UnidosUS and PolicyLink Issue New Report on Banking in Communities of Color
Report supported by Citi focuses on how the financial sector can reduce barriers to financial inclusion in communities of color
WASHINGTON, DC—UnidosUS and PolicyLink, at the Asset Building Policy Network (ABPN) South Florida Economic Inclusion and Racial Equity Convening in Ft. Lauderdale, Florida, today issued a new study on the challenges low- and moderate-income (LMI) people of color face in obtaining safe and affordable financial products and services. The report entitled, “The Future of Banking: Overcoming Barriers to Financial Inclusion for Communities of Color,” focuses on how financial service providers have an opportunity to reduce disparities, and it provides recommendations on reforms to advance financial inclusion.
“Barriers to financial inclusion prevent people from fully participating in the American economy, and the data shows that minority communities struggle to access traditional banking products and services,” said Marisabel Torres, Senior Policy Analyst for UnidosUS. “In our report, we look at the experiences of people of color as they seek out financial services, and we connect the dots and make recommendations across the whole financial system—from traditional banking, financial technology, regulations and policy.”
“Our findings help illuminate the path forward for banks, fintechs, regulators and others to collectively begin a race to the top – towards financial inclusion for all—by adequately serving the financial needs of the 63 million people who have been shoved to the sidelines of our economy,” said Chris Brown, Director, PolicyLink. “If we can leverage innovations to construct the proper regulatory frameworks and incentivize inclusive financial models, everyone can win. But we have to do it intentionally, safely and equitably.”
“For more than a decade, Citi has collaborated with Asset Building Policy Network members to produce research and innovative solutions to help expand economic opportunities for lowerincome members of communities of color,” said Jasmine Thomas, Senior Vice President, Citi Community Development. “Our aim is to help enable key stakeholder groups better understand and support intentional efforts to close the racial wealth gap and build more inclusive cities for all.”
UnidosUS—the nation’s largest Latino civil rights and advocacy organization—and PolicyLink— a research and action institute focused on advancing racial and economic equity—conducted their research by interviewing leading stakeholders and experts in the financial sector and conducted focus groups with LMI communities of color in San Diego, Los Angeles, Chicago and Philadelphia.
Financial data for LMI consumers points to alarming inequities. For example, nearly half of Latino (43 percent) and Black (47 percent) households are unbanked or underbanked. These communities will often turn to alternative financial services that are extremely costly and have less regulation. More people need access to affordable transactional services, credit and loans.
The report details specific challenges LMI consumers face like identification requirements, high fees and balance minimums, fewer bank branches in LMI communities, language barriers, nonexistent and poor credit histories and predatory alternatives.
The report also cites barriers to progress like actions that have increased regulatory uncertainty. The report made recommendations to ameliorate financial isolation and to facilitate economic integration for underserved families, especially lower-income and minority communities. Some of the recommendations are:
- Creating a nationwide network of financial system “navigators” for the underbanked and unbanked.
- Increasing the accessibility, accountability and utility of financial institutions to meet LMI consumers’ needs.
- Adopting a more inclusive credit rating system that works for all.
- Increasing transparency and reforming the checking account reporting system.
- Increasing credit availability to low- and moderate-income consumers.
The ABPN is a coalition of leading civil rights organizations, formed in 2008 with founding support from Citi, with the goal of developing and advocating policy solutions that close the racial wealth gap. This report builds on prior quantitative research by the ABPN in 2014, which included UnidosUS, the National Urban League and the National Coalition for Asian Pacific American Community Development, where more than 5,000 low income individuals in minority communities were surveyed about their interactions with the financial sector. The new study uses a qualitative approach of consumer and stakeholder interviews to better understand the limitations of the current financial system and foster ideas for innovation.
To read “The Future of Banking: Overcoming Barriers to Financial Inclusion for Communities of Color,” please click here.