account requires a form of legal identification, and this lack of documentation can be a barrier to banking for undocumented or undocumented resident immigrants. However, following regulatory changes in 2002 that allow banks to accept new types of identification, increasing numbers of undocumented immigrants are opening US bank accounts (Taparia, 2005). In the present study we examine the effects of citizenship status, i.e. undocumented, legal permanent resident versus US citizens, as well as the effects of country of origin on the likelihood of having a bank account.

Proposed model

TIle model tested here proposes that banking usage is a function of acculturation, microculture, and demographics. This model is based on a microcultural purchase outcome model proposed by Ogden et at. (2004) that presented a systems approach to studying the effects of culture and acculturation on consumer purchase decisions. Acculturation is operationalized in terms of length of time in the USA, plans to return home, and use of Spanish language communication and media, Microculture is measured in terms of country of origin. These include the USA, Mexico, Cuba, Puerto Rico, the Dominican Republic, or "other" Latin American country.

Although there are no specific hypotheses specified for demographic variables, income, age, and level of education are included in this model as background variables. This follows Eckman and Kotsiopulos (1997), who found significant differences in attribute importance and choice based on the incomes of Hispanic consumers. Citizenship status is also included in the model to control for the effects of legal identification and documentation on having a bank account.

Acculturation theory suggests that over time, individuals will retain elements of their native culture, while adopting some elements of their new culture. One such native element

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IS use of English versus Spanish. Although there IS evidence that many Hispanic immigrants remain bilingual and that the percentage of those who prefer English has not changed (Grow et al.; 2004), the more English used for regular communication and media consumption has been viewed as a key indicator of acculturation CvVebster, 1992, 1994).

Hi proposes that the more Spanish vis-a-vis English used for regular communication and media consumption, the less acculturated, and hence, the less likely an individual is to have a bank account.

HI. There is a negative relationship between usage of Spanish language and having a hank account in the USA.

H2 follows the same logic as the first hypothesis, except in this case, acculturation is measured in terms of length of time in the USA. Length of time in the host country is also a suggested determinant of acculturation (Ogden et al., 2004). In other words, the longer an individual resides in the USA, the more potential contact he or she has with US mainstream culture and institutions, including the banking system.

H2. There is a positive relationship between length of time

in the USA and having a bank account.

jun et al. (1993) found that individuals who view their stay in the host society as temporary tended to identify more with their culture of origin. Based on this reasoning, we propose that those who stay in the USA for longer periods of time are more likely to have a bank account, while individuals who are in the country for shorter periods are less likely to have a bank account.

H3. Individuals who plan to return to their country of

origin are less likely to have a bank account.

Penaloza (1995) suggests that there are significant differences in cultural attitudes and behaviors of individuals from Mexico, Cuba, Puerto Rico, and other countries, and that country of origin is an important basis of segmentation. In addition, Ogden et al. (2004) argue that individuals from different countries of orrgm may have significant demographic, psychographic, behavioral, and geographic differences. Other studies have pointed out microcultural differences in socioeconomic characteristics and attitudes (Minor, 1992). Thus, H3 suggests that the propensity to have a bank account will vary based on microculture, i.e. countryof-origin after controlling for level of acculturation and demographics.

H4. Controlling for level of acculturation and demographics, bank account possession varies by country-of-origin.

Method

Data used for this analysis was collected in a survey sponsored by a start-up financial institution interested in targeting the Hispanic marker. The sample was provided by Survey Sample Inc. (SSI), and included a random sample of telephone numbers linked to Hispanic surnames in 19 designated market areas with high-density Hispanic populations.

Telephone interviews were conducted by trained interviewers employed by a private marketing research firm using computer-aided telephone interviewing (CATI) from

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March 11 to April 4, 2004. Respondents were screened to determine if they were self-identified Hispanics, and were given the option to have the interview conducted in English or Spanish. The response rate after refusals and incomplete surveys was 48 percent. Incomplete surveys were not included in the sample.

