Cash Is Crucial for Business in Latino Areas, Study Says
By CHRIS CZIBORR
Orange County Business Journal
Cash is king for a segment of Orange County’s growing Hispanic population.
Roughly 40 percent of the county’s Hispanics bypass banks and rely instead on cash for just about everything spending $2.4 billion a year, according to a report by California State University, Fullerton’s Center for Public Policy and the Institute for Economic and Environmental Studies.
Hispanic cash spending supports scores of jobs in businesses that have sprung up around it: specialized retailers, money transfer and check cashing services and trucks that sell a variety of products from produce to ice cream in Hispanic neighborhoods.
Many Hispanics rely on cash for practical and cultural reasons. Some aren’t legal residents and lack U.S. documents needed to open a bank account. Still others come from countries where trust in the banking system isn’t what it is here.
“A lot of our customers don’t have bank accounts because of the formalities involved,” said John Vallejo, Anaheim store director for Fullerton-based Hispanic grocery chain La Rioja.
The company’s stores in Anaheim, Fullerton, Santa Ana and Buena Park do more sales in cash than credit or debit cards, “especially compared to a Vons,” he said.
On a day with, say, $13,000 in sales, only about 10 percent would be done with plastic, Vallejo said.
While the cash spending of Hispanics supports a thriving subset of the county’s economy, banks are missing out, according to the Cal State Fullerton report. They forego $357 million in Orange County deposits each year, according to the university.
Those deposits 95 percent of which would be loaned out could support nearly 4,000 Southern California jobs a year, the report finds.
Similar research covering the Chicago area found more than half of all Hispanics there had no bank accounts, said Cal State Fullerton associate economics professor Radha Bhattacharya, who did the study with associate economics professor Denise Stanley.
Other immigrant groups such as the Vietnamese also rely on cash. But the impact of Hispanic cash spending is bigger: Hispanics make up 31 percent of Orange County’s 2.9 million people and are the county’s fastest-growing group.
Roughly 215,000 people don’t use banks, according to the study, and their ranks are growing along with the overall Hispanic population.
Even those Hispanics who do use banks tend to be more “cash centric” than average Americans. The main reason many Hispanics eschew banks is the need for identification and minimum balances.
Hispanics turn to cash for cultural reasons, Vallejo said. “A majority might see credit cards as a bad thing,” he said. “People worry about running up balances.”
Corona-based furniture and electronics retailer La Canasta Furnishings Inc., which has stores in Santa Ana and Anaheim, relies heavily on cash, especially in Santa Ana, said Frederico Uribe, the company’s sales and marketing vice president.
The stores often extend credit to buyers, more so than mainstream retailers, Uribe said.
“Hispanic customers are pretty good in terms of maintaining their credit-worthiness with us,” he said. “Most use cash to make down payments. A majority of our (Santa Ana) customers use cash to make installment payments.”