Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Billie Simmons, Daylight co-founder, in Brooklyn, New York City, U.S.

Daylight/Eli Schmidt/Reuters

After a doctor’s visit, three court appearances, five trips to the bank and having her name and address published in a newspaper, Billie Simmons finally got a debit card with her chosen name.

As a transgender woman, that meant she didn’t run the risk of outing herself every time she used her card for routine expenses like buying groceries.

The legal process to change her name and her gender on identity documents took several weeks. Yet four years on, Simmons still receives her monthly credit report in an email addressed to her dead name.

Story continues below advertisement

She hasn’t been able to change her online banking username and her credit score is incomplete, only reflecting transactions made after she legally changed her name.

“It’s a constant emotional reminder that the system will always see me as the person I used to be and it won’t let me move on with my life,” the 27-year-old said.

“On tough days that’s a really hard thing to grapple with. These banking systems are not designed for us.”

Hoping to address some of these issues, Simmons has co-founded Daylight, an online banking provider focused on the LGBTQ community that is set to launch this summer.

Among its features, it allows users to set up an account online with their chosen name, regardless of what appears on their ID documents, and receive financial coaching focused on goals common among many LGBTQ consumers, such as saving for surrogacy or adoption.

Daylight estimates there are 30 million Americans who identify as LGBTQ. It is among a cohort of new digital banks in the United States targeting communities where many people say their needs have not been met by mainstream lenders.

Such startups include First Boulevard and Greenwood, both focused on serving Black Americans, Cheese Financial aimed at the Asian community and Majority serving immigrant groups.

Story continues below advertisement

“Historically, community banks have focused on cheaper customer acquisition by focusing on an underserved geography,” said Ian Kar, founder and CEO of research firm Fintech Today.

“The internet removes geographical restrictions. Developing banking services around people’s identity, like race and sexual orientation, is a modern approach.”

Digital banking startups that target specific demographics raised a collective $318 million from investors in 2020, according to data provider CB Insights.

They’ve raised $86 million in eight deals in 2021, including a $40 million cash injection for Greenwood from U.S. financial institutions including Truist Financial Corp, JPMorgan Chase & Co and Bank of America Corp.

Yet such startups are entering an increasingly crowded market for digital banking, where many rivals offer similar basic services and pricing, like no monthly fees, overdraft fees or minimum balance.

They’re betting their branding and tailored offerings for their target groups will trump the wider range of services offered by big banks. Yet they may need to swiftly expand their customer bases to challenge larger lenders who enjoy scale and cheaper sources of capital, according to some industry experts.

Story continues below advertisement

YAWNING WEALTH GAP

Kansas City-based First Boulevard, founded in the wake of George Floyd’s murder last year, says it aims to help customers build wealth and reinvest in the Black community.

The inequality in the United States is stark: the average wealth of Black families is $24,100 - less than 15% that of white families, at $142,500, according to Federal Reserve data.

Just 6% of Black business owners surveyed in 2020 by the Association for Enterprise Opportunity said their primary source of credit came from banks, versus 23% for all businesses. When approved, the median loan amount for Black business owners was less than half of the loan amounts extended to white peers, according to the survey.

“We are one of the only communities in the world that were considered property when our financial system was built,” said Donald Hawkins, First Boulevard’s CEO.

Among its offerings, First Boulevard is building a marketplace which gives users cash back for buying at Black-owned businesses.

Prentiss Earl, a teacher and entrepreneur in Kansas City, said he’d never felt comfortable asking his mainstream bank for financial advice, but would at a lender like First Boulevard.

Story continues below advertisement

“I want to feel I sense that my money is going to business ventures and people who look like me,” Earl said.

First Boulevard is launching on Juneteenth - an annual holiday on June 19 commemorating the abolition of slavery in the United States - and says it has a waiting list of 200,000 users.

It recently raised $5 million in seed funding from backers including UK banking giant Barclays Plc and fintech investment firm Anthemis Group.

“If you see more attention to this segment it is because it has been lacking for so long,” said Amy Nauiokas, founder and CEO of Anthemis, referring to minority groups.

‘IT’S INTIMIDATING’

Given the challenges facing such entrants into the competitive digital banking market, success could hinge on how quickly they can grow their customer base by building a brand that resonates as authentic with the communities they aim to serve, according to analysts.

“You could make a mistake very easily as you will never appeal to every single person in that community. It’s a community but not everyone is a carbon copy,” said Sarah Kocianski, head of research at fintech consultancy 11:FS.

Story continues below advertisement

Houston and Stockholm-based Majority provides banking services to immigrants in the United States, a diverse group spanning multiple nationalities, cultures and languages, and says it signed up 5,000 subscribers in its first 3 months since launching.

The company began by offering financial services to the Nigerian community in Houston, later expanding to Cubans in Miami. It now plans to target immigrants from Ghana, Kenya and Ethiopia in Washington DC. It hires employees from the same communities who can act as local advisers.

CEO Magnus Larsson said many migrants go to physical stores in their communities to access basic financial services.

“Why do people go there when it’s expensive? Because of the cultural context,” he added. “They are uncomfortable or not feeling welcome (in mainstream banking). It’s intimidating.”

FINANCIAL ACCESS

For some people, specialized banks can be crucial, according to Ken Lian, who lacked a credit profile and struggled to open a checking account after he moved to the United States from China in 2008. He ended up paying more than $1,000 in various fees like ATM withdrawals and overdrafts.

He now has a 800 FICO credit score, which is considered above average, but says he can still get rejected by mainstream banks because of his relatively new status in the country.

Story continues below advertisement

This year Lian co-founded Cheese Financial, a digital banking service for the 21 million Asian Americans.

Tailored to be accessible for customers with no credit history, the company is also working on being able to take on new customers without requiring a social security number.

It offers 10% cash back at more than 10,000 stores and Asian-owned businesses and has pledged to donate $10 for each new user to a non-profit organization focused on helping the community.

“Given the current environment the Asian community is facing, we built Cheese as a new banking platform with a social cause,” Lian said, referring in part to a spike in attacks on Asian Americans over the past year.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies