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| THREE QUESTIONS FOR |
| Jason Wright |
| Jason Wright, a partner in McKinsey’s Washington, DC, office, focuses on modernizing higher-education institutions, government agencies, and industrial companies through large-scale transformations. Jason also co-leads McKinsey’s global inclusion strategy and spearheads global outreach to executives of color.
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| African-American families still lag behind white families in terms of wealth. How can that change? |
| The wealth gap leaves many black families at a significant economic disadvantage, with less financial security and less ability to fully participate in the economy. Less wealth also means black Americans are underrepresented in the market for financial products and services. A lack of access to financial services is not just a symptom of the racial wealth gap; it is also a cause. Without the ability to affordably save, invest, and insure themselves against risks, many black families struggle to translate the income they earn into wealth. |
| Greater access to financial services could be central in closing the gap. We have identified five key aspects of financial inclusion. A household with full access to the financial system should be able to make everyday transactions through a safe and affordable transaction account, have access to credit, hold insurance against key risks, be able to save for big goals or rainy days, and ultimately accumulate long-term wealth. While many families take these elements of financial inclusion for granted, black families face more difficulties gaining access to the whole puzzle. |
| What are the challenges of being financially excluded? |
| Black families face greater geographic isolation, fewer products tailored to their economic realities, explicit racial discrimination and bias, and more. |
| Two simple factors tell the tale: banking and car ownership. Basic checking and savings accounts are harder for black consumers to open and more expensive for them to maintain. In majority-white counties, there are 41 banks per 100,000 people, compared with just 27 in neighborhoods where the majority are people of color. And when black families do gain access, they often pay more than their white counterparts. |
| Car ownership, too, is essential in many communities for getting to work and holding a job, but it is more expensive for the financially excluded. People of color are more likely to be offered costlier pricing options than their white counterparts. |
| Financial exclusion also has intergenerational consequences, creating real challenges in black families’ ability to sustainably build wealth. Moreover, modern-day financial disparities, such as the approximately 45 percent of black individuals who report experiencing racial discrimination when trying to rent an apartment or buy a home (compared with 5 percent of white Americans) continue to make economic mobility and wealth building more difficult for black Americans. |
| What changes can be taken to tangibly improve this picture for black families? |
| Financial inclusion will not be achieved unless the private, public, and social sectors commit to coordinated efforts. Leaders at banks and other private-sector institutions can make an enormous difference simply by rooting out the geographic, process, and economic barriers at their institutions that make it more difficult for black families to gain full access to financial products and services. |
| The public sector, in its role as policy maker, regulator, watchdog, and developer of financial infrastructure, could identify and support initiatives such as student-loan reform (black Americans with bachelor’s degrees who took out student loans hold nearly $4,400 more debt than the average American college graduate) and innovative systems that support multidimensional credit scoring. |
| In addition, the public sector could monitor and enforce equity in policies related to financial inclusion—for example, ensuring real-estate agents do not discriminate against black families who wish to move into neighborhoods that do not comprise majority black residents. The social sector, meanwhile, can help identify and pilot innovative solutions that, once proven, could be brought to scale. |
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| BACKTALK |
| Have feedback or other ideas? We’d love to hear from you. |
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