With New Digital Banking Offerings, Greenwood Aims To Close Racial Wealth Gap

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Michael “Killer Mike” Render, Ambassador Andrew J. Young and Ryan Glover are founders of Greenwood, the first digital banking platform for Black and Latinx people and business owners. Photo by Cam Kirk. 

At a time when Black-owned banks are disappearing through closure or consolidation, digital banking startup Greenwood Financial, which launched in October 2020, is showing Black banking’s resiliency with its Black- and Latinx-focused offerings.

With over 500,000 sign-ups to its account-opening waitlist in its first 100 days, the digital platform is generating serious interest as it gears up to open accounts in June. The financial firm’s aim is to help close the persistent racial wealth gap between the white community and the Black and Latinx communities.

The founders include former UN Ambassador and Atlanta mayor Andrew Young, Bounce TV founder Ryan Glover, who is Greenwood’s chairman, and rap artist Mike Render (a.k.a. “Killer Mike”). Young has mentored the two younger men since they were teens, which is how their relationship formed. The bank’s largest single investor, actor and activist Jesse Williams—best known for his starring role in TV’s “Grey’s Anatomy”—provided Greenwood Financial $3 million in seed money in September 2020.

The trio decided on a neobank, that is, an institution that offers digital banking services without physical branches, “because 65% of Americans bank online, and that number rises by 3% annually,” says Glover. The name Greenwood Financial is in tribute to “Black Wall Street,” the moniker given to Tulsa’s Black entrepreneurial Greenwood District, which was destroyed a century ago in 1921 by white mobs.

“Because we’re strictly a digital bank, we partner with existing banks that are FDIC insured to hold our deposits.” This will allow Greenwood’s customers of all income levels nationwide—and whether Black, Latinx or allies—to access the neobank’s services.

Building Black and Latinx Wealth

Young recalls conversations he had with Martin Luther King Jr., with whom he worked extensively during the civil rights movement. “We were fighting to integrate lunch counters, when we know most people couldn’t afford to eat there,” he remembers.

King also talked about integrating buses, so Black people could sit anywhere they pleased on them. “But we knew real racial justice would come only if we owned the restaurants and bus companies, and that’s what our goal became, building Black wealth through home and business ownership,” Young says.

As Atlanta’s mayor, Young became recognized for getting white-led banks to lend to Black-owned businesses, including the largest Black-owned bus company in America. If Black consumers get lending opportunities like white consumers, he says, Black consumers can succeed today much the way they did in Tulsa’s Greenwood District.

“Walmart started out in Bentonville [Arkansas] as a little country store, and they had a vision, but they also had access to capital,” he explains. “Now they’re the largest business in the world,” he continues, “and there’s no reason there cannot be a half a dozen or more Black companies in various fields that do that with access to capital,” he adds. “We’ve integrated lunch counters and buses,” he continues. “Now we want to integrate money.”

If Black and Latinx consumers had the capital to build more businesses, this combined $3.1 trillion market could spend more money in their communities. Right now, a dollar only circulates zero to one time in the Black community and six times in the Latinx community, compared to virtually unlimited times in the white community. The neobank wants to change that.

“Greenwood will identify qualified entrepreneurs, business owners and creatives and equip them with the bank capital they need to grow their businesses to make their dreams a reality,” says Glover.

Planning a Full Slate of Services and Give-Backs

Unlike most neobanks, which provide limited products and services, like depository accounts, Greenwood has plans to offer the same services a full-service, traditional bank does. They expect their services to be so robust that people of all races will want to open accounts with Greenwood, and they welcome that. “This is not meant to be a Black and Latinix against white endeavor,” says Young.

Greenwood originally slated launch of their platform with debit spending and savings accounts for January 2021, but the pandemic has pushed back Greenwood’s platform launch plans. They now expect these products to roll out in June 2021.

In addition to two-day early pay with direct deposit, they’ll offer Apple, Samsung and Android pay, virtual debit cards, peer-to-peer transfers, mobile check deposits and free ATM usage at over 30,000 locations with no hidden fees. “We’ve scaled our operations to target 600,000 active accounts by the end of 2021,” Glover says.

By the same time, Glover expects Greenwood to debut lending products, with credit products to follow in early 2022, and investing products to get offered in mid- to late-2022. “By the end of 2022, Greenwood intends to have fielded a robust suite of financial products,” Glover says.

