For traditional banks and financial institutions that have been around for decades (or centuries, even), transformation is inevitable. In the digital sense, for example, traditional banks have spent the past several years realising that without significant improvements to their legacy processes, they won’t be able to hold onto their customers — or attract new ones from up-and-coming generations.

Now, these banks are experiencing a similar revelation about one particular group that is quickly accumulating a disproportionate share of wealth: Hispanics.

In the US specifically, the Hispanic population represents 20% of the total population and is on track to reach $113trn in collective wealth by 2050. To put this into perspective, the total household wealth of 100% of the US population right now is $154trn

As the growth of other demographics wanes, financial institutions are doing the math: If their growth is intrinsically tied to the growth of the audiences they serve, and they aren’t serving Hispanics, then they’re missing out on a very lucrative path to growth.

While many banks have captured Hispanics’ checking and savings accounts, positioning for long-term, Hispanic-fueled growth will mean winning their wealth management business, too.

Three defining characteristics of Hispanics’ approach to investing

Here are three defining characteristics of Hispanics’ approach to investing that make it clear why banks must undergo “Hispanic Transformations,” designed to replace superficial efforts with foundational changes to their offerings, operations and revenue models.

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Hispanics are naturally distrusting of the financial industry — partially because they don’t understand it

Most US Hispanics haven’t been brought up to depend on financial institutions in the same way that other demographics have. In many Hispanic households, long-term wealth isn’t even discussed, so it’s not until they enter the workforce that Hispanics are exposed to conversations about investing.

When it comes to inspiring Hispanics to invest, banks must consider that these new prospective customers are probably the first people in their families to invest in the stock market. They often don’t know who to ask — or simply don’t have someone to ask.

This reveals an opportunity for banks and financial institutions to step in as the financial advisors that a majority of Hispanics have never had.

Doing so, however, requires more than simply offering Spanish language translations of their mobile banking apps, or introducing ESG or DEI programmes with minority marketing messaging. In the last economic cycle from 2021-2022, for example, we saw many banks targeting the Latino market, but then they ultimately gave up after a year and a half.

Winning Hispanics’ long-term trust and loyalty requires meeting them where they are with financial education opportunities that show how banks will help them grow and protect their money, rather than just telling them that they can do so.

Hispanics’ wealth will be achieved collectively, rather than through an individual approach that the financial sector was originally designed for

In analysing the Hispanic demographic, banks and financial institutions are not going to find a sea of high-net-worth individuals. What they will find, though, is a growing number of diligent, everyday savers.

Whereas this less affluent audience offers little appeal to legacy investment systems that are based on large, lump sum deposits from customers with at least $1m in household wealth, it becomes increasingly attractive when the wealth of each of these individuals is multiplied by 20% of the population — which is currently more than 60 million people in the US alone.

This is what’s referred to as “collective” wealth, and it represents an enormous growth opportunity for banks and financial institutions.

Understanding that the financial behaviours of these individuals look different from the top 1% of the population that legacy investment models were designed for is how banks will ultimately be able to tap into their $113trn collective wealth opportunity.

Hispanics are more likely to invest with micro-investments than through payroll deductions or in large lump sums

The majority of leading investment models offer consumers one of two options for growing their wealth. One, they can meet the minimum requirements to open and maintain a brokerage account for investing in public market securities. Or they can rely on long-term savings accounts, typically a 401k or IRA, offered by their employer.

Hispanics have not participated in either of these two models.

Instead, they’re driving a new approach to investing altogether known as micro-investing, or investing through small but regular, automated deposits into diversified portfolios. According to Finhabits’ Power in Numbers report, these micro-investments are enabling Hispanics to save up to 6.5% of their income.

While it might not seem worthwhile to banks when viewed through the lens of individual Hispanic investors, it’s what’s powering Hispanics’ ability to accumulate enough wealth to nearly match the total wealth of the rest of the population.

And it’s not just Hispanics that banks and financial institutions will have new access to with this modern approach to investing. What they’ll ultimately find is that micro-investments also appeal to the 99% of consumers who have been left out by hard-to-reach, high-net-worth investment models.

Much like the race towards digital transformation, transforming to meet the financial needs of Hispanics is no longer a question of ‘if’ but ‘when’ — and how quickly. Banks that are only just beginning to think about this audience have already fallen behind those who are.

Carlos Garcia is CEO, Finhabits

Carlos and Finhabits are currently working with Mastercard and other financial institutions on initiatives designed to educate Hispanics on how they can move beyond basic checking and toward long-term investing and wealth creation. The Finhabits platform is currently used by nearly 700,000 Hispanics to invest and access financial education