Survey data were collected in 16 states: 24 percent were from major metropolitan areas in California, 19 percent from metropolitan areas in Texas, while approximately 10 percent were drawn from each of the following states: Florida, New York, and Illinois. A possible consequence of this sampling frame is that these markets have a higher concentration of Hispanics, and may be areas where banks have adopted more aggressive strategies to target this population.

Respondents were self-identified Hispanics. The survey included questions about household and other demographic characteristics, use of Spanish language, employment history, and financial behaviors, attitudes, and behavioral intentions. items from the survey instrument used for this analysis are listed in Appendix,Figure Al Selected items form the survey of Hispanic renters.

Analysis

HI through H3 were tested using a binary logistic regression model where the dependent variable is the possession of a checking or savings account. Respondents with either a checking or savings account were coded as a "1" and "0" otherwise. This is consistent with the definition of unbanked used by the Federal Reserve, which includes individuals or families who do not possess any type of transaction account at a financial institution (Hogarth and O'Donnell, 1999). This variable was regressed on the following independent variables: length of time in the USA; years before returning to home country; citizenship status; country of origin; Spanish language usage; respondent age; level of education; and annual income. Items used to create these variables are listed in the Appendix (Figure AI).

Length of time in USA is a IS-level ordinal variable ranging from less than one year in the USA to more than 31 years. The length of time before permanently returning to home country is a 19-1evel ordinal variable ranging from less than one year to never planning to return home permanently. Citizenship status, including undocumented residents and permanent residents, is entered as a series of dummy variables. US citizens and work visa holders were omitted to avoid linear dependence. Finally, the Spanish language usage variable is a summation of six items measuring the extent of Spanish use when watching television; listening to the radio; reading published materials; speaking to family members; speaking with friends; and speaking with co-workers and acquaintances. The Cronbach's alpha coefficient for this scale is 0.875, which is considered to be very good reliability (Devellis, 2003).

In terms of demographics, income is included in this model as a continuous variable. Respondent age is a six-category ordinal variable ranging from "18 to 25" to "over 65". Level of education is also a six-category ordinal variable ranging from "elementary school" to "post graduate."

1-14 was tested using a second logistic regression model.

This model included the same dependent and independent variables as the first model, with the addition of a series of dummy variables representing country of origin. Dummy variables for country of origin were entered for Mexico, Cuba,

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Puerto Rico, Dominican Republic, and "Other" country as a 1 or zero, where US citizens serve as the omitted category.

Findings

Of the respondents, 56 percent reported having either a checking or savings account. This suggests that in our sample 44 percent are unbanked. This is consistent with estimates based on other data sources (Perez, 2003; Aizcorbe et al., 2003). A total of 42 percent had a checking account; 28 percent had a savings account, and about 14 percent had both checking and savings.

Approximately 17 percent of respondents were US citizens, while another 37 percent were permanent residents, i.e. "green card" holders. In addition, approximately 22 percent of the sample reported that they are undocumented residents of the USA. This is similar to undocumented share reported by the Pew Hispanic Center, which estimates that 23 percent of Latin American immigrants are undocumented (Passel, 2005). It is somewhat surprising that respondents were willing to provide honest answers about their undocumented immigration status. However, this data was collected prior to the recent controversy about proposed immigration reform legislation.

Not surprisingly, the highest rate of checking and savings accounts occur among US citizens and permanent residents holding "green cards". For example, 54 percent of US citizens and 41 percent of permanent residents have a checking account, compared to only 18 percent of undocumented residents. Thus, the incidence of "unbanked" consumers is far more prevalent for those who are either undocumented or in the US on work visas.

In logistic regression, the - 2 log likelihood statistic tests the hypothesis that all model coefficients are equal to zero, and is used to test the overall mode (Allison, 1999). In this model, the p-value for this statistic is less than 0.01, which is evidence that at least one of the coefficients is nonzero. A list of variables, their parameter estimates and significance is reported in Table 1.

