Big banks launching diversity initiatives and neo-banks entering the market to address underbanked communities of color
The social unrest during America’s COVID summer has taken a welcome – if unexpected – turn of events for the banking industry. What started as an outgrowth of Black Lives Matter, the #bankblack movement is bringing more attention to disparity and diversity in financial services. Following the call to bank Black, OneUnited Bank in Boston immediately garnered $50 million of new deposits. Now, needed conversation is taking place, spurring those in big banking to respond with more diverse recruitment efforts and leaders outside banking to prioritize people in underbanked communities of color.
According to American Banker, “Unfortunately, some leaders in the banking industry and others have incorrectly claimed that a lack of diversity was due to not having enough diverse candidates. Such claims were recently made by Wells Fargo CEO Charlie Scharf, only reigniting the debate.” To begin reckoning with lack of diversity in its ranks, what banking must do is expand its traditional means of recruiting talent. One source of inspiration is community banking and credit union models where FIs focus on tapping people from within local communities for key management roles.
Rather than pushing diversity from inside the industry, some community leaders from outside financial services are taking on the mantle of leadership themselves. In Durham, NC for example, a recognized local business owner and social media influencer have launched “Bank Black Durham” to encourage people of color to bank with local, Black-owned banks, with a goal of increasing “Black homeownership by 10 percent in the next decade and grow the ranks of Black-owned small businesses by 25 percent in the next five years.”
Now comes a national neobank – Greenwood Financial – founded by civil rights icon Andrew Young, TV executive Ryan Glover and rap star Killer Mike to provide financial services to an underserved audience. With less lending and mortgage approval among people of color, Chairman of Atlanta-based Greenwood, Glover says, “It’s no secret that traditional banks have failed the Black and Latinx community.” So, how are these underserved communities responding? In less than 24 hours, Greenwood received “tens of thousands” of account requests.