Now that I have your attention, we can talk about the financial service needs of the working poor comprised of the financially disenfranchised, immigrants and lower tier of the middle class and which type of banking institution is positioned to best meet their needs.
The New York Times editorial board recently published an article about how New York's ID card (IDNYC) holders deserve respect by gaining access to big banks that do not accept the card as a primary form of identification. According to the article, more than 700,000 residents have received the card since the program began in January 2015.
Rather than seeking to increase the deposits of big banks like Bank of America, Capital One, Citibank and JPMorganChase, perhaps we should think about how this gap in service could actually strengthen a relationship between community banks and the working poor.
It's a common myth that big banks offer better service and provide more protection for depositors than main-street banks ("community banks") in the event of a financial meltdown. But we have seen from the not so distant past that big banks assume more than their fair share of high-risk.
Consequently, many wall street big banks that have a global presence had to be bailed out by the government, while many smaller community banks that assumed less risk weathered the great recession without much help from lawmakers, lobbyists and politicians. It is highly unlikely that the government will establish a Troubled Asset Relief Fund (TARP) or some other type of financial assistance program to save community banks in the event of a future financial crisis.
The public is safe to choose any financial institution that participates in the Federal Depositor Insurance Corporation (FDIC) program which protects each depositor to at least $250,000 per insured bank. Therefore, the focus should not be on size or forcing global conglomerate banks to cater to a certain demographic, but rather, who is best suited to provide mainstream financial access to the underserved.
Community banks offer financial services that are coveted by those desiring to become a part of the financial mainstream. Whether it is basic checking and savings accounts with higher rates, debit and credit cards or loans and check cashing services, community banks provide all of these services for less fees, lower minimum account balances and much lower risk.
Many IDNYC card holders are risk adverse and may be shocked at the level of risk that big banks take and would be satisfied with less risk and an opportunity to build a communal banking relationship, which is more likely to reinvest back into the community they serve.
But should the real concern be about big banks accepting IDNYC cards as valid primary ID? Some may argue that pushing 700,000 plus individuals into the arms of big banks is a disservice to community banks that find it hard to compete with larger banks that are heavily supported by lobbyists and politicians that rely of them for campaign contributions.
Moreover, community banks can serve IDNYC cardholders much better for less fees and better quality service. Most large banks place lesser emphasis on in-person service and heavily rely on remote service centers that are based in other countries to provide customer assistance. However, community banks don't have overseas call centers and continue to invest in doing business the old-fashioned way, person-to-person interaction better known as relationship banking for the average consumer.
The New York Times (NYT) editorial board understands the banking industry and they didn't have to go too far to unearth noteworthy facts that were published in their own paper. The NYT business and financial editor, Gretchen Morgenson wrote an article highlighting that big banks are still a risk and that they have an advantage over community banks. The basis of this sentiment has not changed much since the article was written.
In fact, there are viable community bank options. For example, Carver Bank is headquartered in Harlem, NY and was founded in 1948 to serve African-Americans because of the dearth of mainstream financial services available to Black people at the time. Today, Carver is the largest African-American operated bank in the United States. If this market distortion did not exist then Carver Bank would not have been created.
Also included as a viable community bank option is Astoria Bank, which has 88 branches in the New York metropolitan area that provide retail and business customers and local communities with quality financial products and services. In my recent conversation with an Astoria Bank representative, the IDNYC card will be accepted as a primary ID in the near future.
Perhaps, it would be best if editorial boards and politicians focus on ensuring that our society has a business environment that will benefit mainstream with better service, better rates and quality products that lessen the dependency on banks that are so called, "too big to fail."