This model includes income, age, and level of education, although no specific directional hypotheses are tested here. Each of these demographic characteristics were significant at the p < 0.01 level. In particular, there was a positive relationship between respondent age, level of education, and income and having a bank account. Thus, older immigrants, those with higher incomes, and those with higher levels of education are more likely to have checking or savings accounts. Because these variables are positively correlated

Table I Bank account logistic regression model - acculturation effects

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with level of acculturation, these lin dings support our premise that acculturation explains bank account possession.

The coefficient on the undocumented resident dummy variable is significant and negative, suggesting that undocumented residents are significantly less likely than US citizens or work visa holders to have a bank account. However, the permanent resident coefficient is not significant, which means that there is no significant difference in having a bank account between permanent residents and US citizens or work visa holders.

According to 1-1 J, there is a negative relationship between Spanish language usage and having a bank account. The coefficient on the Spanish usage variable is significant and negative. This suggests that the more Spanish language used in regular communications, the lower the likelihood of having a bank account. Thus, Hi is supported.

In terms of banking and length of time in the USA, the coefficient on the variable measuring time in the USA was marginally significant and negative, which is the opposite of the hypothesized sign. Thus, H2 was not supported. This result suggests that all else equal people who have been in the USA for longer periods of time are actually less likely to have a bank account than those who are in the USA for shorter periods of time.

According to 1-13, individuals who plan to return home later rather than sooner are more likely to have a bank account. This hypothesis was partially supported. The coefficient on the variable indicating plans to return after live years was not significant, while the coefficient on the variable indicating plans to remain in the USA permanently was significant and positive. This suggests that the number of years respondents plan to be in the USA do not affect banking, although those who plan to be in the USA permanently versus are more likely to have accounts than those who plan to be in the USA temporarily.

H4 proposed a relationship between microculture and banking, where microculture is operationalized as country of origin, controlling for level of acculturation and demographic characteristics. This hypothesis was tested with a second logistic regression shown in Table II. The p-value for this model is less than CUll, which is evidence that at least one of the coefficients is nonzero. The pattern of results in this model was similar to those from Model 1 with one exception. As reported in Table II, the variable measuring years in the USA was not significant once countries of origin were included in the model. This implies that observed differences in banking across different countries of origin may be related to differences in the length of time their immigrants have

Estimate Standard error Wald Chi-Square Odds ratio
Years in USA -0.0495 0.D197 63244 0.952 *
Years before returning home 0.0486 0.0109 19.8153 1.05 **
Age 0.1996 0.055 13.1921 1.221 **
level of education 0.2369 0.0642 13.623 1.267 **
Income 0.0736 0.0142 26.6989 1.076 **
Undocumented -0.7611 0,2033 14.0173 0.467 **
Green card 0.0313 0.1694 0.0341 1.032 NS
Spanish -0.0762 0.D142 28,7719 0.927 **
Notes: * P < 0.05; ** P < 0.D1
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Table II Bank account logistic regression model II - acculturation and microcultural effects

Estimate Standard error Wald Chi-Square Odds ratio
Years in USA - 0.0079 0.0231 0.1171 0.992 NS
Years before returning home 0.0649 0.0124 27.1411 1.067 ***
Age 0.1043 0.0599 3.0347 1.11 *
level of education 0.2088 0.0659 10.0358 1232 ***
Income 0.0741 0.0146 25.8696 1.077 *'**
Spanish language use - 0.4821 0.2138 5.0854 0.617 **
Undocumented 0.1486 0.1745 0.7249 116 NS
Green card -_·0.0563 0.0155 13.149 0.945 ***
Mexico -1.3809 0.363 14.4695 0.251 ***
Cuba __ 0.4677 0.5295 0.7802 0.626 NS
Puerto Rico -1.1012 0.5567 3.9131 0.332 **
Dominican Republic -1.0626 0.5434 3.8244 0.346 *
Other country - 0.9662 0.3817 6.4086 0.381 *** Notes: " p < 0.10; ** P < 0.05; *** P < 0.01

resided in the USA. In addition, the undocumented resident

variable was not significant in this model

also suggesting

that immigrants from different countries also differ in their propensity to have legal immigration documentation.

