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Money In Color: In Some Ways, It Is Black and White

Over the past year, ������has conducted three studies on the nature of systemic racism in America to help our clients answer society’s call for business to address historic inequities. Across our research, financial services consistently shows up as the least trusted sector in its perceived ability to address systemic racism. We would like to change that.

Our own employees reminded us that, to counsel our clients in the financial sector more effectively, we needed to dive deeper into the institutional mistrust we saw in our early research. So, this summer, we set out to unpack it.

We knew a few things going in. As I have said and written before, to be Black in America and trust institutions is to will away the generations of trauma that came before us. In the financial space, the issue is especially fraught and familiar. We just marked the 100th anniversary of the race massacre in Tulsa, Oklahoma known as . This year we’ve seen new public awareness about the legacy of redlining and its implications for home ownership and wealth generation. The quantitative stats on the consequences of systemic racism in the financial services industry are striking:

• The typical white family has 8x the wealth of the typical Black family and 5x the wealth of the typical Latinx family
• Black and Latinx households are around five times as likely to be unbanked as White households
• Black Americans make up only 3 percent of conventional mortgage applications, but they face the highest denial rate
• And, Black college graduates owe an average of $25,000 more in student loan debt than white college graduates

Our new study, comparing interactions with the financial system across white, Black, Latinx and Asian Pacific Islander populations in America, found widespread awareness and acknowledgment of systemic bias, particularly from the Black community:

• The majority of Black Americans say they’ve experienced systemic bias and discrimination across all industry sub-sectors, including mortgage lenders, banks, auto lenders, credit card companies, and insurance companies.
• The issue bears itself out in customer service interactions: 49 percent of the Latinx population and 40 percent of the Black population report needing to change their behavior or appearance to interact with banks (34 percent for the general population). A whopping 23 percent of Latinx Americans and 13 percent of Black Americans with annual incomes under $50K report being denied service altogether, compared to just 6 percent of white Americans in the same income bracket.
• Communities of color reported systemic bias regardless of their personal financial situation, confirming that this is about race, not class. In fact, it’s worse for high income earners. 68 percent of Black Americans who earn over $100K annually report at least one negative experience interacting with the financial system, compared to 58 percent of the general Black population and 36 percent of high-income white Americans. The top reported negative experiences were being given higher rates or fees due to skin color and being asked to supply more proof of employment than necessary.
• Absent fair treatment from the financial system, people of color are forced to find alternative solutions. Black and Latinx respondents are more likely to leverage resources outside of the traditional financial system, such as pawn shops and payday lending.

The impact is palpable. 57 percent of Black Americans agree with the statement: “My personal finances would be better off if financial services companies treated people in my racial / ethnic community fairly,” vs. 31 percent of the general public. Members of Black and Latinx communities see financial goals—most notably creditworthiness, car ownership, and a comfortable retirement—as less attainable than their white counterparts. And they report outsized impacts on their mental health as a result.

Banks and other institutions should act as an instrument for shepherding our nation’s financial health. Absent widespread public trust, this role becomes harder to play—and, in the context of our current attempt at economic recovery, it represents a missed opportunity for all involved.

The good news? The solutions in this space may not be easy, but they are in fact obvious and doable. Many financial institutions are already doing the hard and necessary work of examining, unpacking, and recasting their commitments to specific communities of color. Our study finds that the most impactful solutions may in fact be the simplest ones: building representation into the workforce, undertaking bias mitigation training, treating customers fairly, and creating inclusive, welcoming environments.

As with all issues of race and institutions in America, the challenges of systemic racism in our financial system can be mitigated through trust. Our research has shown consistently that Americans have a deep desire to believe that business will solve the issues facing society today—business, not government or nonprofits. For America’s financial institutions, this means both responsibility and opportunity.

For banks and other institutions that acknowledge the legacy of mistrust, examine their role in it, and over-consider communities of color in their solutions, the payoff will come in trust, in business results, and a more equitable society. It’s a moment worth not only examining, but meeting with intention and action.

Lisa Osborne Ross is CEO of ������U.S.