Blacks and Financial Services - US

Published by: Mintel International Group Ltd.

Published: Mar. 1, 2010 - 114 Pages

Table of Contents

SCOPE AND THEMES

What you need to know

Definition

Sources

Consumer survey data

Consumer Expenditure Survey

Advertising

Abbreviations and terms

Abbreviations

Terms

Generations

EXECUTIVE SUMMARY

Contributing factors to Black buying power

Black household income and buying power

Changes in income and spending

Saving in the Black household

Attitudes toward money, primary financial concerns, and risk

Banking and investment services owned

Loans held

Card ownership and usage

Attitudes towards financial decision making, sources of advice

Insurance products

Health insurance

Other insurance

Retirement planning

CONTRIBUTING FACTORS TO BLACK BUYING POWER

Key points

African Americans contributing less to “graying of America”

Figure 1: U.S., Black population, by age, 2004-14

Slight decline in household size

Figure 2: Average household size, by Hispanic origin/race of householder, 2001 and 2008

Figure 3: Households, by number of persons in the household—Hispanics vs. non-Hispanics, 2009

Figure 4: Households, by number of persons in the household—Black vs. all, 2009

Figure 5: Black households and all households, by presence and ages of children, 2009

Number of household earners

Figure 6: Number of Black household earners, by household income, December 2009

Figure 7: Number of Black household earners, by age, December 2009

BLACK HOUSEHOLD INCOME AND BUYING POWER

Key points

Income distribution

Figure 8: Household income distribution for all households and Black households, 2008

Figure 9: Household income distribution, by race/Hispanic origin of householder, 2008

Median income

Figure 10: Median household income, by race/Hispanic origin of householder, 2008

Income of Black households versus total U.S. households

Figure 11: Increase in percentage of Black households with incomes of $50K or more versus total U.S. households, 2003 and 2007

Black vs. White income

Figure 12: Black household income as a percentage of White household income, 1998-2008

Purchasing power

Figure 13: Purchasing power, by race/Hispanic origin, 2008

Figure 14: Top ten states with the largest share of Black buying power, 2008

CHANGES IN INCOME AND SPENDING

Key points

Impact of the recession—overview

Figure 15: Adults vs. older Black adults and the recession, 2010

Low-income Black adults facing declines in household income

Figure 16: Changes in Black household income, by household income, December 2009

College educated Black households less likely to see income decline

Figure 17: Changes in Black household income, by educational attainment, December 2009

Excessive spending among Black women may be slowing

Figure 18: Blacks’ attitudes toward spending, by gender, December 2009

Impact of the economy on Black households

Focus is frugality, regardless of household income

Figure 19: Impact of the current economy on Black households, by household income, December 2009

Financial behavior is impacted by the presence of children in the home

Figure 20: Impact of the current economy on Black households, by presence and number of children in the household, December 2009

Financial outlook

Regardless of income, Black households are spending less

Figure 21: Blacks’ attitudes toward financial situation, by household income, December 2009

Less optimism among post-graduate level African Americans

Figure 22: Blacks’ attitudes toward financial situation, by educational attainment, December 2009

African Americans have a positive economic outlook

Figure 23: Blacks’ attitudes towards whether they are better or worse off than five years ago, 2007 and 2009

SAVING IN THE BLACK HOUSEHOLD

Key points

Monthly saving habits

Amount saved is reflective of income level

Figure 24: Monthly savings of Black households, by household income, December 2009

Households with children save more than those without children

Figure 25: Monthly savings of Black households, by presence and number of children in the household, December 2009

Ownership of savings vehicles

Figure 26: Ownership of savings vehicles, by race/Hispanic origin, April 2008-June 2009

Changes in saving habits

Figure 27: Changes in saving habits in the Black household, by household income, December 2009

Save or splurge?

Figure 28: Save or splurge, by household income, December 2009

Figure 29: Attitudes towards money, by gender, April 2008-June 2009

Saving for what?

Figure 30: Saving habits of Black households, by educational attainment, December 2009

ATTITUDES TOWARD MONEY, PRIMARY FINANCIAL CONCERNS AND RISK

Key points

ATTITUDES TOWARD MONEY

Black adults are less averse to being in debt

Figure 31: Attitudes toward money, by race/Hispanic origin, April 2008-June 2009

Higher income Black households are among the underbanked

Figure 32: Attitudes toward money, by household income, April 2008-June 2009

Younger Black adults more trusting of banks

Figure 33: Attitudes toward money, by age, April 2008-June 2009

PRIMARY FINANCIAL CONCERNS

Concerns about retirement savings increase with household income

Figure 34: Blacks’ primary financial concerns, by household income, December 2009

