The role of financial services in improving racial equity in the United States
The past few years have changed the debate about racial equity in the United States. The racial wealth gap remains central to this conversation, which encompasses increasing financial inclusion, creating equitable opportunity, and building generational wealth.
The wealth gap between black and white households in the United States has persisted for decades, as black Americans now own about 1.5% of the country’s wealth, and the median black family owns about 13% of median white family wealth. family.
We also know that nearly half of black households are underbanked and are more likely to fall victim to risky financial products such as loans.
This disparity has a significant human cost as well as an economic cost. Wealth is not only an end in itself, but also a means to create economic well-being for families. It protects families from financial shocks, whether it’s a job loss, a health problem or other unexpected expenses. And this contributes to the resilience of individuals and their social networks and communities.
Wealth also allows families to invest in their own economic mobility. With wealth, people can invest in their own or their children’s education, as well as in home ownership and entrepreneurship. Such investments generate social mobility and additional wealth.
McKinsey Institute for Black Economic Mobility, estimates that closing the racial wealth gap could lead to GDP growth of 5% per year in the United States.
Financial services companies and the financial system as a whole must play a role in bringing about this change.
The role of financial services
The annual difference in wealth flows between white families and black families is about $330 billion. Access to financial services and interactions with the financial system play a large role in this disparity. More than 75% of the difference comes from differences in return on investment, the cost of debt and intergenerational transfers.
When it comes to financial services, Black Americans and other people of color face inequities across the board, including reduced access to financial institutions in their communities, lower approval ratings, and availability and participation. least to a range of financial products and services. By helping to address these inequalities, financial services companies can help solve this seemingly intractable problem.
It is clear that the financial services sector must play a role in reducing these disparities. Recognizing this imperative, McKinsey recently brought together ecosystem leaders to discuss how the industry can ensure it is representative, inclusive and serving Black communities.
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