Banks' Tech Upgrades Can Hinder Financial Inclusion, Treasury Official Warns

Source: American Banker

When banks make changes to improve services for some customers, those same moves could put up new barriers to minorities and other underserved groups, a Treasury Department official warns.

Barriers to access for many Black and Hispanic Americans go beyond the costs of services, Janis Bowdler, a counselor for racial equity at Treasury said Tuesday during a panel discussion on financial inclusion hosted by The Clearing House and Bank Policy Institute.

Underbanked consumers may choose predatory institutions over mainstream banks because, despite banks' efforts to build trust, they fail at providing services that are fast and accessible to minority communities, experts say. For example, people who need immediate funds may have no choice but to pay a high fee at a check-cashing store when the only alternative is an online check deposit system that takes several days to deliver funds. 

"Consumers out there, lower-income consumers, people of color, those that have had different experiences with financial institutions, they're fundamentally rational actors," Bowdler said. "They're making choices to go to payday lenders and alternative financial services. It's not because they don't know that those things are pricey, necessarily. It's because they're not getting what they need in one way or another from their financial institution, whether that is rapid access to cash, the ability to control their spending, and so on."