Tuesday, May 28, 2024
HomeEconomyBank Branch Closures Disproportionately Affect Minority Communities

Bank Branch Closures Disproportionately Affect Minority Communities

The US banking system is rapidly changing; since 2010, there have been 15,500 fewer brick-and-mortar bank branches. An FDIC research states that despite the drop, a record low of 4.5% of households is still without banking services. A closer look at the statistics shows that Black, Hispanic, and Indigenous Americans are disproportionately underserved by banking services, despite the fact that generally, this is excellent news.

In comparison to white households across all income levels examined, 11.3%, 9.3%, and 6.9% of Black, Hispanic, and Indigenous American households, respectively, are unbanked, according to the FDIC survey results. This disparity draws attention to a crucial factor that prevents minorities from having access to banking services: the dramatic decline in bank branch availability over the past ten years as a result of mergers or closures brought on by changes in consumer behavior and technological advancements like mobile banking apps or ATMs that can render physical locations unnecessary.

As banks themselves become increasingly scarce in many neighborhoods – particularly those which are majority Black or Hispanic – individuals without accounts may be left vulnerable to theft or natural disaster as accessing funds can then become difficult if not impossible without easily available options for deposits or withdrawals nearby. In addition, people in these communities may have far fewer prospects for economic advancement and financial growth if they lack access to typical banking services like savings accounts and loans, which puts them at a disadvantage when it comes to their own personal affairs.

What’s more worrying is that more concentration of bank branches is anticipated if current trends continue, since research by S&P Global Market Intelligence has indicated that since 2012, larger banks with wider branch networks have profitability that is 20–50% higher than smaller banks. Due to the fact that larger banks prefer to gather around prominent real estate locations, this might potentially increase the gaps between minorities living in rural and more metropolitan areas, further excluding them from financial services based only on geography.

It is evident that multiple efforts must be made if we are to close the access gap between minority households and banking services. Solutions range from public policy initiatives promoting access for everyone, regardless of location or demographics, to expanding financial literacy programs designed to teach people how to make the best use of available resources in their own communities, as well as new technologies like digital wallets that offer convenient access to financial services. Only then will we be able to see true equity amongst all groups when it comes to having access to the money needed to create opportunities and succeed in generations to come?

LATEST

EXPLORE