Black Americans are more likely to use digital banks as their primary financial institution than any other ethnic group in the US, according to a new analysis from business research firm Morning Consult.
Morning Consult drew its analysis from a series of surveys between July 2021 and January 2022. The company found that 14 percent of black people said a digital bank was their primary banker, compared with 8 percent of whites and 13 percent for Hispanics. Black people also outnumber other ethnicities in having credit union accounts, the surveys found.
Charlotte Principato, a Morning Consult financial services firm and author of the study, said the studies mean traditional brick-and-mortar banks must expand their online functions if they want to attract or retain black customers. Principato also said that more black people are adopting digital banks because those institutions do exactly what consumers want.
“Many digital banks have the explicit goal of reaching traditionally disadvantaged populations, so it’s not surprising that they have managed to serve and prioritize the portfolio of black consumers,” Principato wrote in her analysis.
Digital-only banks are financial institutions that exist online only, have no physical branches and offer the same services as institutions such as Chase, Wells Fargo or Bank of America. Both 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, such as Venmo and Zelle, said Kevin Cohee, CEO of One United. Digital banks’ mobile apps offer more functionality and new features are added more frequently than traditional banks’ apps, Cohee said.
“If you’re not using digital banking, then you’re not banking,” Cohee told Finurah.
Decades of economic research has shown that black Americans have a scorned relationship with banks. Banks have declined mortgages from potential black homeowners and approved credit cards with higher interest rates compared to other ethnicities. Because of these trends, thousands of black Americans have abandoned formal banking altogether.
According to 2019 Federal Reserve data, a majority of Americans without and under a couch are black.
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