The majority of Blacks and other minority groups are underserved and underbanked in America. The situation has been attributed to the fact that few banks operate in Black communities. The Federal Deposit Insurance Corporation (FDIC) in a report noted that Black and Hispanic households are more likely to be unbanked or underbanked.
It found that more than 15 million colored people did not use America’s formal banking system in a survey published in 2015. However, according to the Center for Financial Services Innovation, underserved people in 2016 spent $173 billion in interest and fees.
Two Black entrepreneurs have set out to address this challenge. Darnell Parker, founder of Ingenious Financial, and Derek Taylor, Chief Operating Officer of Ingenious Financial, have announced plans to raise $200 million to purchase an existing bank to serve underserved and underbanked communities.
Parker and Taylor say the rationale for wanting to purchase an existing bank is to avoid the strict regulations and other challenges that come with starting a bank from scratch.
“When larger financial institutions absorbed some of the minority deposit institutions banks, they left a tremendous void for these banks, who previously served minority communities by providing small to medium-sized business loans,” Parker says.
Minority banks have long been considered innovators in the banking industry, Parker says, adding that they play a significant role in the economic empowerment of minority groups. “But in recent years, they have not always managed to keep up with technological advances,” he said.
The new acquisition will be named Bank of Ingenious and its primary focus will be on supporting underserved retail and business customers who need loans, specifically targeting independent physicians, dentists, veterinarians and similar professional services providers.
Additional details of the bank’s operation include operating with a small physical presence and setting up branches at institutions that are needed. Its operations will also be migrated online to meet current demands and dynamics.
Parker and Taylor plan to complete the acquisition of their first bank by the end of the third quarter and acquire more in the fourth quarter and in 2021. So far, they are meeting prospective targets and are looking for a bank within a metropolitan area with between $50 million and $600 million in assets.
“We hope that this investment will sustain African American financial institutions in the American history, foster popular, engaging workflows, and bring innovation to every client, customer and community we serve,” Parker says.