President Joe Biden spent Monday (March 13) morning assuring everyone that the nation’s banking system is safe after the collapse Friday (March 10) of Silicon Valley Bank (SVB) – which sent shockwaves to global financial markets.
Meanwhile, the steady erosion of Black-owned financial institutions has gone largely unnoticed. These institutions are a cornerstone of Black communities, providing home mortgages, business loans, and financial services to people left out of the mainstream banking system.
Half of all Black-owned financial institutions closed permanently between 2018 and 2021, according to Forbes. As of 2021, only 42 Black-owned banks or credit unions existed in the country, and experts say the numbers will continue to decline.
Closing the technology gap between Black-owned financial institutions and mainstream institutions could stem the erosion, according to an Urban Institute study published in February.
“By improving their technological apparatus, Black depository institutions can more efficiently grow and expand services to communities of color,” the report’s authors say.
The benefits of digital banking isn’t just about convenience to consumers. Technology provides a means of growth for financial institutions, the report highlights.
For example, technology could enable a Black-owned credit union in Chicago to serve customers in Brooklyn or South Central L.A. instead of limiting itself to local residents. Technology would also help lower the cost of maintaining brick and mortar facilities.
The researchers used Black credit unions as a proxy for Black financial institutions in general because credit unions account for 95 percent of the combined number of Black credit unions and banks.
According to the study, only 52 percent of Black credit unions had an informational website compared to 82 percent of non-minority credit unions and 79 percent on non-Black minority credit unions. The disparities were similar for offering online banking services.
When it comes to mobile apps, only 36 percent of Black credit unions offered mobile services, compared to 73 percent of non-minority and 65 percent on non-Black minority credit unions.
The researchers hope the report draws wider attention to the tech gap and inspires action. Currently, private, philanthropic and public sector organizations are helping to close the gap.
“By strengthening the technological apparatus of Black depository institutions, the investments the federal government and other stakeholders have made can help close the current technology gap that threatens the future of these institutions,” the report states.
“Although eliminating technological disparities cannot solve all the challenges these institutions face or the communities of color they serve, closing this gap could better enable them to provide communities of color more access to financial opportunities and ultimately help address the broader racial wealth gap.”