WASHINGTON, D.C. (May 29, 2014) — As the United States shifts to a majority-minority population over the coming decades, banks and other financial institutions will need to develop new strategies and tools to engage the customers of the future: communities of color.
A new report, “Banking in Color: New Findings on Financial Access for Low- to Moderate-Income Communities,” examines how low- to moderate-income households across various communities and states are meeting their financial needs, and the levels to which they are financially engaged.
“Five years after one of the worst economic downturns in U.S. history, communities of color are still struggling to recover the huge amount of household wealth that was lost, while simultaneously dealing with an existing foreclosure crisis and high levels of unemployment,” said Eric Rodriguez, Vice President of the Office of Research, Advocacy and Legislation at NCLR (National Council of La Raza). “In order to guarantee the future economic stability of this nation, we have to get our communities on a path to financial security, which begins with identifying the information and tools that they need to bank better.”
This new report, authored by the Alliance for Stabilizing our Communities (ASOC) — including National Coalition for Asian Pacific American Community Development (National CAPACD), National Urban League (NUL) and NCLR—noted a number of potential opportunities for financial institutions to improve banking for low-income consumers. For example, although the majority of participants surveyed had a checking or savings account with a traditional bank, they tended to avoid the rapidly expanding online and mobile banking platforms in favor of face-to-face transactions, due to security concerns. And while 60 percent of respondents reported owning at least one credit card and using it regularly, less than half of respondents knew their credit score.
“Understanding how communities of color access financial products and services is critical to identifying barriers in achieving economic security for the most financially isolated and vulnerable families,” said Lisa Hasegawa, Executive Director for National CAPACD. “This report gives the financial services industry and policymakers guidance on meeting the needs of low- to moderate-income communities of color, and underscores the importance of linguistically and culturally appropriate services.”
While low-income families are trying to save, they remain vulnerable to emergencies as they try to replenish the savings cushion they lost during the economic downtown. Although more than half of individuals surveyed said that they save via deposits into a savings account, few said that they would have enough money to cover unexpected expenses or emergencies. Data also showed that these communities are behind in saving for retirement.
“The findings from this research do more than simply underscore what we already understand about the economic precariousness in communities of color,” said Cy Richardson, Senior Vice President, Economics and Housing, National Urban League. The report hones in on key cultural characteristics that drive consumer demand and provides a pathway for the financial services sector to align new products with community needs. Beyond the recommendations themselves, this project reflects the shared racial fate that binds the three author organizations, who came together a half decade ago to form the sustainable partnership that is the Alliance for Stabilizing [our] Communities.”