They’re called “Neuvo Latinos,” low-income, young immigrant families with a median income of $14,482. Mostly foreign-born, half of them send money back to their homelands and 96% of them rent rather than own their homes. They lack checking or savings accounts and often turn to pawn shops when they need cash. Attractive candidates for bank services?

While retail bankers may think not, the Center for Financial Services Innovation (CFSI) has data that might prompt you to think again. In a recent report, the researchers at CFSI point out that many customers in this “Neuvo Latinos” category graduate, over time, into another category dubbed “Settled In.” This segment has a median income of $23,358 and does patronize banks – 84% of these households have checking accounts and another 74% have savings accounts.
“If you start going after the ‘Settled In’ group, you‘re likely to discover that they‘re not so available to you, since other banks are going after them. But if you start earlier, at the ‘Neuvo Latino’ level, you can hold on to them,” says Ellen Seidman, one of the report’s authors and a director of the Treasury Department’s Office of Thrift Supervision from 1997-2001.

In banking, such customer segmentation analysis is often done on affluent customers but rarely on low- to moderate-income groups. Hence, the value of CFSI’s report entitled “Getting to Know Underbanked Consumers: A Financial Services Analysis,” which is based on a survey of 1,532 individuals in low- and moderate-income households living in urban neighborhoods of Washington, D.C., Los Angeles and Chicago.

The researchers at CFSI, part of ShoreBank Advisory Services (SAS), which is a consulting affiliate of ShoreBank Corp. in Chicago, found that this slice of the population is far from a homogeneous, undifferentiated mass. Rather, it can be analyzed in terms of 10 very distinct clusters, or segments.

Retail banks, depending on their geographic location or individual strategies, may find some of these clusters to be worth pursuing, according to the CFSI. “Unlike higher-income consumers, they tend to be more brand-loyal and shop less based on price,” says Seidman, senior managing director/national practice at SAS. “If you get them, you will be able to hold them – and hold them as they transition into a part of their lives when they will almost naturally be more profitable customers.”

“The segmentation gives you a clear understanding that if you take a customer at point A, you can help move them to point B, which is more profitable for you.”

CFSI director Jennifer Tescher adds that even the clusters exhibiting the most negative financial characteristics can be of interest to some banks and credit unions because government programs provide subsidies to providers -- in the electronic transfer of benefits, for example.

The CFSI’s report can be viewed at www.cfsinnovation.com/managed_documents/seg.pdf.

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