Parents are more likely to use credit cards

Figure 35: Blacks’ primary financial concerns, by presence and number of children in the household, December 2009

Black men and women are economizing

Putting family before self

Giving and receiving financial support

Figure 36: Financial behavior and attitudes of Black adults, by gender, December 2009

Younger Black adults uninterested in acquiring debt

Figure 37: Financial behavior and attitudes of Black adults, by age, December 2009

ATTITUDES TOWARD RISK

Black investors less risk-averse

Figure 38: Attitudes toward finances, advice and risk, by race/Hispanic origin, April 2008-June 2009

Age determines risk acceptance

Figure 39: Blacks’ attitudes toward finances, advice and risk, by age, April 2008-June 2009

BANKING AND INVESTMENT SERVICES OWNED

Key points

INVESTMENT PRODUCTS OWNED

Investment products owned, Blacks vs. others

Figure 40: Investment ownership, by race/Hispanic origin, April 2008-June 2009

Investment products owned by Black adults

Figure 41: Investment ownership by Black adults, by household income, April 2008-June 2009

CREDIT MONITORING, ANNUITIES AND CDS—OWNERSHIP AND INTENT TO HAVE

Figure 42: Financial products owned by Black households, by household income, December 2009

Figure 43: Financial products owned by Black households, by educational attainment, December 2009

BANKING PRODUCTS

Blacks’ relationship with banking services

Banking products owned, Blacks vs. others

Figure 44: Banking/investment services owned, by race/Hispanic origin, April 2008-June 2009

Black banking/investment services owned

Figure 45: Banking/investment services owned by Black households, by educational attainment, April 2008-June 2009

Figure 46: Banking/investment services owned by Black households, by household income, April 2008-June 2009

LOANS HELD

Key points

Half of all Black adults do not have loans

Figure 47: Loan ownership, by race/Hispanic origin, April 2008-June 2009

Black adults more likely to have auto loans vs. mortgage

Figure 48: Loan ownership among Black adults, by household income, April 2008-June 2009

Education loans most likely among Black adults aged 18-24

Figure 49: Loan ownership among Black adults, by age, April 2008-June 2009

CARD OWNERSHIP AND USAGE

Key points

DEBIT CARDS

Lower levels of ownership of debit cards by African Americans

Figure 50: ATM/debit card ownership, by race/Hispanic origin, April 2008-June 2009

Black women have higher ownership of ATM/debit cards

Figure 51: ATM/debit card ownership, by gender, April 2008-June 2009

Black adults are frequent users of ATM/debit cards

Figure 52: ATM/debit card usage frequency, by race/Hispanic origin, April 2008-June 2009

The higher the income, the higher the usage of ATM cards

Figure 53: ATM/debit card usage frequency, by household income, April 2008-June 2009

CREDIT CARDS

Outstanding credit

Figure 54: Consumer credit outstanding, percentage change, 2005-09

Credit card ownership

Figure 55: Credit card ownership, by race/Hispanic origin, April 2008-June 2009

Credit card ownership higher among Black women

Figure 56: Ownership of credit cards by Black adults, by gender and age, April 2008-June 2009

Attitudes about credit card debt by Black consumers

Figure 57: Attitudes towards credit card debt by Black adults, by household income, December 2009

Educational attainment is not a guarantee of financial security

Figure 58: Attitudes towards credit card debt by Black adults, by educational attainment, December 2009

ATTITUDES TOWARDS FINANCIAL DECISION-MAKING, SOURCES OF ADVICE

Key points

BLACK HOUSEHOLDS LESS ENGAGED IN FINANCIAL SERVICES AND PLANNING

Overview

The unbanked

Unbanked by choice

High-risk customers

ATTITUDES TOWARD USE OF FINANCIAL SERVICES

By household income

Figure 59: Attitudes toward use of financial services by Black adults, by household income, December 2009

By educational attainment

Figure 60: Attitudes toward use of financial services by Black adults, by educational attainment, December 2009

SOURCES OF FINANCIAL ADVICE

Financial literacy is the key to success for Black investors

Figure 61: Blacks’ sources of financial advice, by household income, December 2009

Educational attainment is a factor in seeking financial advice

Figure 62: Blacks’ sources of financial advice, by educational attainment, December 2009

INSURANCE PRODUCTS OVERVIEW

Ownership of insurance products other than those provided by an employer

Figure 63: Insurance products (other than that offered by an employer) owned by Black households, by household income, December 2009

Figure 64: Insurance products (other than that offered by an employer) owned by Black households, by age, December 2009

Ownership of health insurance—total

Figure 65: Ownership of health insurance (empoyer provided and private), by race/Hispanic origin, April 2008-June 2009

Figure 66: Black household ownership of health insurance (empoyer provided and private), by household income, April 2008-June 2009

