What it means to ‘bank Black,’ and why more Americans are doing it – Business Insider

Last year, Kim Nehls started banking with OneUnited Bank, the largest Black-owned bank in the US. For Nehls, a college professor at the University of Nevada, Las Vegas, keeping her money at a Black-owned bank is just one way to fight systematic racism. That's true for many consumers who choose Black-owned banks the decision is often influenced not by money, but by social impact.

Nehls told Insider, "One of the reasons I like OneUnited is because of their corporate social responsibility. They have financed over $100 million in loans, mostly in low- to moderate-income communities. OneUnited also promotes financial literacy through workshops for adults and children to build generational wealth that has for far too long escaped Black families."

Nehls is part of a growing population of Americans putting their deposits into Black banks. In 2016, there was a spike in interest in "banking Black" after activist and entertainer Michael "Killer Mike" Render went on an MTV News and BET News Town Hall and encouraged viewers to deposit their money into Black banks in reaction to the police shootings of Philando Castile and Alton Sterling. Experts estimate that, since then, more than $60 million has been moved into Black banks.

Banking in the United States has a long history of racial injustice. In 1874, thousands of Black people saw their savings wiped out when Freedman's Bank collapsed. The government-chartered bank, started for newly freed Black Americans, promised to return some of the lost funds to customers, but most received nothing or pennies on the dollar.

Shawn Rochester, author of "The Black Tax," told Insider that the Freedman' Bank collapse bred distrust of banks among Black Americans.

Freedman's was marketed as a Black bank but actually run by white managers, Rochester explained. Those managers used Black customers' money in risky ways, and lost a total of $3 million from 61,000 Black depositors, most of whom had been members of the Union Army.

"This is why Frederick Douglass described the failure of the Freedman's Bank as the equivalent of extending slavery for another 10 years," said Rochester. "The collapse of the Freedman's Bank, combined with another 100 years of continuous, intentional discriminatory practices, led not only to significant distrust of the financial services industry, but also to the under-development of a financial infrastructure both within the Black family and across Black the community."

Black Americans' distrust of banks today is not unwarranted. Black applicants are routinely charged more for mortgages and auto loans, and are often flat-out denied loans. By turning to Black banks, Black Americans are deciding to put capital back into their communities, which Rochester said could have a transformative effect, starting with employment opportunities.

"If a substantial portion of Americans started using Black banks, that would trigger a number of things," said Rochester. "The biggest impact is that you would have a massive increase in employment in the Black banking infrastructure. It would be very stimulative for job creation."

After the demise of Freedman's Savings and Trust, the first bank organized and operated by Black Americans was Capital Savings Bank, opened in 1888 in Washington, DC. Capital Savings Bank closed in 1902, and several other Black-owned banks opened in the following years, thriving in the 1950s and 1960s. Because of the financial crisis in 2007, many Black-owned banks closed, and today the number of Black-owned banks and credit unions across the country has dropped down to just over 40.

The goal of many of these banks is still the same, though. OneUnited, an online bank, says it is committed to serving the needs of urban communities. Part of its mission includes "treating all customers with respect, dignity, and personal attention to their banking needs regardless of their account balances."

For many customers who switch, they see keeping their money at a Black bank as aligning with their core values.

Sacha Thompson, a diversity, equity, and inclusion consultant in the Washington, DC, area, said she was motivated to switch to a Black-owned bank because she wanted her money to impact the communities she was working for.

"I started my business in 2020 and switched banks in January 2021," she said. "I use Industrial Bank, which is a regional east coast bank. The money stays within the community, and I appreciate that. I live in a majority-Black community and wanted to see that money return in some small way."

For others who have switched, they've said that the feeling of community and banking with someone who looks like them ranks high on their list.

Shakera Thompson, a business and trademark attorney who has banked with OneUnited Bank since 2018, said she feels more comfortable with a Black-owned bank.

"While I don't contact the bank often, on the few occasions that I have had to reach out, the customer service was great," she told Insider. "The agents were very warm and helpful, and it felt like speaking with acquaintances as opposed to the stuffy experiences I have sometimes had with other banks."

Because switching banks is a hassle, some may want to dip their toes in with a small deposit at a Black bank. Although everyone's financial situation looks different, Rochester wants people to consider depositing much larger sums of money when they can. The difference could mean the survival of a Black bank.

Rochester, who banks with OneUnited, said,"Those really small deposits actually drive up the cost of banks in general. My view is that you need to have those of us in the top 5% or 10% of wealth, who really control the vast majority of Black wealth, setting the example by putting more of our deposits in Black banks."

For those who aren't in that top tier, moving your rainy-day fund to a Black-owned bank could still be meaningful. Said Rochester, "It's a very stable source of deposits that allows those institutions to now increase their lending capacity and earn more stable income."

For far too long, Black Americans have been discriminated against and shut out of traditional banking, and a migration towards Black banks has a number of immediate benefits for both the banks and the customers.

Andrea Longton, founder of The Social Justice Investor, started transferring a portion of her savings earlier this year to Hope Credit Union, a Black-owned bank in Mississippi. Longton said the bank offers the same products and protections as her previous bank, but now there's an added bonus.

"My money works for me every day, and I want it to work for social justice," she told Insider. "Transferring a portion of my passive savings to a Black-owned financial institution is a straightforward, financially sound, and impactful strategy to drive sustainable financial earnings coupled with social justice returns."

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What it means to 'bank Black,' and why more Americans are doing it - Business Insider