The Impact of Banking on Society Is Awesome. (Industry Report: Banking)

By Woolfolk, Phillip D. | Diversity Employers, October 2001 | Go to article overview

The Impact of Banking on Society Is Awesome. (Industry Report: Banking)


Woolfolk, Phillip D., Diversity Employers


Overview

The banking system with all its complexities, challenges and opportunities touches virtually all aspects of our daily lives. Using a credit card to make a purchase, writing a personal or business check, paying bills and moving funds online or accessing your funds through an automatic teller machine are just a few examples of how you may participate daily in the banking system. Even the local pawn shop provides banking-related services such as loans and check cashing in communities where those services are either not readily available or where consumers perceive the pawnshop to be their best or only-banking alternative.

According to the Fannie Mae Foundation, pawnshops represent approximately 42 million transactions annually for a total of $3.3 billion in gross annual revenues.

In this article, we will address a number of topics including the types of services provided by full service banks, demographic changes and potential opportunities, mergers and acquisitions, regulatory issues and predatory lending challenges, financial literacy and fringe banking services.

Changing Demographics and Potential Opportunities

The growth in minority populations across the country could have significant opportunities for college graduates over the next 10 to 20 years. This statement, however, must be tempered by several assumptions without which corresponding opportunities for African-American college graduates may be minimal. First, we must assume that the banking industry will accept the demographic trends as a bonafide business opportunity to expand into relatively under-served communities including low and moderate-income and minority communities. Second, we must assume that the banking industry believes that tapping into the minority community will yield bottom line results in terms of shareholder value and profitability.

There is certainly significant data to suggest that profitability, business growth and increased market penetration could be the outcome for the banks that aggressively pursue the minority community as a business objective. One such example is Bank of America and its strategic alliance with the National Association for the Advancement of Colored People (NAACP). Bank of America is the third largest bank in the country with assets of approximately $609.7 billion. This strategic alliance recognizes the viability of expanding access to credit to low- and moderate- income communities, community-based organizations and individuals for residential mortgage loans, small business loans and community and economic development initiatives.

Fortunately many banks across the country are recognizing the business value of minority communities as emerging markets. Because, it is estimated in the next 20 to 25 years, 38% of the population of the United States will consist of minorities. The three major minority groups are expected to be African Americans, Hispanic and Asian Americans.

Collectively, these three groups are expected to represent over one trillion dollars in annual spending power. This suggests the potential for tremendous competition within the banking industry for market share of minority dollars. These minority dollars offer the industry a significant supply of potential low cost deposits. In the current interest rate environment, mortgage rates, student loan rates and consumer loan rates in general are relatively low. Banks need low cost deposits in the form of retail checking accounts, savings accounts and certificates of deposit in order to improve profit margins.

If demographic and population trends follow expectations, the industry should yield career opportunities at all levels. Opportunities could include entry-level positions such as business support services, information technology, telecommunications, marketing, advertising, sales, relationship managers, attorneys, accountants, compliance officers, junior, middle and executive level managers, investment bankers, investment advisors, insurance agents, consumer lenders, mortgage and commercial lenders to name a few. …

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