Cities work to bring fintech to underserved communities

As digital commerce expands, cities must be mindful that the tech that kept businesses operational during the pandemic is available to underserved communities.

There's long been a concern that digitally-focused developments such as cashless retail could exclude underbanked consumers. The other side of this issue is that small businesses could themselves be left behind as their more deep-pocketed rivals cater to consumers' new digital habits.

Digital payment technologies "are some of the most timely, most relevant solutions in business history," said Melvin Coleman, executive director of the Atlanta Black Chambers. "They allowed us to continue to transact business and operate safely during a pandemic. Now that these enhanced processes exist, many consumers expect to utilize them going forward. It's a whole new world now."

Atlanta Black Chambers is a nonprofit group of business, community and government leaders that advocates for sustainable Black-owned organizations, including education and training programs. ABC helps businesses deploy new technology, which during the pandemic often meant bringing digital ordering, payments and business management to traditionally brick-and-mortar operations.

This work is being done against a backdrop of a racial gap in access to technology and a disproportionate impact of the economic downturn. The number of working business owners fell from 15 million to 12 million in the spring of 2020, the largest drop on record, according to the National Bureau of Economic Research, which found Black business owners experienced the largest loss, with a 41% drop in active business owners. Latinx business owners fell by 32% and women business owners fell by 25%.

There's also a general technology gap that impacts consumers, small business entrepreneurs who often rely on their own personal technology and the ability of those owners to hire staff.

Research from Deutsche Bank Securities found 76% of Black people could get shut out of 86% of jobs in the next 25 years because of a lack of access to technology. The U.S.'s five largest technology firms could address that by investing $15 billion in education and projects to ensure wider access to technology. That's less than 1% of the largest five technology companies' market cap expansion of $2 trillion during the pandemic, according to Deutsche Bank Securities.

"The digital divide is still a real thing. The gap is being closed in business and entrepreneurship by innovative solutions that are available at everyone's fingertips primarily due to smartphones," Coleman said, adding he's "all for" the Atlanta Federal Reserve Bank's Special Committee on Payments Inclusion which will research ways in which the technology that has accompanied the mass move online may inadvertently exclude partes of the population.

The Atlanta Fed's committee, which includes companies from across retail, government, financial services and academia, will examine how to bring digital commerce to businesses and consumers who are reliant on cash — focusing more on expanding fintech than increasing bank accounts. Both solutions are necessary, according to Coleman.

"Given the phrase 'cash-reliant individuals,' I believe I am speaking about the same people when I reference the phrase 'the unbanked' in the Black community and society in general," Coleman said. Because this community is not participating in the financial system, driven by the technology being deployed in the financial and retail markets, some goods and services may not be available to them or definitely could cost more, according to Coleman. "There is also a factor in the racial wealth gap," he said.

Coleman and ABC are stressing access to critical resources, such as training, relationships and financing, making new businesses aware of the online payment technology that is available, along with other merchant innovations.

"Opportunities exist, but access is denied due to poor preparation. I'm talking about books and records, required certifications, etc.," he said. "This is why training and relationships and mentorship is critical."

In San Francisco, the impact of the pandemic on small businesses has been stark, with 50% of small businesses in the San Francisco Chamber of Commerce's footprint closed at the low point in 2020, said Rodney Fong, president and CEO of the San Francisco Chamber of Commerce.

There is some recovery, as there has been an increase in job postings in the restaurant sector as restrictions have loosened. Similar to cities such as New York, there is actually a staff shortage for restaurants.

Advancements such as mobile ordering and payments can help businesses recover, and encourage access to a broader community, according to Fong.

"Digital payment is the future. We see this economy growing in other cities and countries, and the best action we can take as a community is to ensure we involve vulnerable communities in this transition," Fong said.

The cost of business is higher in San Francisco than most other cities. This poses an added challenge in reaching underserved communities, according to Fong.

"This is preventing our small business entrepreneurs from getting off the ground," said Fong, adding initiatives such as San Francisco's Small Business Recovery Act are vital. The mayor's program reduces bureaucracy and streamlines permits and access to financing with a focus on micro merchants and communities that have had difficulty accessing resources in the past.

"If we do not do this, the digital device will only continue to grow," Fong said. "San Francisco is a city of innovation, and as we look to new futures of payments, we must do so with intention and inclusion."