Cooperative Principle #7: Concern for Community. As credit unions, we take that principle seriously, working to serve our communities and support them in good times and bad. However, there are communities out there that are struggling to fit into the standard banking mold. For one reason or another (different backgrounds, different needs, special circumstances, etc.) these communities are currently underserved or underbanked. A few examples include the LGBTQ, Black, Latino, and immigrant communities.
Regardless of how their community came to be underserved, it seems they feel credit unions and banks are unwilling to help alter the standard mold and meet them halfway. In the areas where current financial institutions are failing to meet the needs of underserved communities, new FinTechs are rising to the challenge, created by those same communities—with the intent of filling in gaps left behind by traditional institutions and then returning profit to those communities.
In LGBTQ communities
Take Billie Simmons for example. After legally changing her name and gender over four years ago, she still faced a plethora of issues in regards to her financial situation. The most glaring of these problems was her bank’s inability to recognize her new name. Despite legally changing her name, her dead name continued to appear on her cards, accounts, and credit score reports. This meant Billie faced the fear of being outed with every purchase she made with her cards, with every piece of mail she received, and with every credit score check.
Though she eventually was able to get a card with her new legal name on it, it took four years after the change, several trips to the doctor, and numerous bank visits for them to allow the name change. What’s more, after overcoming the four-year struggle with her bank, she lost all financial history she had before the change, leaving her credit history incomplete, negatively impacting her credit score, and affecting her ability to be financially successful.
Billie’s experience is not an isolated incident. People in the LGBTQ community face similar issues and struggles, and feel they receive little cooperation or understanding from banks and credit unions. Billie noted, “On tough days that’s a really hard thing to grapple with. These banking systems are not designed for us.”
Feeling rejected from standard banking practices, Simmons founded Daylight, an online banking experience tailored to serve the LGBTQ community. Not only does Daylight come with all the features and appeal of a modern FinTech, but it offers understanding and convenience to a community that has historically been overlooked by financial institutions.
Daylight members can get accounts and cards that show their chosen name, even if their legal ID says otherwise, a community that supports and understands them, and work with staff tailored to them and not just “friendly to them,” along with budget tracking, card locking, early pay, and other benefits offered by modern financial institutions.
Daylight also argues that while many banks claim to support the LGBTQ community, many in fact donate to projects and politicians that work against them, whereas Daylight was made by the community, for the community.
In immigrant communities
The LGBTQ community isn’t the only one who feels rejected by standard banking practices. Immigrants also face unique struggles with the modern banking system that FinTechs are looking to overcome.
Perhaps the largest struggle relates to credit scores and credit history. When moving to the U.S., immigrants lose their credit score from their country and need to start over. Even someone immigrating from a country as close and similar to the U.S. as Canada, with an outstanding credit score, would technically have no credit information upon their arrival.
This credit history wipe can make it incredibly difficult for them to do even simple tasks, such as open a bank account. Lack of credit also means they cannot obtain car loans, cellphones, or apartments—all of which require a credit check. Even some employers will run credit checks before hiring. It can take years for them to build credit but even once they do, banking can still be a struggle.
Ken Lian for example, founder of Cheese Financial—a banking service created for “immigrants, Asian Americans, and people who wish to support those communities,”—now has a FICO score of over 800 after immigrating to the U.S. in 2008, but is still rejected from financial institutions because of his “new” status in the country—despite having been here for over a decade.
Similar to Simmons, Lian decided to take matters into his own hands and create a financial institution that worked for him and those like him. Cheese Financial aims to provide banking services to those with little to no credit history or who are new in the country. They are also working on expanding their reach and are hoping to be able to offer service to customers without taking a social security number.
Furthermore, Cheese is promising to donate $100,000 back to the community and is pledging $10 for each new user that signs up. Along with incentives such as 10% cash back at over 10,000 stores and Asian businesses, early paychecks, and no fees. It rewards users by investing money right back into their community.
In Black and Latino communities
According to the Federal Reserve, 14% of Black households and 10% of Latino households were without bank accounts as of 2019 and 31% of Blacks and 24% of Latinos were reported as underbanked. This is in part because non-white majority neighborhoods have fewer banks and credit unions than white-majority neighborhoods and those institutions have higher account balance requirements to avoid service fees in non-white majority neighborhoods.
This means that it is disproportionately harder for these groups to succeed financially in the modern banking system. To help counteract this, there has been a recent uptick in “Black Banking.” In fact, it’s estimated that over $60 million dollars has been moved into Black banks since 2016, when rapper Killer Mike, during a TV appearance, urged people to move their money to black-owned banks.
Journalist Marielle Segarra notes that, “The message of the Bank Black movement is that people should invest in these banks, that they serve the black community in ways other banks don’t.” This has led to the startup of several Fintech companies including First Boulevard, Greenwood, and MoCaFi.
All offer the same benefits of other financial instituions (early paychecks, budget tracking, no ATM fees, etc.) along with the social incentives that show they have an honest concern for community. Greenwood, founded by the previously mentioned Killer Mike, Ryan Glover, and Amb. Andrew Young, gifts $10,000 every month to Black or Latino owned businesses, along with donating enough money to provide five meals to a family in need with each account that is created. Meaning that those in the community know their money is going right back into the community.
How are we serving these communities?
With modern technology and online services growing, underserved communities are no longer content to try to fit into a banking mold that wasn’t made for them. Instead, they’re taking finances into their own hands and creating experiences tailor-made for their communities in ways that allow them to and reward them for giving to their community.
Credit unions’ field of membership is typically location based, with a large emphasis on community (see Cooperative Principle 7) but they may soon find more and more people in their communities may feel less of a connection to physical location and more so to identity-based communities. Credit unions should be reevaluating how they’re working to cater to these members while showing they care and understand their different life experiences and needs, not just with words but with action and services.
Efforts such as those of Myles Meyers, the founder of Superbia Credit Union, America’s first serving the LGBTQ community, should be lauded. However, despite announcing the signing of their charter in September 2019, according to Superbia’s website, the organization is still awaiting regulatory approval to operate in 2021. Will other underserved communities consider the credit union model when the prospect of launching a new credit union is so covered in red tape? As Chip Filson recently described it, “Today, NCUA’s chartering process is at best clogged and at worst non-existent for everyone.”
If the NCUA will not cooperate, it will fall on existing credit unions to make a difference. Are you allowing name changes on debit cards? Supporting those with little credit history? What is your credit union doing to be financially inclusive? If you don’t have solutions for the problems above, maybe it’s time to start brainstorming some. Perhaps your credit union already has a number of community programs, but unless you’re reaching out to all of the community—including those underserved—you’re going to miss out on potential members.