Banks lose millions by overlooking ‘black pound’

‘Overlooked and underserved’... why are multi-ethnic consumers still one of the world’s largest untapped audiences?

Group chooses brands and financial products differently to white consumers (PA)

Black, Asian and multi-ethnic consumers continue to be overlooked and underserved by a financial services industry that is still failing to adequately serve a diverse and financially powerful customer base, according to a damning report.

The findings echo long-standing criticism of an industry whose approach to diversity and inclusion is still in its infancy.

This group of consumers pay £268m into pensions each month and have a disposable income of £375m but choose brands and financial products differently to white consumers, the report reveals.

Based on a study of 3,500 multi-ethnic consumers, the report notes that black, Asian and multi-ethnic consumers are more likely to use multiple financial products, and be focussed on pensions and financial planning than white consumers.

Half of those asked said planning for the future financially was important to them, compared to 37 per cent of white consumers.

Around £268m is paid into the pensions of multi-ethnic consumers each month, yet just 54 per cent have a private pension, compared to 75 per cent of white consumers.

Of the group surveyed, Asian consumers are putting 28 per cent more away each month to their pensions than white people.

The “black pound” report refers to “multi-ethnic consumers”, those who are black, Asian, and multi-ethnic. Its aim is to educate businesses, including financial institutions, on how to appeal to this audience.

When it comes to savings, income, and investments, these consumers save an average of £6.2m every month and have a combined total of £62.5m in savings and investments.

This provides a huge opportunity for financial companies and shows the economic power this group has.

The total average monthly disposable income of these consumers is £375m or £4.5bn as an annual figure.

Yet these consumers are more likely to describe their financial situation as “getting by” when compared to white people, and a higher percentage say they have nothing or just a little left over after paying their bills.

The report says if a company or brand impressed them in some way, 78 per cent of multi-ethnic consumers would make a point of telling their friends about it compared to 67 per cent of white consumers.

If financial companies want to reach this audience, products also need to be carefully put together as 12 per cent of these consumers seek products that match their religious or cultural needs.

Multi-ethnic consumers want to shop with brands that have a commitment to diversity and inclusion throughout their entire business, from the products on sale to the staff they employ.

Of those asked in the report, 59 per cent say they are more likely to purchase products from a brand with an inclusive product range. It also found that many multi-ethnic consumers use specialist shops because of the limited stock on offer at some of the UK’s biggest chains.

They are also more likely to consider boycotts of brands than white customers.

Lydia Amoah, founder and chief executive officer of the agency Backlight, which produced the report, said: “I would like the black pound report to change how brands treat their consumers and treat everyone with respect and serve them equally.

“For the first time, this report shows the untapped economic power of the multi-ethnic consumer and allows businesses to understand an audience that has rarely been researched in depth. From media consumption through to health and beauty product choices, multi-ethnic consumers have distinct motivators. Businesses must understand and reflect these to sell their products and services and be truly inclusive.”

The topic of diversity and inclusion in the financial sector when it comes to race is nothing new. Last year the Financial Conduct Authority launched a discussion paper looking at this issue.

It said at the time it recognised the financial sector had taken steps forward on diversity and inclusion, but that there was clear there is still a long way to go and that despite years of discussion and many research studies, the conversation about diversity and inclusion was ‘in many ways is still in its infancy’

The report stated: “Large gender and ethnicity pay gaps still exist in the financial sector, there are parts of the industry which lack diversity at senior levels, and the products offered to customers still do not always meet the needs of disadvantaged groups.

“In addition, staff at both firms and regulators do not often have the vocabulary or skills to conduct open and constructive conversations about sensitive subjects such as race.”

Numerous studies have also shown how this group of consumers were also disproportionately affected by the coronavirus pandemic.

Given the current cost-of-living crisis, it’s likely this situation could get worse and the gap between these different consumers may widen.

Therefore, it’s even more important for financial companies to have processes in place to both provide suitable products to multi-ethnic consumers but also have systems to help and support them if they need financial assistance.