Will Low- And Moderate-Income Communities Be Left Behind In the Future Of Banking?

Will Low- And Moderate-Income
Communities Be Left Behind In the
Future Of Banking?

PCDC Executive Director John Chin participated in a discussion panel about the future of banking for communities of color at the People & Places Conference in Alexandria, Virginia in April. Retail banking has evolved since the Great  Recession: 1) government regulators have required changes, and 2) financial institutions have modified their services to meet the needs of today’s customer. However, does the offering of tomorrow’s services meet the needs of communities of color?

The dialogue left many impressions. Here are a few. One, banking challenges before 2008 remain for communities of color. Two, a banker said that government regulations create challenges for financial institutions to offer products that meet the needs of low-income communities; although this position was contested by others. Three, Fintech (Fintech is a term used to describe financial technology, an industry encompassing any kind of technology in the financial services) is modernizing banking, but how does it meet the needs of low-income communities? Four, banking barriers remain and cause low-income people to pay exorbitant fees for check-cashing and pay-check advancing.

Mr. Chin suggested that banks can do more to meet the pay check-cashing needs of low-income communities so that workers can retain a greater percentage of their wages. Banks can offer short-term borrowing for paycheck advances or small business accounts receivable and inventory loans. Banks can create a cash fund, which would serve as collateral for short-term borrowers. This program could be designed to incentivize rapid repayment, while helping to build credit history and move people into banking.      

Mr. Chin joined panelists Policy Link Director Chris Brown, Citi Community Development Vice President Christina Corea, Prosperity Now Senior Policy Manager Emanuel Nieves, and UnidosUS Senior Policy Analyst Marisabel Torres. This panel discussed the research from data and focus groups carried out by members of this panel in 2018. The report will be released in late May 2019.