Black banks and credit unions are less likely than other depositories to offer digital banking services, and a new analysis hints at just how deep the deficit runs.
While around 80% of the nation's non-Black credit unions provide an informational website and online banking services, only about half of Black credit unions do the same, according to new research from the Urban Institute that looked at regulatory disclosures by federally insured credit unions.
Moreover, just 36% of Black credit unions offer a mobile app to their customers, compared with roughly 70% elsewhere.
The analysis doesn't include similar information about Black banks. But researchers from the Urban Institute say the results may be a proxy for all Black depositories. As of Sept. 30, 2022, there were 361 Black credit unions in the United States and just 20 Black banks, federal data show.
The point of the report was to try to quantify the extent of the technology disparity at Black banks and credit unions, said Michael Neal, a principal research associate at the Urban Institute.
"We hear about [the technology gap] anecdotally," Neal said in an interview. "But being able to put numbers to the problem can help to size the challenge and be a step toward solving it."
The digital divide at minority banks and credit unions, and small depositories in general, remains one of the key challenges for a segment of the industry whose larger, nonminority competitors have spent billions of dollars to build and enhance their digital banking capabilities.
Smaller institutions often don't have enough financial resources to spend on the technology, in-house expertise and technical assistance that's required to launch and maintain digital services.
The lack of such services may also be a reflection of less consumer demand among customers at Black credit unions, particularly older people and those who don't have internet access, Neal said.
But not everyone agrees with that theory. Nicole Elam, president and CEO of the National Bankers Association, the trade group that represents minority banks, said it's unlikely that the technology gap can be explained by a lack of demand, since there is no evidence for that hypothesis among Black customers.
Instead, she said, the problem stems from cost, integration, compliance and capacity constraints.
For Black credit unions, being able to offer more technology to customers is becoming a survival issue, said Denise Huginnie, senior advisor of the African American Credit Union Coalition.
The group has been bringing together small credit unions and vendors to address issues such as expanding digital footprints, reducing costs, identifying ways to share services and attracting new members, including students and those in the 18- to 34-year-old range, Huginnie said.
"This is not a legacy situation anymore — where you bank where your mother did," Huginnie said. "You have to have the services that people want, and it has to be a mobile-first environment."
Small banks are also feeling the pressure to keep up on the technology side of the business.
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Since 2020, when George Floyd's murder sparked a national discourse on racism, inequity and justice, smaller minority institutions, particularly Black banks, have received various forms of corporate, philanthropic and federal assistance in moving forward on digitization.
One of the newest programs is MDI ConnectTech, an initiative
MDI ConnectTech is currently conducting assessments of pilot banks to "help them identify low-hanging-fruit technology solutions," Elam said. The National Bankers Community Alliance, which rolled out MDI ConnectTech, is the philanthropic arm of the NBA.
In addition, an MDI ConnectTech working group is trying to identify possible shared technology solutions, Elam said.
The technology gap outlined by the Urban Institute reaffirms the need to provide more public, private and philanthropic help to Black banks and other minority depository institutions, according to Elam.
"There's a role for everybody to play," she said. "It's just a matter of having more people helping."