\i(,'e find support for H4, in that the coefficients on the Mexico, Puerto Rico, Dominican Republic and "Other" Latin American country variables were all negative and statistically significant. TIlUS, immigrants from these countries are less likely to use banks than Hispanic individuals born in the USA. The coefficient on the Cuba variable was not significant, which suggests that banking among individuals from Cuba does not differ from that of Hispanics born in the USA. In sum, holding level of acculturation and demographic characteristics constant, there is evidence that individuals from different countries differ in their propensity to have bank accounts.

Odds ratios, also shown in Tables I and II, show the effect of a change in each independent variable on the odds of having a checking or savings account. In both models, demographic variables, including level of education, age, and the undocumented dummy, had the largest impact on the odds of having a bank account. Thus, although acculturation and microcultural factors were significant, demographic characteristics have much larger effects on banking.

Discussion

In general, the results of this study support the proposed framework. For example, there is evidence of a relationship between acculturation and use of banks when acculturation is measured in terms of use of English versus Spanish. One interpretation of this finding is that language is a barrier to banking use, and that people who do not speak English well are less willing or less able to do business with predominately English speaking banking institutions. However, another interpretation is that there are people who could do business at an English speaking bank but choose not to, suggesting that more complex, cultural phenomena may be at play.

Level of acculturation also affects banking in terms of plans to return to one's horne country. It is no surprise that people are less likely to open bank accounts if they only plan to be in the USA temporarily, and people who plan to remain in the USA permanently are significantly more likely to have a bank account

than short-term residents. Interestingly, however, people who plan to be in the USA for five or more years are no more likely to have a hank account than people who plan to be in the USA for shorter stays. This suggests that the relative length of time before returning horne does not affect banking usage as much as whether or not residence in the USA is intended to be permanent. One possible explanation worth exploring in future research is that people may perceive bank funds to be hard to transfer back home once they are ready to leave.

Surprisingly, however, people who have lived in the USA for shorter periods are actually more likely to have bank accounts than those who have been longer term residents, although this finding was not consistent in both models. One possibility is that in general Hispanic immigrants open bank accounts fairly early after arriving in the USA unless they are somehow inhibited from doing so by other factors such as cultural beliefs. For example, Bendixen and Associates (2004) found that many Hispanic and Latino immigrants have negative feelings about hanks that stem from prior experiences their home countries.

Microculture, or country of origin, also has a significant effect on banking in some cases. These results show that controlling for demographic and acculturation variables, individuals from Mexico, Puerto Rico, the Dominican Republic and "Other" Latin American countries are less likely to open bank accounts than those born in the USA, while individuals from Cuba have accounts at the same rate as those born in the USA.

A post hoc analysis of reasons for not using hanks was conducted to shed light on these microcultural differences. According to results of a chi-square test, there is a significant association between country of origin and reasons for not using banks. As shown in Figure 1, immigrants from Mexico are more likely to mistrust banks than those from other countries. At the same time, immigrants from Puerto Rico had the highest incidence of "no need for banks". One limitation of this study is that there is no data with which to further understand the difference between these responses. However, these differences support the finding that these countries are unique and that other microcultural differences are at play. This could be an important issue for further research.

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Figure 1

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Conclusions

Based on these findings, there are several actions that marketers might consider in order to promote the use of banks among Hispanic immigrants. Implications of these findings relate to segmentation and targeting efforts to encourage the use of banking services among Hispanic immigrants in the USA.

