Sunday, September 18, 2016

Black Banking is a Great Idea. Are Black Consumers Finally Waking up ?

We support the Bank Black Movement !!! And we are moving some of our money from the local credit union to OneUnited Bank. We have long championed Black Economic Empowerment. Now it is time to do something about it. We hope it is a sign of a larger awakening by Black consumers.

Black consumers spend and estimated between $1.1 and $1.2 trillion dollars a year.

The Bank Black movement started when rapper and activist Killer Mike (Michael Render) gave a radio interview after the killing of Philando Castile and Alton Sterling.  During the interview Render called for Black people to withdraw their money from banks and corporations that "don't speak on our behalf."

Here is Killer Mike interview on 107.9 in Atlanta. Call to Bank Black starts at 2:07

Eight thousand people heard Mr. Render, took his advice and opened a bank account at Citizens Trust Bank in Atlanta, GA. The call to action moved an estimated $1 million dollars. Other Black banks have also benefited from the #bankblack movement. Ebony has the story.

There are several Twitter accounts and web site discussing the Bank Black movement.


The mainstream press also likes the idea. There has been a lot of coverage.  Here are some sample articles. All are supportive.

The Takeaway: Black Banks could help narrow the wealth gap
Forbes (a conservative view)
Huffington Post

Quick History of US Banking since the 1980's

Banking has changed drastically since the 1980s when bank deregulation was passed. Banks could no longer lend to their traditional corporate customers, so they began to seek new customers and charge new fees.  Many unprofitable banks went under. Larger banks consolidated into the big four large US banks we have now.  The big four control 80% of the US banking market.

In the new, degregulated environment, banks searched for profitability, Some tried sub-prime real estate lending. Other sell investments and insurance. During this time, retail banking exploded and so did the pressure to sell financial products to new customers. Banks shifted to making money from fees and financial products rather than loans. They added or increased fees on account maintenance, overdraft, and ATMs and on debit and credit card use.

Current Bank Environment

Banking today is like any other such mass market consumer business. It is much more like fast food and retailing than traditional banking.  The goal is to minimally service the low profit customers using technology and cheap labor while lavishing personal service on high profit customers. Retail banks also use their geographic monopoly to squeeze out competitors. In my small town in New Jersey we have over 10 banks and Chase has three banks with 1/2 a mile.

Banks have another thing is common with fast foods restaurants: low pay. and part-time hours. On, GlassDoor, starting pay was $16.00 for tellers at Chase. The next level job at a bank branch is "Personal Banker." PB's are really salesmen work on low salaries and high incentive sales commission plans. Banks are no longer great places to work. If you want more details, go to  GlassDoor, enter Chase, Citibank, Wells Fargo or BOA and read the reviews.

 Current Black Bank Environment

There are 24 Black banks in the US according to the FDIC Minority Depository Institutions Program. You can read more about the FDIC program here.

My experience with Black Banks

I have long supported Black banking.  The results have been mixed.

I have banked at a number of Black Banks over the years.  I have used Citizens Trust Bank, Industrial Bank, City National Bank, Carver Savings Bank, and Amalgamated Bank(Union). And, if I can brag a little bit, one of my ancestors help found the first Black bank, Consolidated Bank and Trust, in Richmond.

However, Black banks have failed to keep up technically with mainstream banks and failed to compete with check cashing and money transfer services. They seem to be one-step behind as competitors, like the RushCard, check-cashing business and Western Union.

Over the years, I have been charged high fees and had limited access to my money at Black banks.. Fees ate up the balance at two locations. And ATM surcharges used to hit me all the time.  It was hard to get access to my money or talk to someone at the bank during none working hours.

What do consumer want in a bank ?

Consumer want the traditional bank where the teller knows you along services such as check cashing, easy ATM access, a debit/credit card for electronic payments, low cost banking services, and on-line banking and bill payment.  No one expects a free bank with no fees.  They do expect reasonable fees.

Investment options are few for Black Banks

In banking, there is a supply side and a demand side. Banks are in the middle trying to make a balance.

Unfortunately, there are limited investment options for Black banks. No bank(Black or otherwise) can hold a full portfolio of mortgages in a community. The number of mortgages would exceed the banks risk/capital ratio. And the loans are too geographically concentrated.  Instead bank sell their loan portfolio to other banks. Selling the loan requires the loan meet a certain standard and quality. Many Black home owners do not meet the basic lending criteria.  So only by bundling together lots of mortgages can the risk be reduced to meet bank standards

There are also relatively few Black business to invest in.  They are concentrated in certain industries such as clothing, restaurants and food service. Those industries are highly risky and unprofitable. Concentration means risk. So even when a Black bank has excess funds to invest, it still may not invest in the Black community.

OneUnited Bank

Hopefully, OneUnited Bank will bring Black banking into the modern age. One United Bank see a market opportunity.  One United Bank, is a local and online bank available in all 50 states. They are using the #bankblack movement to increase deposits. The link to OneUnitedBank is below.


EBE proposals for the future of Black banking

1) Recruit top talent and be open to change. Give options to employees and shares to customers.
2) Give long time customers special treatment.  Use a CRM to ID "good" customers.
3) Build the brand.  Advertise, Marketing and Sell the Black bank brand !!!
4) Tackle check cashing head-on with longer hours
5) Make micro-loans. Make people earn their credit rather than use rating agencies.
6) Give business advice.(Clients can sign a waiver)
7) Look for sub-prime mortgage loans that are really prime
8) Set-up personal banking for sports starts, celebrities, and high net worth individuals
9) Focus on HBUCs and educational loans

I believe in Blacks working together to control their financial future. Black people in the US spend an estimated $1.2 trillion dollars a year.  Its obvious we should try to use some of that money to build up the Black community.  We support the Bank Black movement.

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