Why doesn’t everyone have bank access? What does unbanked or underbanked even mean? Why does the system we rely on work against us, pushing many hard-working people further into debt? Well, the truth is, banks have been around since the 1400s, charging interest and fees on spices and seeds. While we would all like to believe that the historic banking system has the consumer in mind, let’s be honest with ourselves. This lack of trust and reliability is why more and more people, particularly Black and Latino people, are coming to crypto to get out of debt and, further, free themselves from the burdens of the banking system.
“What we really need to be doing is to now utilize the technology behind blockchain to enhance the quality of life for our people,”
…says Christopher Mapondera, a Zimbabwean American and the first official speaker.
Honestly, we couldn’t agree more.
What Does Unbanked Or Underbanked Mean?
Individuals marginalized by their financial situation are also referred to as the unbanked or underbanked, meaning that they either don’t have a bank account or often use nonbank solutions for their financial needs. Nonbank solutions often include money orders, check-cashing services, bill payment services, and online options to send or receive money. According to studies published by the FDIC, the number of Americans who often turn to the above-mentioned nonbank solutions is a staggering 48.9 million adults. Furthermore, studies conclude that 7.1 million Black and 7.6 million Latinos living in America are unbanked. That’s a total of 14.7 American people, consistently turning to expensive services to handle their basic necessities.
Why Are So Many Black And Latino Citizens Unbanked?
One of the reasons millions of Americans are underbanked is a general distrust in the traditional banking institutions. There is no shortage of evidence to support the disparate treatment of Black and Latino individuals.
In 2017, the University Of California at Berkeley conducted a study, making the inequality clear. Upon looking at nearly 7 million 30-year mortgages, researchers found that; “Black and Latino applicants were charged higher interest — an average of nearly 0.08% — and heavier refinance fees when compared with white borrowers.” To further clarify, that was in face-to-face transactions. When applicants applied online or through an app, Black and Latino applicants still paid more. However, terms were scarcely better than when borrowing in person.
It is common for these traditional financial institutions to practice something called redlining, as well. “Redlining” is when financial institutions will deny loans or mortgages based on where the applicant resides. An even more sinister custom practiced by traditional financial institutions is the tendency to offer subprime lending to Black and Latino consumers rather than conventional lending. (Even when they more than meet the qualifications). Subprime lending is often a deathtrap that brings higher rates and fees.
But That’s Not All…
It’s not just distrust that keeps many individuals from having a bank account, though, but also the lack of funds in the first place. Some bank accounts require a minimum deposit even to open one. Not only that but many banks charge fees on accounts that fail to maintain a minimum balance. These practices target consumers who live paycheck to paycheck, or in other words, bankers in the lower tax brackets—blatant discrimination.
With no other choice, those marginalized by the traditional banking system turn to desperate solutions to solve their financial problems. For example, they pay outrageous fees to cash their paychecks. Then often must take the risk of keeping their cash on them or in what they consider a safe place. Finally, when they can’t make their money stretch, they take cash advances on their paychecks to make it to payday.
John Holdsclaw, chairman of the Community Development Financial Institution (CDFI) Coalition, commented,
“What you find a lot of times is that people who get cash advances on their paychecks fall into this system where the debt keeps resetting.”
A loan that never goes away, cash advances drag so many borrowers down because it’s easy to fall into the trap of paying the minimum fee when it’s due rather than paying what they owe.
What Can We Do About The Bank System?
Satoshi Nakamoto had all of this on his mind in 2009 at the conception of Bitcoin. Now, in 2022, the decentralized currency unregulated by any government or financial institution has just begun to bridge the gap for the marginalized. As a result, more Black and Latino Americans see the potential of cryptocurrency to build wealth outside of the traditional banking system that has failed to serve their dreams properly.
John Gerzema, CEO of Harris Poll,
“There has been a long history of discrimination in investments and that could be why we have seen a wide demography of interest and inclusivity in crypto – because it’s new, open and seemingly has fewer barriers to entry.”
Empowered individuals from Black and Latino communities who were ahead of the game and invested in Bitcoin have watched their investment grow immensely since then. Crypto has been a vital piece of pulling people out of their financial problems. In April, a Harris Poll reported that while just 16% of U.S. adults overall own cryptocurrency, 18% of Black Americans have gotten in on it. (For Latino Americans, the figure is 20%.)
What Crypto Means For Black And Latin Communites…
Crypto is certainly changing the view for many Americans of color. For example, the story of Jesus Martinez details his life selling flowers on the streets and how he was able to turn his passion into a full-time business by taking payments in Bitcoin to sell his digital art.
Then, there’s the story of Penelope and America Lopez, otherwise known as the CyberCode Twins. They “bailed their parents out” utilizing crypto when they fell behind on their mortgage. The twins chipped in again recently when their parents lost their jobs during the pandemic. As a stable solution, their home now serves as an Airbnb that brings in income while providing the Lopez family with a place to live. Again, this is due to the incredible power of digital currency.
Latino And Black Communities See A Future In Crypto
Angela Fontes, formerly a Vice President in the Economics, Justice, and Society department at NORC at the University of Chicago, relates,
“I may not think I have the ability to enter the stock market and purchase stocks if I’m a single mom…But I may think I can get some cryptocurrency. I don’t need a broker to do it and I don’t need a 401(k) account.”
If you’ve noticed in headlines that banking officials are often heated about crypto and even rallying to regulate against it, now you know why. Crypto is the solution to the problem the traditional banking system created for its benefit. But if they want to stay in their bag, they need to climb on board. That’s the logical thing to do. Unfortunately for the banking system, being honest isn’t a tradition. Banks have been taking advantage of people for so long that they don’t know any other way.
If you’re ready to take the first step towards financial freedom, Choose Byte Federal. Or if you are in the market to expand your cryptocurrency portfolio, we can help with that too.
Choose Byte Federal. Go Bank, Yourself.