It appears, based on the results presented here, that the issue of the unbanked is partly a matter of acculturation. As Hispanic immigrants spend more time in the USA or postpone plans to return to their home countries, gain formal education or higher incomes, they are more likely to have a checking or savings account. Hence, marketers should target less acculturated immigrants including those who view themselves as temporary US residents and those who use Spanish primarily for communicating outside the home. Based on the findings of a study of financial decisions among US Hispanic households, Stevenson and Plath (2006) recommend targeting Hispanic consumers through Spanish and English language communications, and sponsoring Hispanic community-based programs.

However, according to Torres and Briggs (2005), Hispanictargeted advertising tends to be less effective with high involvement services because consumers evaluate many service attributes in addition to ethnicity, If members of this target marker perceive banking to be a high-risk service, it is also likely to be a high involvement service. Hence, marketers must focus on those attributes of banking services that are most important to members of Hispanic market segments, and must keep in mind that attribute importance may differ across microcultures (Kara and Kara, 1996). The present study as well as previous research suggests that one important

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attribute is trustworthiness of financial institutions. Marketers should develop communications strategies that build new associations to US banking services that emphasize the safety and soundness of the US banking system and the protections offered to customers of lJS financial institutions. Previous research suggests that these differences may stem from negative experiences and associations brought from Latin American countries of origin (Bendixen and Associates, 2(04).

Findings from this study suggest that microcultural differences play a role in the adoption of bank accounts. Because these microcultures are often concentrated in particular geographic areas, they may provide a viable basis for segmentation (Ogden et al., 2004). Hispanic immigrants from the Dominican Republic, for example, tend to be more concentrated in the Northeast region on the USA, while Mexican immigrants tend to be more concentrated in the Southwest and on the \vest Coast (Penaloza and Gilly, 1999). Evidence from this study suggests that these microcultures differ in terms of banking and reasons for not banking, and thus, may seek different benefits from banking services.

For respondents who did not have a bank account, the most commonly cited reasons were "do not need banks", and "use cash only". This suggests that in addition to targeting the segments described above, marketers must develop products and services that meet the unique needs of these consumers. For example, approximately two-thirds of Latin American immigrants send money to their home country (Millman, 2004). Therefore, such families might see an advantage in low-cost, convenient alternatives to making these transfers. Members of these segments might also value lower-cost

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advantages to check cashing outlets and other alternative financial service providers.

An additional, though perhaps controversial, way to segment this market is in terms of citizenship status, since undocumented residents are less likely than permanent residents or US citizens to use banks. This is a substantial market segment, including over nine million undocumented residents (Passel, 2005). Undocumented residents are less likely to use banks, although there is no difference in use of banks between permanent residents and US citizens. This implies that legal documentation may be a barrier to banking access. This finding may also reflect efforts on the part of undocumented residents to avoid a "paper trail" that may attract attention from immigration authorities. Policymakers could consider alternative forms of legal identification for opening bank accounts. For example in 2002, the US Treasury department issued a statement encouraging banks to accept the "Matricula Consular", a document issued by the Mexican government, in lieu of a visa issued by the USA (Tap aria, 2005). Similar types of documents could be provided for immigrants from other countries to facilitate their access to banking services.

In conclusion, this study presented a model of banking based on acculturation and microculture (Ogden et al., 2004). As the ethnic and demographic composition of the US changes, it is increasingly important to understand the effects of these factors on consumer behavior.

Limitations

It is important to note that the Hispanic population and other studies of this population include homeowners as well as renters, while our sample includes renters only. Because owners are more likely to have checking accounts, the estimates listed below are lower than what we would expect to see in a sample that included homeowners.

In addition, several of the independent variables in this model are significantly correlated. For example, the correlation between use of Spanish language and level of education is - 0.33 (p < 0.0001). There is also a relationship between country-of-origin and certain acculturation variables, such as level of education. Standard regression diagnostics did not reveal a problem with multicollinearity (Allison, 1999). However, because of the relationships between these predictors, results should be interpreted with caution.

