Wells Fargo, JPMorgan Chase and other big banks have been abandoning lower-income areas and shifting their services to wealthier neighborhoods, according to a new report.
There has been a trend among larger banks to trim their branch networks and instead rely on cheaper ATMs and online banking to serve customers. According to data analyzed by Bloomberg, lower-income areas are bearing the brunt of that trend.
Between 2014 and 2018, banks have shut down 1,915 more branches in lower-income areas than they opened, according to Bloomberg. JP Morgan, Wells Fargo and Bank of America led the industry in low-income-area closures.
Shuttering a neighborhood bank can have far-reaching effects, according to a report in Fortune magazine. It can mean fewer banking choices and potentially higher costs. A 2014 study by economist Hoia-luu Q. Nquyen found that a branch closure can cause a 13% drop in the number of small-business loans made in the area – a drop that lasts several years and isn’t offset even when other banks enter the neighborhood.
Lower-income areas are often minority neighborhoods that face financial discrimination, Fortune reported. A 2016 study found that in many cities, African-American customers were less likely to get mortgages than white customers in comparable economic circumstances.