Black Americans use digital-only banks as their primary financial institution…
Black Americans use digital-only banks as their primary financial institution more than any other ethnic group in the United States, a new To analyse from business research firm Morning Consult found.
Morning Consult drew its analysis from a series of surveys between July 2021 and January 2022. The firm found that 14% of black people said a digital bank was their primary banker, compared to 8% of white people and 13% of Hispanics. Blacks also outpace other ethnicities in having credit union accounts, surveys show.
Charlotte Principato, Morning Consult financial services analyst and author of the study, said the surveys mean traditional banks will need to bolster their online capabilities if they want to attract or retain black customers. Principato also said more black people are embracing digital banks because these institutions are doing exactly what consumers want.
“Many digital-only banks have a stated goal of reaching traditionally underserved populations, so it’s no surprise that they’ve been successful in serving and earning primacy in the wallets of black consumers,” Principato wrote in his analysis.
Digital-only banks are financial institutions that only exist online, have no physical branches, and offer the same services as institutions such as Chase, Wells Fargo, or Bank of America. The number and popularity of digital banks – including Ally, OneUnited and Varo – have exploded over the past decade.
Black Americans like how digital banks integrate other financial apps they often use — like Venmo and Zelle, said Kevin Cohee, CEO of One United. Digital-only bank mobile apps offer more functionality and new features are added more frequently than traditional bank apps, Cohee said.
“If you’re not using digital banking, then you’re not banking,” Cohee told Finurah.
Economic research over decades has shown that black Americans have a despised relationship with banks. Banks denied prospective black homeowners home loans and approved credit cards with higher interest rates compared to other ethnicities. Due to these trends, thousands of black Americans have left the formal banking system altogether.
According to 2019 Federal Reserve data, the majority of unbanked and underbanked Americans are black.
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