US Banks Overcharged African American Says McKinsey Report
McKinsey & Co has identified one new factor influencing the disparity in financial capabilities between the White Americans and African Americans.
Report authors and McKinsey partners Shelley Stewart and Jason Wright said African Americans are being "underserved" by US banks. If not underserved, black families are compelled to pay overcharged fees to transact with the banks, the authors said.
The study, released on August 13, is the latest look into the factors driving the ever-growing U.S. racial wealth gap. In an ideal world where the wealth gap is resolved and African Americans are given equal access to bank services, they could save up to $40,000 in the course of their lifetime, according to the study.
Further, more relaxed bank access for African Americans will also bring in advantage for the entire country, with a GDP increase of up to 6 percent by 2028.
Instead, the situation at present, as highlighted in the report, is disproportionate. For example, in neighborhoods where the majority are white families, there are about 41 banks for every 100,000 residents. On the other hand, neighborhoods flocked with more African Americans only have about 27 banks for every 100,000 people.
Even the required minimum balance showed a discrepancy between white and black individuals. Banks operating in white neighborhoods have an average minimum balance of $626.
By comparison, the required minimum balance in black neighborhoods was at an average of $871. African American regions are also known to have more expensive payment services that mostly deal with lending and borrowing money with corresponding interest rates.
The latest report from McKinsey is a reflection of the entire U.S. banking industry where there are only 19 banks operated by African American executives as of October 30, 2018. The gap is also indicated by the number of assets under management between black-owned banks and their counterparts.
For example, when ranked according to the top 5, JPMorgan Chase has more than $2.7 trillion in total assets while black-owned OneUnited has only $661 million. Other black-owned banks also pail in comparison.
Liberty Bank and Trust Company have $594 million in assets; Citizen Trust Bank with $411 million assets; Industrial bank with $423 million assets under management; and The Harbor Bank of Maryland with assets of $282 million.
By comparison, the other four large US banks have multibillion assets under management. Goldman Sachs manages $933 billion; Wells Fargo & Co has $1.895 in assets; CitiGroup with $1.917 trillion in assets; and Bank of America with $2.3 trillion in assets.