Communities struggling with banking access give banks on wheels a spin

NEW YORK — Parked on the edge of West Tremont Avenue in the Bronx, among a series of sedans and minivans, is sometimes a bank on wheels.

Lower East Side People’s Federal Credit Union, a nonprofit that provides banking services to New York’s economically disadvantaged neighborhoods, launches its mobile branch In a refurbished school bus in 2014 after the devastation of Superstorm Sandy, which forced the closure of its brick-and-mortar branch. It has since been upgraded to a specially designed Mercedes-Benz van that serves New York’s Lower East Side, East Harlem, the Bronx and Staten Island, partnering with community groups in the boroughs.

VAN provides most of the services of a traditional bank such as opening a savings or checking account, securing loans and providing financial advice. However, there is no ATM due to the security risks that come with carrying cash in a vehicle.

Bank on Wheels is an effort to fix gaps within the American banking landscape that disproportionately affect black and Hispanic communities. According to a 2022 Federal Reserve report, 40% of black individuals are unbanked and underbankedThey are followed the most of any racial demographic in the US by Hispanic individuals, 29% of whom are either unbanked or underbanked.

Adults are considered unbanked if they do not have a bank account and rely exclusively on alternative financial services that charge high fees such as check cashing, payday loans, pawnshop loans as a few examples. Underbanked means that someone has a bank account but is still partly dependent on alternative financing.

To be sure, the number of unbanked persons has seen an annual decline, from 8.2% in 2011 to 4.5% in 2021. 2021 report From the Federal Deposit Insurance Corporation. This decline correlated with an increase in the use of online banking, one of the primary drivers of brick-and-mortar consolidation.

but given the current digital divideIf online banking completely replaces access to in-person branches, financial equity in America will remain at risk.

The banks aim to offer at least a partial solution to the increasingly abandoned banking landscape in minority communities. But even the people driving the efforts don’t see them as permanent fixes.

FCU spokeswoman Alicia Portada said, “A physical branch is the solution. The mobile branch is a temporary thing – to try and build a physical branch – to build membership and build partners.”

Still, Portada can’t ignore the value of mobile branches as credit unions and banks close faster than they open annually: “There is an absolute need for other options.”

BankonBuffalo, a regional bank based in Buffalo, New York, made its debut bank on wheels this winter.

Darnell Heywood, community responsibility officer at BankonBuffalo, said that at one point, Buffalo had a bank “on every other corner within the city.” Now, Haywood describes an empty banking scenario. The closest bank branch is more than two miles from the city center, he notes, adding that this particularly affects black and brown residents of the area.

Haywood said, “When you think about black and brown communities when it comes to banking, when it comes to anything with regards to finance, the No. 1 reason they may not have financial knowledge is because they are not private to access.” BankonBuffalo’s mobile branch is one attempt to bridge those access gaps.

banking desert

On a chilly January day in the Bronx, the FCU Mobile branch had no pre-booked appointments but was ready to accept walk-ins. was parked outside University Neighborhood Housing Program Resource Center, an affordable housing nonprofit. The mobile branch partners with various non-profit organizations such as UNHP.

A member of the UNHCR, who did not give her name, entered the resource center’s office in the mid-afternoon. During talks with UNHP director Jumelia Abrahamson, she also met Cristal Veras, one of the representatives of the Les Peoples’ FCU. After a quick chat with Veras, she heads into the Mobile branch to find out more.

Inside the van, there were two small staff desks, a laminate bench for customers to wait for service, and a couple of filing cabinets. It took some maneuvering by the customer to navigate the narrow aisles of the vehicle. Then she got a seat with Gian Alvarado, the bank’s marketing and outreach specialist, who told her about lending and credit options. After consulting with Alvarado for about a half hour, the customer walked out of Bank on Wheels after applying for a $12,000 loan.

Historically, Banks on Wheels appear after disasters such as Hurricane Katrina or public health crises, when brick-and-mortar branches are forced to cease operations. In 2022, the Lower East Side FCU Mobile branch saw a higher growth in membership than it had in the past. covid pandemicAccording to Portada, a spokesperson for the FCU.

and as online banking closesFueled by the pandemic, more brick-and-mortar locations are closing their doors. In 2021, US Bank Closures Reach One record high, That trend has made lack of access to banks more than a temporary problem.

According to the US Census Bureau, a bank desert is any area with no bank branches within 10 miles of its center., To be sure, many areas that do not meet that formal criteria still lack adequate access to financial services.

about 10% of all US bank branches closed Between 2017 and 2021, about one-third of them were in majority-minority and low- to moderate-income neighborhoods, according to a report from the National Community Reinvestment Coalition. When the pandemic began in March 2020, the rate of closures doubled from 99 to 201 per month.

