The coronavirus has taught many banks and credit unions just how serious the digital divide is.
Millions of Americans can’t afford or don’t have access to reliable high-speed internet at their homes. This issue came to light as the pandemic spread across the country and companies scrambled to get as many of their employees working from home as possible.
Banks and credit unions were no exception to this. Some executives have identified this as a technology gap they faced in supporting employees once the outbreak hit. This could become an even bigger challenge as financial institutions consider allowing more employees to work virtually once the outbreak passes.
“In rural areas where there is no broadband option, your only option is satellite, which is expensive and terrible service,” said Angela Siefer, executive director of the National Digital Inclusion Alliance, which advocates for expanding high-speed internet access. “In urban, suburban and rural areas, there is maybe infrastructure, but it might be really expensive. Depending on your family situation, that’s one cost you cut.”
Scope of the problem
It’s unclear exactly how many Americans lack access to broadband. The Federal Communications Commission estimates that 18 million Americans don’t have access to high-speed internet, defined as speeds of at least 25 megabits per second for downloads and 3 megabits per second for uploads.
However, sources criticized the FCC’s numbers as underestimating the scope of the problem. The agency uses census blocks to measure accessibility. If a service provider says it can provide broadband to just one customer in the census block, then the agency considers the entire area as being covered.
Other research has found the number of consumers without access to broadband could range anywhere from 42 million to 162 million.
Those who don’t have broadband at home may be able to log on through other means. For instance, the person may go online only using a smartphone, or he or she might visit a library to use the free internet offered there.
Once the pandemic hit, however, many of these solutions were no longer viable or were not conducive to a 40-hour workweek.
“Think about your use of the internet and then imagine none of that is possible,” Siefer said. “Those who have gone without internet at home found workarounds and then the workarounds didn’t work anymore.”
Those who work in the financial services industry are not spared from this challenge.
Even if employees were already broadband subscribers, capacity may have become strained as their spouse also started working remotely and children began learning online.
Capacity issues forced a handful of employees at Virginia Credit Union in North Chesterfield, Va., to abandon working from home, said Christopher Saneda, chief operating officer.
“The staff having bandwidth issues are typically in our rural areas where high-speed internet is known to be an issue,” Saneda said. “There are not many, but for those few staff, multiple business systems running simultaneously taxes the capability of their provider’s service.”
Canandaigua National Bank & Trust in New York paid to have business broadband installed at about half of its call center employees’ houses once the pandemic hit. The main reason for the upgrade was to ensure security but it also provided these workers with more reliable internet.
Overall only a few employees of the $3.1 billion-asset bank didn’t have access to internet at high enough speeds to work remotely, said Annette Joyce, executive vice president of information technology and project management. To solve this issue, Canandaigua National provided laptops with Aircards so those staffers could log on.
The bank is still deciding what its work-from-home policies will look like once the pandemic passes.
“This has been a change for the majority of our employees to spend the majority of their time working from home” Joyce said. “There are some that never worked from home, but they can do it productively and they are enjoying that freedom.”
Why employees may lack broadband access
Accessibility, especially in rural areas, is one of the biggest challenges in ensuring that all Americans can subscribe to broadband, sources said. It’s expensive to build out the infrastructure required for this utility and internet service providers have been reluctant to make the investment since they fear they won’t recoup those costs.
The average county designated as “mostly rural” had a household subscription rate of about 67%, according to a 2018 report from the Census Bureau. That number dropped to 65% for the average county considered “completely rural.” The average “mostly urban” county had a subscription rate of more than 75%, according to the data.
Thousands of banks and credit unions are based in or serve rural communities, meaning their employees who live in the area may struggle to gain access to broadband. Fifty-four percent of community banks, or roughly 3,000 institutions, operated primarily in rural markets in 2017, according to a speech by Randal Quarles, vice chairman of supervision for the Federal Reserve.
One of the nation’s largest credit unions, the $42.8 billion-asset State Employees’ Credit Union in Raleigh, N.C., also ran into the issue. Roughly 50 workers out of its more than 7,200 employees did not have access to internet at high enough speeds at home, said Jamie Applequist, chief administrative officer. Some of these staffers live in the mountainous region in the western part of North Carolina, and in some cases the credit union couldn’t solve the problem.
“We were looking at some places in the mountains and they didn’t have Wi-Fi capabilities,” Applequist said. “We have the internet at home and we just take it for granted.”
Affordability tends to be another major obstacle in Americans paying for internet at their homes. Roughly a quarter of adults said they did not subscribe to a broadband service for their house, according to a 2019 survey from the Pew Research Center. Of those respondents, 50% said the monthly cost was a reason for not having a subscription.
That could be a problem even for those who work in financial services, sources said. Only 63% of Americans would be able to cover an unexpected $400 expense, according to the Federal Reserve’s Economic Well-Being of U.S. Households report for 2019, which was released in May.
Management may not know that an employee is struggling financially and may have decided to cut that expense, sources said.
“It’s a very American concept that poverty is supposed to be shameful,” said Francella Ochillo, executive director at Next Century Cities, an organization that works with municipalities on expanding internet access. “There is a stain. If you are the employee who can’t afford to do your job, you won’t ask for help.”
What can banks and credit unions do about the issue
Sources said financial services executives could take several steps to help ensure all of their employees have access to broadband.
For one, institutions could add a monthly or yearly stipend to their benefits package meant to help offset the overall cost. Providing this benefit to all employees, instead of requiring those who are in need to come forward, will help eliminate any potential stigma.
Toronto-Dominion Bank plans to give most employees the option to return to the office this month and is aiming for workers to officially transition to their new working models by June.
The Biden administration once again extended the pause on student loan payments enacted to help borrowers during the COVID-19 pandemic, this time through the end of August.
Employees will still have some flexibility to work from home, but are strongly encouraged to collaborate with colleagues in person, according to people familiar with the matter.
Employers should look at this as a way to invest in their workforce. Staffers who lack internet at home may struggle to get promotions since they can’t work on projects in the evening or over a weekend. They could also face challenges when trying to find a higher-paying job elsewhere since they may not be able to develop as strong of an online presence on important networking sites, such as LinkedIn.
“Just like anything that has to do with being low income or not having enough, there can be a level of embarrassment with it,” said Jessica Denson, communications director at Connected Nation, which advocates for better high-speed internet access. “Having a benefit offered across the board is the best way to deal with it.”
To help eliminate the issue more broadly, institutions can cover costs associated with getting broadband to underserved areas as part of their philanthropic efforts. Additionally, banks can receive credit under the Community Reinvestment Act for helping to expand broadband access.
For instance, Truist Financial in March pledged $25 million in aid in response to COVID-19, including working with organizations that provide broadband services to underserved communities. BBVA Compass provided a grant for a feasibility study and strategic plan to expand broadband access along the U.S.-Mexico border.
“I’ve seen the disparity for certain low-income communities and rural areas where there hasn’t been an investment in broadband infrastructure,” said Jordana Barton, senior advisor for the San Antonio branch of the Federal Reserve Bank of Dallas. Internet access "is such an opportunity for upward mobility.”