The neobank is establishing a three-pronged give-back program to support Black and Latinx businesses and causes. “Customers can donate their rounded-up change to UNCF for education, Goodr to feed the hungry or NAACP to support civil rights,” says Glover. For every customer sign-up, Greenwood will donate five free meals to a family in need. Each month, the digital platform plans to provide one small business owner who’s a Greenwood customer with a $10,000 grant.

Greenwood also plans to work with brick and mortar minority-owned backs to provide deposits to help strengthen historically Black banks. “This racial wealth gap is an existential crisis that affects the soul of America, and it’s an issue that requires all people of goodwill to deploy the resources required to solve it,” says Glover.

Historically, Black-Owned Banks Consistently Weakened by Racism

Greenwood Financial, as the first of its kind Black-owned private equity-funded neobank, overcomes the historical challenges Black-owned solely brick-and-mortar banks have experienced, including limited markets and access only to local depositors.

“There haven’t been many meaningful, authentic digital banking solutions that cater to the African American and Latinx community until Greenwood,” Glover says. The neobank’s primary purpose is to conquer the discriminatory banking industry practices Black and Latinx customers routinely face while keeping money in their communities.

As has been widely reported, systemic racism within the U.S. banking industry has a long and complicated history. Author and law professor Mehrsa Baradaran documented the inequities inherent in banking while Black in her 2017 book, The Color of Money: Black Banks and the Racial Wealth Gap, exploring what has been essentially a segregated economy.

Black-owned banks have a long history in the Black community, beginning during Reconstruction in the late 19th century. They opened to help the community protect its money and maintain control of its financial resources, so they benefited the Black community.

Otherwise, Black deposits flowed out of Black communities into white-led banks, which lent Black dollars to white customers for mortgages and business development, but not to Black customers. That includes for government-backed mortgage loans, from which Black consumers, including depositors of banks that made the loans, got excluded.

White-led banks then thrived, in part from deposits by the Black wealthy and middle class. Traditionally, Black-owned banks have been local, brick-and-mortar branches dependent on the deposits of Black people in their community. Until the mid-1960s, racial segregation ensured that wealthy and middle-class Black depositors lived in those neighborhoods. But not enough affluent Black people lived there to sustain traditional Black banks, which needed sufficient deposits from community members to make loans that generate interest revenue.

Black-owned banks also got excluded from the white-controlled economy, meaning they couldn’t engage in the commerce, trade, property acquisition and asset management that white banks conducted with one another. Without support from white institutional or consumer deposits, Black-owned banks’ ability to grow and service their customers further weakened, and most closed. Today, there are fewer than 20 Black-owned banks, and around 30 Latinx-owned banks, most of them traditional brick-and-mortar.

Providing a More Equitable Banking Experience

In their report, “The Racialized Costs of Banking,” New America, a nonprofit think tank based in Washington D.C, found that Black and Latinx customers get charged more by “Main Street” small and community banks to open and maintain checking accounts. In majority-Black neighborhoods, the deposit requirement to open a bank account is $80.60, compared to $68.50 in white neighborhoods.

Average checking account costs and fees are $262.09 higher for Latinx customers than for white customers and $190.09 higher for Black customers, the report found. As New America states, “Discretionary banking practices amplify the racialized costs of banking…Tellers in places with small white populations report significantly higher overdraft fees and greater likelihoods of using credit or screening agencies than tellers in places with large white populations.”

With little access to banks or credit unions that cater to them, Black and Latinx consumers get forced to maintain accounts with white-led banks. Despite the banks’ holding billions in deposits by these customers, white-led banks, Glover says, “have consistently failed Black and Latinx customers.”

As has been well documented, banks have a long history of deliberate discriminatory practices against both groups. But it’s not just large national banks that make headlines with discrimination in mortgage and auto lending scandals. Even in smaller banks, Black and Latinx people more often get declined for loans and are charged higher interest on those loans.

Glover says Greenwood intends to eliminate these disparities with their depository service. “Our accounts will have no hidden fees,” he says. As Render stated in a September press release about the $3 million in seed money received from Williams for Greenwood, “A Black person is twice as likely as a white person to be denied a mortgage. This lack of fairness in the financial system is why we created Greenwood.”

The neobank also will address one of the biggest challenges facing unbanked Black and Latinx people: check-cashing stores. “For every $100 Black and Latinx take these check-cashing organizations, they leave with $80,” he says. “That’s an atrocity, and there’s no way to close that wealth gap, having to operate under those financial terms,” Glover continues.

Greenwood, he adds, “will not be predatory in any way. We will be at the opposite end of the spectrum of how institutions have traditionally treated the underserved communities in the country.”

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