Further research

There are several future research directions that would contribute to the literature on acculturation. As mentioned previously, further understanding of differences at the microcultural level and how these differences affect the use of banks and other financial services is warranted. Additional research is also needed to understand how acculturation factors relate to the use of other financial services, like mortgage lending, insurance and investments. Further research should also explore the relationship between acculturation and access to these services as well as the relationship between acculturation and other factors, such as information quality and availability, and distribution channel selection.

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Appendix

Figure A 1. Selected items from the survey of Hispanic renters

Q3 In whichcotliltry were youb,)fll?

Onitt,d States ;""~XlC()

Cnb,:

Puerto RiN) DOtnll1Cm) R.(1)ubhc

Other (SpedfYl _

" ,~

3 -'I

-5 6

Q4:",\, !-{(,IV kmg .. I1M.:: you l.ived in thel_lnittx1 States? Years

{f so. wht~n Y,~af;;

IS·2$" 2(~ .. 34

35·M 4$·54- 55·64- 65+

"3

-'I

5 6

Spanish LatlgUlq,<e Response C,ueg5_wlcs:

EnglNh .lMgw~g,~ television ,l!lIIK~ time English langu;l_ge televhionm()st of !he time I'hlfin Sptmbh \u1d half in Engl.hh Spilnishl;mguage tdt'vi~;<)n most of the time Spanisl1l,m.guage tde\,j~im:l aU the: time

-'I

Q7 Whe:n you list,'i"1 to the radin, do ytm list(m to, .. ?

{S_pur~ihh LHngi.iHgeRt.:;poll~{'; (_~::tt(!:guri0S)

Q8 Wh.:::n .you nmd !li,;w/s-p,wers, magll;~ines or intcm.:::t <j{} )1'0\1 pref.:::r ttl read thelt) in ...

(S}1<1n-ISh I..~~Ugl1{'\gC Response (~atc:godcs )

Q9 Wh.:n you sp;;:uk to yOlfr p'am,t$ and (>ldcr!illllHy mcmb.:::(s J(lyml spc<t'k to t!l."m

{Sp~llh.:Jt l..~~nguageReSp01JSt~ (~:.~tcgorics )

Ql0 \~'h(m y(}(i sp"ilk to your neighhors <md n-i(~lds do y\J\l spI,;.:uk to them in .. ,

($panhh Lwgl1ag.: R'!SpOl.l~e Cak~g(lfies)

QU \-Vlwn YOtl sp"ilk to your ",}\;\"otkw,:; ,{nd ,wq!:.laim;llle@ do }'(llj s\.1.:::ak kytiwrn in .. ,

(Spanish Lmgu<1gc Response Catcgo.de&)

Ele.m.;:ntary 01' none Some. high schoo! Gradm\tc hil?~h s,;hQo!

Some {;()lk!~;~ (1.3 ye,"rs) lcchnkal} ComplcW(i \.~cHcge (4 years or ronre) Post ,~r<ld,uatc (,-WC( 4' yean,)

2

"3

4

5 6

Q46 Bo:w much is the HOUSEHOLD ANNUAL income- wtmtlng rlU thc members of the fMnily tb,Clt work'?

Checking account SHvings ~'t(~:COUBt

"

. .t..

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Figure A1

Q55A \-" .... hy d,.m't yml have ~I hank acc(nmt?

Dm,'t trust bunks Don't need banks No idenlHic:3tion lise cash only Other

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3

4 s 6

Q67 Are you an American Citizen, PemlaJlC"ui Resident with a Green Card or citizen orauother C()l111try?

