Thousands of Black Americans Have Left Formal Banking Behind And Are Now Leading the Way In Digital-Only Banking
Black Americans are using digital-only banks as their primary financial institution more than any other ethnic group in the U.S., a new analysis from business research firm Morning Consult found.
Morning Consult drew its analysis from a series of surveys between July 2021 and January 2022. The firm found that 14 percent of Black people said a digital bank was their primary banker compared to 8 percent of white people and 13 percent for Hispanics. Black people also outpace other ethnicities in having credit union accounts, the surveys found.
Charlotte Principato, a Morning Consult financial services analyst who authored the study, said the surveys mean traditional brick-and-mortar banks will need to step up their online features if they want to attract or keep Black customers. Principato also said more Black people are adopting digital banks because those institutions are doing exactly what consumers are desiring.
“Many digital-only banks have the expressed goal of reaching traditionally underserved populations, so it’s not surprising that they have been successful in serving and gaining primacy in the wallets of Black consumers,” Principato wrote in her analysis.
Digital-only banks are financial institutions that exist only online, do not have physical branches and offer the same services as institutions such as Chase, Wells Fargo or Bank of America. Both the number and popularity of digital banks — including Ally, OneUnited and Varo — have exploded in the past decade.
Black Americans like how digital banks integrate other financial apps that they use often — like Venmo and Zelle, said Kevin Cohee, One United’s CEO. The mobile apps from digital-only banks offer more functionality and new features are added more frequently than the apps from traditional banks, Cohee said.
“If you’re not using digital banking, then you’re not banking,” Cohee told Finurah.
Economic research over decades has shown that Black Americans have a scorned relationship with banks. Banks have denied would-be Black homeowners home loans and approved credit cards with higher interest rates when compared to other ethnicities. Because of these trends, thousands of Black Americans have left formal banking altogether.
A majority of unbanked and underbanked Americans are Black, according to Federal Reserve data from 2019.
Read full story at Finurah here.