A new Urban Institute Study cites the need for black depository institutions to boost their technology infrastructure. According to the report, closing the tech gap is necessary to ensure that those black banks and credit unions can expand their service offerings to communities, companies, and individuals of color.
Black banks and credit unions are key providers of banking services like credit access in many communities of color, especially in areas of low-income. As the report notes, they have also been critical financial service providers for wealth-building in traditionally underserved communities. For example, black banks played a vital role in providing mortgages to black borrowers in the aftermath of the Great Recession.
The report’s authors note that the average black bank is only seven percent the size of the average nonminority bank, with black-owned credit unions being just 19 percent the size of their nonminority-owned peers. Despite this disparity in size and available resources, the authors suggest that black depository institutions will need to address the need for more digital banking services if they want to keep pace with changes in consumer behavior.
Calling on black banks to bridge the digital divide
According to data in the report, older black Americans are nearly twice as unlikely to use internet or mobile phone technology as their white counterparts. However, those numbers are dramatically different for black Americans born after 1965, nearly all of whom have access to those technologies.
The report does acknowledge that greater adoption of digital technology services will need to be accompanied by an increased emphasis on cybersecurity. At the same time, however, it argues that increased financial inclusion cannot just focus on “the demand side” as represented by unbanked consumers. It must also focus on the supply side by ensuring that these banks provide the key digital banking services those consumers expect.
“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. 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.”
