How banks like Chase are expanding their branch networks to help support the quarter of low-income Americans without access to financial services
Perhaps one of the most significant but unanticipated side effects of “the uninterrupted march toward fewer branches since 2010” has been how closures would further disadvantage underbanked communities. If branches were becoming irrelevant with transactions migrating digitally – as so many industry watchers predicted – who could have foreseen the adverse impact on consumers and communities? Now, the relationship between access to branches (or lack thereof) and underbanked communities has become clearer, and banks and credit unions are stepping up to do something about it.
While the proportion of unbanked Americans has stayed steady at 6% over the past two decades, a deeper dive into Federal Reserve data reveals that 23% of low-income Americans are living “without access to any traditional financial services such as savings accounts, credit cards or personal checks,” according to CNBC reporting. That matters because underbanked people are more susceptible to predatory practices and don’t have secure ways to keep their money safe. The issue is most pressing in communities of color, with Black and Hispanic adults 14% and 11%, respectively, more likely to be unbanked than their white counterparts.
“Much of this disconnect between financial institutions and communities of color can be attributed to lack of banks in their neighborhoods,” according to CNBC in their interview with Joe Lugo, founder and CEO of J^3 Creations, a consultancy helping businesses with cultural competence. Lugo says, “There is a subliminal message being sent to the community from generation to generation. When they don’t see a financial institution or a bank, they tend to say, ‘There’s no avenue for me this way. If I had a dream to start a business or buy a home, that’s not for me because they don’t exist here.’”
For Jamie Dimon, this need for access represents an opportunity to serve. According to the Wall Street Journal, JPMorgan Chase plans to open nearly 100 new branch locations in low-income communities across the county, including “inner cities and rural towns where banks have been shrinking their footprint for years.” These new branches are community centers with the usual elements of a prototypical branch, like tools for transactions and staffing for support, in addition to open public spaces for hosting small businesses and financial literacy workshops. Piloting this model for the past five years, Chase is now ready to roll it out nationwide.
“This is not just ‘do-gooding,’ this is business,” says Dimon to the Wall Street Journal. “We measured these branches by number of customers, deposits, investments, and the model works.” In addition to typical bank staff, Chase is hiring 75 new community managers – not to sell or market Chase products and services but to “partner with community organizations and help teach residents on best practices to grow their wealth and build trust in the Chase brand at the same time.” Diedra Porché, head of community and business development for Chase says, “What we’re doing is a comprehensive approach to lifting a community economically.”
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