Importance of being well insured—home and life insurance

Figure 67: Importance of being well insured—home and life insurance, by race/Hispanic origin, April 2008-June 2009

HEALTH INSURANCE

Key points

Expenditure on health insurance

Figure 68: Average annual expenditures on health insurance, by Black and other races, 2008

Black households spend more of their healthcare dollars on health insurance

Figure 69: Distribution of average annual healthcare expenditures, by Black and other races, 2008

Changes in Black healthcare expenditures

Figure 70: Average annual Black household expenditures on healthcare, 2002-10

Figure 71: Changes in spending by Black households for medical expenses, by household income, November 2009

Sources of health insurance

Figure 72: Means of obtaining health insurance, by race/Hispanic origin, April 2008-June 2009

Figure 73: Black households’ means of obtaining health insurance, by household income, April 2008-June 2009

OTHER INSURANCE

Key points

Life insurance

Black adults are less likely to own life insurance

Figure 74: Ownership of life insurance, by race/Hispanic origin, April 2008-June 2009

Life insurance companies are targeting older Black consumers

Figure 75: Ownership of life insurance by Black households, by age, April 2008-June 2009

Auto insurance

Figure 76: Ownership of auto insurance, by race/Hispanic origin, April 2008-June 2009

Figure 77: Ownership of auto insurance by Black households, by household income, April 2008-June 2009

Homeowner’s insurance

Figure 78: Ownership of home insurance, by race/Hispanic origin, April 2008-June 2009

Figure 79: Ownership of home insurance by Black households, by household income, April 2008-June 2009

Disability and long-term care insurance

RETIREMENT PLANNING

Key points

A different kind of retirement

Figure 80: Attitudes toward individual’s responsibility for retirement planning, by race/Hispanic origin, April 2008-June 2009

As incomes increase, so does the belief in personal responsibility

Figure 81: Attitudes toward individual’s responsibility for retirement planning by Black adults, by household income, April 2008-June 2009

Younger Black adults assume more personal responsibility for retirement

Figure 82: Attitudes toward individual’s responsibility for retirement planning by Black adults, by age, April 2008-June 2009

Retirement savings

Figure 83: Ownership of 401(k) accounts, by race/Hispanic origin, April 2008-June 2009

Ownership of pensions increases with household income

Figure 84: Ownership of 401(k) accounts by Black adults, by household income, April 2008-June 2009

MARKETING AND ADVERTISEMENTS

Key points

TELEVISION COMMERCIALS

Narrow range of choices in financial services advertising

Figure 85: Colonial Penn Life Insurance, Pennies a Day—Spare Change, January 2008

Figure 86: The Money Tree, New Apartment, June 2008

Figure 87: The Cash Store, Carol, October 2007

Some companies are producing relevant, informative commercials

Figure 88: ING Financial, Clark, February 2010

Figure 89: Allstate Insurance, Lessons Learned, May 2009

Figure 90: E-Trade, Laughing Babies, February 2009

PRINT ADS

Figure 91: Wells Fargo, 2009

Figure 92: Prudential Financial, Retirement Red Zone, 2010

Figure 93: MetLife, Generation to Generation, 2009

Figure 94: State Farm, Honeymoon, 2010

U.S. BLACK POPULATION

Key points

U.S. population by race

Figure 95: Population, by race/Hispanic origin, 2004-14

Figure 96: Population, by race, 1970-2020

Figure 97: Asian, Black, and Hispanic populations, 1970-2020

U.S. Black population

Black population by age

Figure 98: U.S. Black population, by age, 2004-14

U.S. Black geographic concentration

Figure 99: Black geographic concentration, by region, 2007

Figure 100: States with the highest share of Black residents, 2008

Black metros

Figure 101: Metropolitan status of Black households, 2001 and 2007

Figure 102: Top ten metropolitan areas with the largest number of Black residents, 2006-08

APPENDIX: TRADE ASSOCIATIONS

Abstract

As banking regulations changed the fee structure for most banking products and interest rates declined, banks began to rely on fees and penalties to increase profitability. According to a Federal Deposit Insurance Corp. study in 2008, 93% of overdraft fees come from the 14% of customers who exceed their balances five times or more in a year. Aggressive overdraft practices have generated billions of dollars in fees for banks prompting some banks to actually focus their efforts on this minority, who are responsible for the vast majority of overdraft fees, in order to increase income.

Beginning in July 2010, banks will be prohibited from charging overdraft fees on ATM or debit card transactions unless the consumer agrees in advance (opt-in) and has been made aware of the fees involved. Although some consumer groups argue that the new regulations don’t go far enough, the option of having a $6 transaction refused which prevents a $35 overdraft fee is likely to be appealing to many consumers.

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