Here’s How You Save Black Banks

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Written by Stanley Fritz

 

The black community is at a crisis point with our dollars, and it’s because Black-owned banks have become an endangered species.

The number of black banks in the U.S. fell by 24 percent between 2007 and 2009 — almost double the decrease that historically white-owned and white-run banks had over a longer period from 2007 to 2013,

While this generation has been diligent in its efforts to support Black and POC-owned/run businesses, Black banks have remained the one entity that hasn’t gotten the love. Because of this, the visibility and existence of Black banks has dwindled to dangerous levels.

After reaching a high of 55 Black-owned banks in 1994, there are currently only 23 remaining. At this rate only seven will be left by 2028, according to a report by Creative Investment Research, a company that focuses on minority-owned businesses.

Some people might believe that Black-owned banks are no longer necessary. That couldn’t be further from the truth.

While there are plenty of non-POC options for banking, these institutions are not always with or for POC communities. We’re depositing our dollars into banks that have zero incentive to invest in our people, and that discriminate in their loan practices. Instead of giving back, they’re blocking people of color from financial opportunities and making money off of industries that negatively impacted us.

Black banks
illustration by Carlos Aponte

We don’t have to put our dollars in places that will use it against us. Black banks, with the right support, can still serve as pillars of our communities. And with black dollars available they can and will reinvest into the neighborhoods while providing needed capital. Unfortunately, the support hasn’t arrived, and what they currently have isn’t enough to have a real impact. Without our help they will continue to drop like flies and our neighborhoods will turn into financial deserts.

Before you panic, know that there is potential for change.

The tech industry may have the silver bullet to save a once-mighty corner of the financial sector. Which is why Black-owned banks should follow the wave of financial evolution, and join the peer-to-peer cash market.

Right now millions of people are transferring money to friends, paying bills, and even giving out loans through peer-to-peer apps. The most popular tools for this process are Cash App, Venmo and Paypal.

These apps allow for the transfer of money, no matter the bank, within minutes. In the short period they have been available to the public, these apps have changed the way people go out, pay bills, and even track their transactions. It has also been lucrative for the companies that run these apps.

Take Square Cash for example. According to its SEC filings, roughly $1 billion dollars was processed through Square Cash in 2015. A good chunk of that $1 billion came directly from the peer to peer transactions of their cash app.

Imagine if there was a Black-owned equivalent to Cash App, or its rival, Venmo. It would allow you to send money to friends, family, and others, request payments and even temporarily store funds. This would be a game changer. Now, imagine that same app being backed by a physical bank? It would have all of the same features of Cash App, Venmo, and PayPal, but the small fees usually attributed to these apps would be feeding into a Black-owned and run institution.

But let’s dig deeper. How would this work? Well, it’s pretty simple, the hardest part would be finding the right people to create such an app, and eventually finding users. With a bank behind it, getting the necessary certifications for transactions should happen without much fanfare.

Once the technical work is taken care of, the app could be promoted as the money app that builds Black power, Black business, and Black communities. Participants would be able to send and receive payments. Bank-to-bank transactions with the usual wait time would be free. Same-day transactions can be charged 25 cents, and if you opened an account with that bank and held at least $100 in it, those transactions would be free as well.

A structure like this has the potential for Black-owned banks to tap into a lucrative industry, and significantly grow the number of account holders in their universe. An added bonus is that Black and brown consumers wary of the banking industry would finally have a viable competitor to the white-owned apps whose leaders have not always been allies to our communities or politics.

The way we spend, save and receive money has changed, but that doesn’t mean the need for Black banks is no longer there. We have the opportunity for these important industries to step into fresh waters, and we must use this moment of crisis to get creative and evolve.