A 'platform built by us and for us': Black leaders start neobank
Television executive Ryan Glover, rap star Killer Mike and civil rights leader Andrew Young have launched a digital bank for Black and Hispanic consumers called Greenwood Financial.
“It’s no secret that traditional banks have failed the Black and Latinx community,” said Glover, who is chairman of Atlanta-based Greenwood.
“We needed to create a new financial platform that understands our history and our needs going forward, a banking platform built by us and for us, a platform that helps us build a stronger future for our communities," said Glover, who nearly a decade ago was among the co-founders of Bounce TV, a broadcast entertainment network that caters to an African American audience. "This is our time to take back control of our lives and our financial future.”
"The four largest banks in America have all settled lawsuits for discriminating against Black and Latinx customers,” said Aparicio Giddins, the chief technology officer at Greenwood, who previously led mobile banking technology teams at Bank of America, TD Bank and JPMorgan Chase. “Blacks are routinely charged more than whites for checking accounts.”
An analysis done by Zillow found that in 2016, nearly 21% of Black applicants were denied a conventional mortgage, and 15.5% of Hispanics were rejected. In 2016, Asian applicants were denied a conventional loan in 10.4% of cases — slightly more than the national average — and whites in only 8.1% of cases.
“That creates a market for us, in addition to what's happening in our country right now with social injustice," Giddins said. "Not only do we want to enter the market, we want to be able to do good for our community and give back.”
Greenwood has established a waiting list for customers, and its initial products — a savings account and a spending account — will be rolled out in the first or second quarter. It will provide a black metal aluminum debit card, and it will support the use of Apple Pay, Android Pay, peer-to-peer money transfers, mobile deposits and a global ATM network. It will offer access to wages two days in advance if they are direct deposits. Small-business lending is on the company’s long-term road map.
“That is a part of building wealth in our community,” Glover said. “In order to build wealth, you need bank capital; bank capital allows individuals and corporations to acquire and create assets. Since the beginning of time, many cultures were able to have access to banking capital in order to build personal and corporate wealth. We haven't as a community had that access, and Greenwood is here to solve that problem.”
For each account opening, Greenwood’s founders say they will provide five free meals to a family in need through the nonprofit Goodr. Also, customers will be given the option to round up their spending transactions to the next dollar and donate the difference to the United Negro College Fund, the NAACP, Goodr and other organizations.
“I don't think any of the big four [banks] are doing anything like this," Giddins said. “This is what makes this opportunity so special. Greenwood on a quarterly basis is going to match that donation to those organizations.”
Glover said Greenwood aims to solve two or three problems that have existed for decades.
One is the lack of recirculation, in which dollars that Black consumers make tend to get funneled outside of their communities and businesses.
“If I deposit $100 into an account at Wells Fargo, Wells Fargo deploys those dollars to other individuals in the form of loans,” Glover said. “Those dollars aren't deployed back to us in our community in an equitable fashion. That is the crux of the problem that we want to solve: the redeployment of our capital back into our community to help it grow.”
The other is an inability to convert income to wealth.
“About 16% to 17% of African Americans are unbanked, versus 3% in the white community,” Glover said.
Greenwood in the long run plans to make commercial loans, focusing on Black entrepreneurs and creative professionals to "equip them with the banking capital they so need to grow their businesses and make their dreams a reality,” Glover said. It will also provide home loans and auto loans to help underserved communities build wealth.
The name Greenwood is an homage to a financial district in Tulsa, Okla., that had a concentration of African American businesses during the early 20th century and was also referred to as "Black Wall Street."
“The district was a thriving community,” Glover said. “You had doctors, lawyers, dentists, tons of professionals. You had movie theaters, tailors, grocery stores and hotels, even banks.”
Dollars were reinvested among businesses and individuals in Greenwood.
Greenwood was burned to the ground in the Tulsa massacre of 1921, in which white residents killed 300 Black residents, injured hundreds more and left 5,000 people homeless.
Helping the unbanked
Giddins said Greenwood is going after the underbanked, underserved, middle class, Black and Hispanic communities that have $1.2 trillion of purchasing power.
“Unbanked does not have to be synonymous with the poor, the dredge or the forgotten,” said Killer Mike, whose real name is Michael Render.
“A lot of times the unbanked are just young people who don't have economic savvy, or haven't been in an environment where that was an option," said Render, who in 2016 was one of the organizers of the #BankBlack movement.
"If you're from a check-cashing environment, you're not necessarily bound to poverty, as much as you need to learn some good habits young so that you can learn and actually do banking,” he said.
Render noted that large banks are closing branches in poor neighborhoods and opening new ones in wealthier communities.
“One large bank left the community I live in and said, well, we're going to have fewer locations — we apologize for that,” Render said. “At the same time, in a city where I have a business, they are building a brand new branch. For me, it was important that we bring a bank right to people's hands.”
Counseling and advice are a big part of what will be different about Greenwood, its founders say.
Render recalls that when he was a kid, his grandmother marched him into a bank and had him set up an account.
“The first responsibility I realized I had as a kid was taking care of myself and my own financial future because my grandmother was 44 when I was born, my grandfather was 54,” he said. “They said: We're not going to be here forever. Let’s instill these lessons.”
For young people who live a neighborhood with only check cashers, their first of financial literacy is to open a bank account, Render said.
“You can't want to play basketball, you’ve got to pick up a ball and make some shots,” he said.
He also wants to teach people to be frugal. He advises people that for every $10 they make, they should save $2 in the bank.
“My wife and I don't buy new cars, we buy pre-owned cars,” he said. “We could afford a million-dollar home. We bought a half-million-dollar home. We try to live at about half the rate of speed we could be going. Being a spokesman for Greenwood gives me an opportunity to say that to a bigger audience.”
Giddins was the first person in his family to graduate from college and to have student debt.
“I was trying to figure out, how do I get debt-free?” he said. “I read a ton of books by Suze Orman and David Bach. I started educating myself about that process — how do you create wealth and how do you get out of the hole? I thought, it all falls back to our financial system and education. How do we educate folks about how to spend their money, how to invest their money, how to save their money?”
He wanted to start a bank, to provide capital and counseling to people so that they could manage and invest their money to get a return on investment.
Then Giddins went to work for a series of banks, and reality set in.
“I realized that with all the red tape, the bureaucracy, the politics, it was really hard to move the needle forward in order to provide true help to the individuals that need it,” he said. “I realized that that dream may not come true, until Ryan approached me with the idea of Greenwood.”