Problem

A lack of financial empowerment and access has prevented communities of color from advancing economically. In 2016, McKinsey & Co. reported that the average white family possessed 10 times the wealth of their Black counterpart. They go on to estimate that this dampening will cost the entirety of the US between $1 trillion and $1.5 trillion over the next 8 years (4 to 6 percent of the projected GDP). Structures that enforce the burden of debt, lack of access to credit, and inaccessibility of loans hinder BIPOC populations’ economic prosperity and freedom, often due to exploitative lending and a financial literacy knowledge gap.

For example, during COVID, lending discrimination for PPP has harmed many BIPOC business owners. "Just 12% of Black and Latino business owners who applied for PPP (Paycheck Protection Program) loans reported receiving what they asked for.” Additionally, 3.74 million Americans live in “banking deserts,” a critical problem in a society that is becoming increasingly cashless. To address this issue, the following innovators and entrepreneurs have developed solutions to make investing in capital more accessible to all people, allowing for households of color to be closer to the means which have historically been occupied solely by communities outside of their own.

Key Terms

<aside> ⚙ We're in need of some innovation in this section. Help contribute and add to this section by suggesting an edit!

</aside>

Solutions

1. Financial Illiteracy / Investment & Savings Gap

If living paycheck to paycheck, it’s challenging for lower-income BIPOC individuals to put disposable income in savings plans or investments. This issue is perpetuated by a lack of financial literacy, which poses a major barrier to entering the formal financial system.

Existing Solutions

LendTable supplies cash advances as “31 million American workers miss out on their employer 401(k) match.” Receiving this money in advance provides the opportunity to invest and save; for example, “a $1,500 employer match can be worth more than $15,000 if it collects 8% interest in a retirement account over 30 years.”
Hatch Credit was started by students, for students — it allows young adults to build credit scores and savings through logging and analyzing reports, providing tips, and improving financial education.
Robinhood is a commission-free investment service that reduces barriers to public market investing for those lacking financial training. It educates on investment basics and helps users maximize their savings through building investment portfolios.
Stash aims to make investing in stocks and ETFs approachable for beginners with a $0 account minimum.
Acorns utilizes a robo-advisor model to support savings in retirement, investments and more.
Fundrise is an online investment platform that crowdfunds investment into the real estate market (eREIT).

What needs to be done?

<aside> 💰 Auto-IRA: A simple technology platform that creates auto-IRA for employees without employer sponsored savings can allow employers to quickly and easily kickstart employees’ savings plans by automatic deductions from a paycheck.

</aside>

<aside> 📈 Diversified asset class management: Current solutions with automated asset managers and advisors allow access to trading stock, bonds, and ETFs, as well as mutual funds and other crowdsourcing options. However, the industry lacks players who offer easy, convenient, and centralized access to broader modes of investment. A solution in this space may allow beginning investors to explore their options across many unique asset classes all from a centralized location that boasts a highly intuitive interface, accessible deep-tech powered back end.

</aside>

<aside> 💵 Liquidity: Many individuals may be dissuaded from investing due to a fear of investing a major percentage of their net wealth as principle. To circumvent this barrier to access, players who offer rapid liquidity options may be able to convert a significant share of these potential users.

</aside>