American Citizen

Ptmmment resident with green card

C'itizt:n (If another CmtUlry 'i),·ith valid work visa Citiz,!!) of another CHllo!ry with tourist visa Uud(lcumentcd.:t!udocumcntc(l

NOlmswcr

Corresponding author

Vanessa Gail Perry can be contacted at: vperry@gwu.edu

Executive summary and implications for managers

This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic couered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present,

\Vhen the world of finance even in its simplest form of just having an easy-to-use bank account is something huge numbers of people do not feel the inclination to be a part of, the banks need to know why.

There are substantial numbers of people who, while maybe not keeping their money under the proverbial mattress, just do not have anything to do with the banks .. and for the banks that is a massive missed opportunity for expanding their customer base, and their business with it.

TIle "unbanked" have their reasons. They might not have enough money to bother with checks; they might not want to provide the personal information required to open an account; they might be from a country where financial institutions are mistrusted; or they might just not understand the system. Whatever the cause, in addition to being an untapped market for the banks, they also pose a major challenge for policymakers and regulators. As well as getting left behind in an increasingly cashless economy, they might also fall prey to high-cost predatory lenders, and have difficulties buying a home or otherwise acquiring assets.

Against a background of a survey which estimated that about a quarter of Hispanic households in the USA were unbanked, Vanessa Gail Perry examines whether this can be explained by acculturation and microcultural factors. From her findings it appears that a reason is indeed partly a matter of acculturation. As Hispanic immigrants spend more time in

3 4

6

the USA or postpone plans to return to their home countries, gain formal education or higher incomes, they are more likely to have a checking or savings account.

Hence, marketers should target less acculturated immigrants including those who view themselves as temporary lJS residents and those who use Spanish primarily for communicating outside the home.

Evidence was found of a relationship between acculturation and use of banks when acculturation is measured in terms of use of English versus Spanish. One interpretation of this finding is that language is a barrier to banking use, and that people who do not speak English well are less willing or less able to do business with predominately English speaking banking institutions. However, another interpretation is that there are people who could do business at an English speaking bank but choose not to, suggesting that more complex, cultural phenomena may be at play.

Level of acculturation also affects banking in terms of plans to return to one's home country. It is no surprise that people are less likely to open bank accounts if they only plan to be in the USA temporarily, and people who plan to remain in the USA permanently are significantly more likely to have a bank account than short-term residents. Interestingly, however, people who plan to be in the USA for five or more years are no more likely to have a bank account than people who plan to be in the USA for shorter stays. This suggests that the relative length of time before returning home does nor affect banking usage as much as whether or not residence in the USA is intended to be permanent. One possible explanation is that people may perceive bank funds to be hard to transfer back home once they are ready to leave.

Financial institutions may not be trusted, possibly from negative experience from countries of origin. Marketers should emphasize the safety and soundness of the US system and the protection offered to customers.

Microcultural differences also playa role in the adoption of bank accounts. Because these microcultures are often concentrated in particular geographic areas, they may provide a viable basis for segmentation. Hispanic immigrants from the Dominican Republic, for example,

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tend to be more concentrated in the northeast region of the USA, while Mexican immigrants tend to be more concentrated in the southwest and on the west coast. These microcultures differ in terms of banking and reasons for nor banking may seek different benefits from banking services.

As approximately two-thirds of Latin American immigrants send money to their home country, they might see an advantage in low-cost, convenient alternatives to making these transfers.

An additional, though controversial, way to segment this market is in terms of citizenship status, since undocumented residents are less likely than permanent residents or US citizens to use banks. This is a substantial market segment, including over nine million undocumented residents who

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might want to avoid a "paper trail" that may attract attention from immigration authorities. Policyrnakers could consider alternative forms of legal identification, such as the identity card issued by the Mexican government in lieu of a visa, for opening accounts. Similar types of documents could be provided for immigrants from other countries to facilitate their access to banking services.

As the ethnic and demographic composition of the US changes, it is increasingly important to understand the effects of these factors on consumer behavior.

(A precis of the article "Acculturation, microculture and banking: an analysis of Hispanic consumers in the USA". S'upplied by lvlarketing Consultants for Emerald.)

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