Cheese Financial co-founders, (L-R) Zhen Wang, Ken Lian and Qingyi Li pose for a picture in this undated flyer. Cheese Financial / Handout via REUTERS
May 18, 2021
By Anna Irrera and Maria Caspani
NEW YORK (Reuters) – After seeing a doctor, three court appearances, five trips to the bank, and having her name and address published in a newspaper, Billie Simmons finally received a debit card with her chosen name on it.
As a transgender woman, this meant she didn’t run the risk of coming out of herself every time she used her card for routine expenses like buying groceries.
The legal process to change her name and gender in identification papers took several weeks. Four years later, Simmons received her monthly credit report in an email on her dead name.
She was unable to change her online banking username and her credit history is incomplete. It only reflects transactions made after a legal change in its name.
“It’s a constant emotional reminder that the system always sees me for who I used to be and that I can’t get on with my life,” said the 27-year-old.
“It’s really difficult to deal with on hard days. These banking systems are not designed for us.”
Hoping to solve some of these issues, Simmons co-founded Daylight, an online banking provider focused on the LGBTQ community due to launch this summer.
Its features include letting users set up an account online with whatever name they choose, regardless of what is on their ID, and receive financial coaching focused on goals that are common to many LGBTQ consumers, such as: B. Saving for surrogacy or adoption.
It is estimated by daylight that there are 30 million Americans who identify as LGBTQ. It is among a cohort of new digital banks in the US targeting communities where many people say their needs have not been met by major lenders.
Those startups include First Boulevard and Greenwood, both of which focus on serving black Americans, Cheese Financial, which caters to the Asian community, and the majority, which serves immigrant groups.
“Historically, community banks have focused on cheaper customer acquisition by focusing on an underserved region,” said Ian Kar, founder and CEO of research firm Fintech Today.
“The Internet removes geographic restrictions. Developing banking services in terms of people’s identity such as race and sexual orientation is a modern approach. “
According to data provider CB Insights, digital banking startups targeting specific demographics raised a total of $ 318 million from investors in 2020.
They raised $ 86 million in eight transactions in 2021, including $ 40 million for Greenwood from U.S. financial institutions including Truist Financial Corp., JPMorgan Chase & Co, and Bank of America Corp.
However, such startups are entering an increasingly crowded digital banking market where many competitors offer similar basic services and prices, such as: B. No monthly fees, overdraft fees or minimum balance.
They rely on their branding and tailor-made offers for their target groups will surpass the broader range of services offered by the large banks. However, according to some industry experts, they may need to rapidly expand their customer base to challenge larger lenders who have scale and cheaper sources of capital.
YAWNING WEALTH GAP
Kansas City-based First Boulevard, founded after George Floyd’s murder last year, is designed to help clients build wealth and invest in the black community.
Inequality in the United States is severe: the average wealth of black families is $ 24,100 – less than 15% of white families’ wealth ($ 142,500), according to Federal Reserve data.
Only 6% of black entrepreneurs surveyed by the Association for Enterprise Opportunity in 2020 said their main source of credit was banks, up from 23% for all businesses. When approved, the median loan amount for black entrepreneurs was less than half the loan amounts given to white peers, according to the survey.
“We are one of the few communities in the world that was considered property in building our financial system,” said Donald Hawkins, CEO of First Boulevard.
Among its offerings, First Boulevard is building a marketplace where users can get money back for purchases from black-owned companies.
Prentiss Earl, a Kansas City schoolteacher and entrepreneur, said he never felt comfortable seeking financial advice from his mainstream bank, but from a lender like First Boulevard.
“I want to feel like my money is being used for companies and people who look like me,” Earl said.
First Boulevard opens on June 19 – an annual holiday on June 19 to commemorate the abolition of slavery in the United States – and has a waiting list of 200,000 users.
Recently, $ 5 million in seed capital was raised from donors including UK banking giant Barclays Plc and fintech investment firm Anthemis Group.
“If you pay more attention to this segment, it’s because it’s been missing for so long,” said Amy Nauiokas, founder and CEO of Anthemis, of minority groups.
Given the challenges such players face in the highly competitive digital banking marketplace, success could depend on how quickly they can grow their customer base by building a brand that analysts say is authentic with the communities they want to serve .
“You could very easily make a mistake because you will never address every single person in this church. It’s a community, but not everyone is a copy, ”said Sarah Kocianski, Head of Research at Fintech Consultancy 11: FS.
The Houston and Stockholm-based majority provide banking services to immigrants in the United States, a diverse group spanning multiple nationalities, cultures, and languages, and claims to have gained 5,000 subscribers in the first three months since launch.
The company initially provided financial services to the Houston Nigerian community and later expanded to include Cubans in Miami. It is now planned to address immigrants from Ghana, Kenya and Ethiopia in Washington DC. Employees from the same communities are hired to act as local advisors.
CEO Magnus Larsson said many migrants are going to physical stores in their communities for access to basic financial services.
“Why do people go there when it’s expensive? Because of the cultural context,” he added. “They feel uncomfortable or unwelcome (in mainstream banking). It’s intimidating.”
For some people, specialist banks can be vital, according to Ken Lian, who had no credit profile and struggled to open a checking account after moving to the US from China in 2008. He ended up paying more than $ 1,000 in various fees like ATM withdrawals and overdrafts.
He now has a credit score of 800 FICO, which is considered above average, but says he can still be turned down by mainstream banks due to his relatively new status in the country.
That year, Lian co-founded Cheese Financial, a digital banking service for 21 million Asian Americans.
The company is tailored to be accessible to customers with no credit history and is also working to attract new customers without the need for a social security number.
It offers 10% cashback at 10,000+ Asian-owned stores and businesses, and is committed to donating $ 10 for each new user to a nonprofit focused on helping the community.
“Given the current environment that the Asian community is in, we developed Cheese as a new social banking platform,” Lian said, citing in part a surge in attacks on Asian Americans over the past year.
(Reporting by Anna Irrera in London and Maria Caspani in New York; editing by Pravin Char)
This article originally appeared on www.oann.com