Two of my chores as a kid involved helping my grandmother to balance her checkbook and to organize her bank statements.
(Yes, I had a strange childhood)
I was pretty good at the checkbook balancing part. But organizing bank statements? Forget it. I was hopelessly disorganized. And when my grandmother became more forgetful as she aged, we were hopeless together. Out of twelve statements a year, we’d probably lose six of them.
The missing bank statements caused a ruckus every tax season. My aunt – a no-nonsense executive assistant to the President of the local university – would visit to collect my grandmother’s documents for the accountant. We’d shrug and give her the five or six we had. She’d not-so-delicately voice her displeasure.
“I don’t understand,” she’d crow, “why you can’t just take the envelope out of the mailbox and put it in the damn drawer!”
I’d promise to do better, but I never would.
One year I found a workaround. I went to the local bank branch, explained my plight to the cheerful branch manager, and asked if banks ever produced duplicate statements. Then I watched a half dozen bank tellers trip over themselves trying to help me out. I can only imagine how adorable they thought it was that I was there to help my grandmother. “Take a lollipop on your way out, kid.”
I became very comfortable in banks through this whole ordeal. I learned at an early age that banks were where you went if you needed help with money. Soon I had a savings account of my own, then a checking account, then a CD, etc. I was off to the races.
The Privileges of Banking
Sadly, far too many Americans don’t have the same positive experiences with banks, and some don’t have access at all. A 2016 study by the New York Federal Reserve found that over 5,000 bank branches closed after the financial crisis, turning many lower-income communities into “banking deserts.” In these locales, it’s much harder to access the basic financial services that even slightly more middle-class Americans use to pay bills and build wealth.
To compound this issue, payday lenders and check-cashing stores often replace local bank branches. A 2016 piece in The Atlantic likened these establishments to “fast-food chains and convenience stores.” They’re easily accessible…but not healthy. The average payday loan borrower, The Atlantic noted, spends over $500 a year in interest on those loans.
Often the axis of banking success splits along racial lines. According to a 2019 report from the Federal Reserve, 14 percent of Black Americans and 11 percent of Hispanic Americans are unbanked, opposed to only 4 percent of White Americans. Traditionally, Black Americans have been best served by Black-owned banks. But as Bloomberg noted recently “the combined assets of Black-owned banks have actually declined,” since 2008, while “the big banks have gotten $2 trillion bigger.”
Add it all up and we’re left with a difficult situation for anyone interested in the financial well-being of his or her neighbor.
Rays of Hope
Fortunately, there are some positive developments taking place. Rapper Michael Render (aka Killer Mike) has worked to make progress for Black-owned banks. His #BankBlack campaign helped One United Bank in Boston raise $50 million in new deposits after the death of George Floyd.
There’s also an explosion of creativity in the mobile banking space and in mobile finance apps in general. There are start-up companies like CapWay that offer checking accounts, debit cards, and financial education through their mobile app. Interested customers only need to download the app on their phone.
Cryptocurrency could also serve an important role. Tyrone Ross Jr., financial advisor and CEO of OnRamp Invest, sees Bitcoin as being an attractive solution for the unbanked and underbanked.
“We are at a point where it’s hard to discuss social justice and ignore Bitcoin’s ability to empower the unbanked,” Ross said. “It is already doing this in many developing nations, but slow to catch on here in the United States because of our myriad of banking choices. Until we get a real-time payments system here, in the US, cryptoassets provide the real-time settlement peer-to-peer rails that don’t require a third party.”
Finally, more established banks appear to be…(sorry)…branching out as well. JP Morgan recently partnered with Harbor Bank in Baltimore to open a branch in Cherry Hill, a neighborhood that “has lacked access to financial services from a national bank for far too long,” according to Harbor Bank CEO Joseph Haskins.
A Cause Worth Fighting For
As a financial planner, I strongly believe in the importance of education and financial literacy. My early experiences with banks helped spark an interest in “how money works” that has served me well throughout my life. But the “banking desert” problem shows that education alone isn’t enough. Work needs to be done to mitigate the structural challenges many unbanked people face. Everyone, regardless of race or class, would benefit from better access to basic financial services.
As planners, we should lend our voices to the cause of democratizing financial access whenever we can.