Mastercard is pledging $500 million over the next five years to expand financial inclusion for Black individuals and businesses. Through three interconnected initiatives, and with the help of various partners, the financial services company aims to deliver tools and resources to allow many long-excluded African Americans to access affordable financial services and build prosperity.
It’s not new territory for the company; Mastercard has just completed a goal of bringing 500 million unbanked and underbanked people into the financial system. But this new initiative will directly target members of the Black community, who have been hit particularly hard by the pandemic. The Federal Reserve Bank of New York found that Black businesses have had a 41% closure rate—versus 17% for white businesses. Even in ordinary times, the median wealth of Black families is a tenth of that of white families.
“We’ve done a lot of research, we know the cost of being financially excluded,” says Marla Blow, senior vice president at Mastercard’s Center for Inclusive Growth. Blow stresses that the measures won’t simply comprise handing out checks, but rather strive to “have a catalytic, long-term impact” in addressing systemic problems.
One piece of the initiative is to allow the unbanked and underbanked to access basic financial services, for which Black people usually end up paying significantly more. Many find it difficult to be approved for credit services, and so are forced to rely on expensive payday lenders and remittance providers for simple transactions.
Mastercard will partner with fintech startups, including Black-owned MoCaFi, which has made banking easier and cheaper through mobile transactions. Mastercard will help increase the volume of people that those fintech products can reach, and will deploy its easy-to-use APIs onto those platforms, which will allow affordable deposits, real-time bill payments, and ability to send money to relatives abroad. Through these debit transactions, Blow says, the previously excluded can build up transaction histories to be approved for credit more smoothly in the future.
Another initiative will focus on increasing capital for Black-owned businesses. Partners in this area will primarily be community development financial institutions (CDFIs), which aim to expand economic opportunity and revitalize businesses in particularly distressed areas or communities. These CDFIs have grassroots knowledge of their communities’ geographies, markets, and customer bases, and so are able to target which businesses should qualify for capital—and what amounts they should receive. That partnership helps Mastercard, “so that we don’t have to go through and try to make that decision from 50,000 feet,” Blow says.
“We are interrogating our policies and procedures,” says Frank Altman, CEO of one of the CDFI partners, Community Reinvestment Fund. “And I think every financial institution in the country needs to be doing that, to see where is the hidden bias in our lending that is unintentionally excluding, or perhaps intentionally excluding, otherwise qualified individuals and businesses from receiving capital.” Mastercard will help the CDFIs to digitize their application processing so that the capital, primarily in the form of microloans, can be disbursed more quickly and in a scaled manner. The company will also make deposits to CDFIs, credit unions, and Black-owned depository institutions to strengthen their reserves.
For the final initiative, Mastercard has hand-selected seven cities with which to partner with governmental leaders to facilitate city programs tailored to their populations. In Los Angeles, in tandem with the Mayor’s Fund, it will expand the Angeleno Card program, which has already provided $36 million of rent relief to hard-hit Angelenos; in Atlanta, it will broaden a similar relief program to help prevent evictions. The selected cities vary in size, from New York to Dayton, Ohio, with a view to extending reach to many more. “We want to be able to demonstrate that the work we do there can apply in big cities, small, and even the in-betweens,” Blow says.
A pivotal theme across all the pieces has been facilitating digitization, because online capability “has become critical to distinguishing between the businesses that survive in this pandemic, versus the ones that don’t,” Blow says. Mastercard’s City Key program has already been distributing digital IDs—which allow people without fixed addresses or bank accounts to be reached by city relief and social benefit programs—to city residents. With this announcement, the company has set a new goal of reaching a million people. And, its Digital Doors program focuses on helping businesses get digitized, through assistance in creating websites, accepting online payments, and enhancing digital know-how.
Michael Froman, chairman of Mastercard’s Center for Inclusive Growth, who was Barack Obama’s chief trade adviser, emphasizes the importance of long-term dedication to this plan. “If it’s just a hobby, if it’s just on the side of the desk, it never gets to scale,” he says. During economic downturns, these programs are usually the first things that private businesses tend to cut. “Instead, we’re doubling down on it.”