The accelerating pace of bank closures has made pre-existing gaps in black and minority neighborhoods worse.

The Bronx, for example, which is populated primarily by Hispanic and black residents, has Least Bank Branches per household in any New York City area, according to the Association for Neighborhood and Housing Development. Currently the city is 123 Bank BranchesThat’s down from 144 in 2018, according to a national bank branch location database.

A Brookings analysis found that in 2017, black-majority zip codes nationwide had a significantly higher number of less banking competition Compared to non-majority-black ZIP codes, that means there were fewer bank branches in those areas. Less banking competition often leads to higher interest rates and lower savings rates for customers.

The racial divisions of the banking landscape are particularly visible in Baltimore.

Lawrence Brown, a researcher of racial equity and author of “The Black Butterfly: The Harmful Politics of Race and Space in America,” He has analyzed the city’s geographic data to coin the “Black Butterfly”. Namely, Baltimore is composed of a “white spine” – an affluent, predominantly white strip running down the city center – with “black wings” where less developed, predominantly black neighborhoods are concentrated.

Which parts of the city does Baltimore’s Black Butterfly correspond to? get investment, and, consequently, where banks are incentivized to keep the doors open. For example, in Baltimore’s Rowland Park, a predominantly white residential community, there are four banks on the same side of the street within a corner.

“But there are large areas, predominantly occupied by Black Baltimoreans, where they have no bank, no loan officer that they can sit down and talk to,” Brown said.

Although banking desertions are on the rise in the wake of the pandemic, lack of access to financial services in Black-majority neighborhoods is not a new phenomenon.

A Brief History of Banking While Black in America

The fact that banking access is disproportionately limited in Black-majority neighborhoods is partly an effect of 20^th The resettlement policies of the century according to Brown.

After the stock market crash of 1929 and the ensuing Great Depression, the federal government created federal home loan bank System of providing loans for housing development.

“The federal government turns the banking system into a system that redlines Black neighborhoods,” Brown said.

The FHLB provided economic development loans based on maps that outlined black areas in red, indicating where loan officers had limited resources. A similar exercise was conducted for Federal Housing Administration loans.

late 20’s^th At the turn of the century, the federal government officially outlawed redlining. In 1977, Congress passed the Community Reinvestment Act, which mandated that banks begin lending to minority and low-income neighborhoods. According to Brown, it wasn’t quite right.

“Now these neighborhoods have banking institutions, but they’re getting predatory lending. So it’s not quite the same and as it develops, it’s still going to have a very predatory effect,” Brown said.

’13 generations back’

Rashida Webb is a black business owner who runs Salon RX, a beauty salon in South Baltimore. when that asked for seed money To start her business, she knew that a traditional bank loan would not be an option. Loan officers routinely told her that her debt, a product of her student loans, was too high.

“Well, definitely. Because I’m a black American. I’m 13 generations behind other people in this country, so it’s going to be different for me.” Webb said. To get her business off the ground, she resorted to payday loans of a few thousand dollars at interest rates of around 17%.

“These kinds of things are sometimes an option when you have to put money into a place or buy supplies,” Webb said. “And even though I’m able to pay off this predatory loan, a bank won’t give me the money because their criterion is your debt-to-income ratio. And if you’re a black American, most likely your debt- The earnings ratio is high for reasons beyond your control.”

Noting how many times Webb has been refused loans from traditional banking institutions, he said he doesn’t trust them. While she hasn’t heard of mobile branches in her area, Webb said she would “definitely use a bank on wheels,” if it was properly regulated and assessed eligibility for loans on a more individual basis. to be done.

Webb isn’t the only black entrepreneur who has had to rely on alternative financing methods to start a small business.

Dwight Campbell, co-owner of Baltimore plant-based ice cream purveyor Cashew Creamery, used “out-of-the-box” funding strategies.

Campbell and his wife, Nicole Foster, who runs the business with him, started a Kickstarter campaign to finance their first machine, but paid for everything out of pocket to start their business while working a full-time job. Campbell and Foster now run their ice cream business full time but are still looking for alternative ways to raise money for expansion.

Campbell said, “The space is too small for Black Capital. It’s like you’re in a museum, but the only space you have is the broom closet.” “No door is open to capital unless it is very expensive money.”

Foster hasn’t personally heard of Banks on Wheels in Baltimore, but she finds banking that emphasizes community ties a breeze. Given the purpose of banks on wheels to bridge financial access to disadvantaged communities, it could have been helpful in the early days of the cashew creamery, he said.

Foster said, “If it had existed, I think it’s something we would have tapped into.” “If we still find one, it might be something we tap into.”