Unexpectedly, the Federal Deposit Insurance Corporation’s Annual Bank Research Conference, a few weeks ago, got me thinking about the importance of having African-American founders building financial technology tools for the unbanked and under-banked.
I had been sitting in this conference thinking about how it would be nice for there to be more African-American representation in the room because of the impact the banking sector had on the African-American community when you think about lending practices among other things. I could count five in the room. So, you can imagine my surprise when FDIC Chairman Gruenberg started talking about unbanked and under-banked rates in the US in his keynote address. He presented data that provided insights into unbanked and under-banked rates across demographics. The data on the African-American community caught my attention, in particular.
While the rate at which African-Americans are unbanked and under-banked is falling (among US households, 18.2% were unbanked in 2015, as opposed to 20.6% in 2013), we are still the most unbanked and under-banked in the US and the FDIC apparently is working to figure out how to continue to drive this rate lower.
Two of the more interesting parts of Chairman Gruenberg’s speech were some of his suggestions for encouraging households to enter traditional banking channels was to eliminate fees associated with opening an account and dealing with overcharges, and his comments on the FDIC’s findings about under-banked households are more likely to own a mobile phone and using it as the primary tool for their finances.
The Chairman highlighted opportunities for banks to bridge the gap between unbanked and under-banked by using the mobile phone not only for traditional banking functions, but also to provide updates on the status of accounts in a timely fashion, and to send alerts to help manage over-drafted accounts and other things that could leave the bank account vulnerable.
When Chairman Gruenberg brought up the FDIC’s observations about the rates at which the unbanked and under-banked use their mobile phones and how that could be an opportunity for the banking sector, I couldn’t help but think about the makeup of the technology industry and the rate at which African Americans are underrepresented. From there, I thought about all of these financial technology products that take different approaches to helping people manage their money, but how I could think of few that had the African-American community in mind from their creation. Off the top of my head, PYT Funds is the only one that comes to mind.
The majority that come to mind speak to the lived experience of their makers who have experience with pain points very different from those are unbanked and under-banked. So, an app that skims off the change in your online transactions and sends that to a savings account has the opportunity to meet the need of individuals in this group, but don’t necessarily have them in mind from the beginning. This is important when trying to develop products that are helpful from the perspective of an individual who is trying to think through where the money for the month is going to come from, the status of their employment, and other things that impact their ability to engage in traditional banking.
Clearly, this is an opportunity for banks and other companies in the finishing technology space to figure out how to meet the needs of the unbanked and under-banked. I would love to see founders who are familiar with this experience through actually having lived it or have seen it from a relatively close vantage point be the ones to execute on it.