Examining Racial/Ethnic, Income, and Nativity Disparities in Access to Brick-and-Mortar Financial Institutions

This study finds that banking deserts fall unevenly across race, income, and nativity lines, with Latinx immigrant, low-income Black, and American Indian and Alaska Native communities facing the greatest gaps in access to brick-and-mortar financial institutions.

Introduction

This study examines where, and for whom, brick-and-mortar financial institutions are accessible across the United States, with particular attention to how race, ethnicity, income, and immigration status shape neighborhood-level access.  Physical access to financial institutions plays a critical role in community economic development, small business expansion, wealth building, relationship lending – a lending approach that emphasizes long-term relationships and personal knowledge of borrowers rather than relying solely on financial metrics. This study is among the first to examine banking access for American Indian, Alaska Native, Native Hawaiian, and Pacific Islander communities at a national scale, populations that have been largely overlooked in research on financial access and inclusion.  

C. Aujean Lee is an Assistant Professor in City and Metropolitan Planning at the University of Utah and Andrew van Leuven is an Assistant Professor in Community Development and Applied Economics at the University of Vermont. 

Methods and Findings

The authors used secondary data from the 2020 Census at the census tract level, including median household income, racial and ethnic composition, and share of foreign-born residents. They combined spatial analyses with logistic regression to examine neighborhood-level access to brick-and-mortar financial institutions. Using these methods, they developed a neighborhood typology that integrates statistically significant racial/ethnic concentration with income levels and nativity,  providing a more nuanced classification than measures based solely on the percentage of non-white residents. The typology yields four neighborhood types: 

• Resurgent: Neighborhoods with a statistically significant concentration of a racial or ethnic group and a median household income above that of the surrounding metropolitan area.
• Community of Constraint: Neighborhoods with a statistically significant concentration of a racial or ethnic group, a lower median household income, and a higher share of native-born residents than the surrounding metropolitan area.
• Enclave: Neighborhoods with a statistically significant concentration of a racial or ethnic group,   a lower median household income, and a higher share of foreign-born residents than the  surrounding metropolitan area.
• Integrated: Neighborhoods without a statistically significant concentration of any racial or ethnic group.

This typology adds important contextual nuance by capturing meaningful differences in neighborhood composition. For example, it distinguishes between higher-income and lower-income Asian neighborhoods, allowing the authors to examine how relationships to banking infrastructure and financial access vary across different neighborhood contexts. 

Key findings from the study:

• Higher-income Asian neighborhoods were more likely to have adequate access to brick-and-mortar financial institutions, partly due to the presence of Asian ethnic banks in those communities.
• Latinx immigrant enclaves, low-income Black neighborhoods, and American Indian and Alaska Native (AI/AN) communities were the least likely to have adequate access to local financial institutions, limiting opportunities to use in-person banking services.
• Even higher income AI/AN neighborhoods lacked adequate banking access, suggesting income alone does not explain access.
• The study reveals a critical distinction between underserved and unserved communities. While many Black communities had insufficient or inadequate access to financial institutions, AI/AN neighborhoods were often entirely unserved, with no financial institutions present at all.

Banking deserts, which are areas with little or no access to physical financial institutions, are not randomly distributed. Instead, they are concentrated in racially marginalized and immigrant communities, reflecting the effects of a long history of discriminatory policies and chronic disinvestment that higher incomes alone have not overcome.

Conclusions

The authors conclude that neighborhood racial and ethnic composition, immigration status, and income intersect in complex and uneven ways to shape access to the financial infrastructure that communities need for financial opportunity and wealth building. They argue that treating banking access as solely an economic problem overlooks the independent influence of race and nativity, which continue to shape access through the enduring effects of discriminatory practices, such as redlining and other forms of racialized disinvestment. Although the authors identify these historical processes as contributing factors to today’s unequal financial landscape, their analysis focuses on documenting contemporary disparities rather than testing the historical mechanisms directly. 

This study also offers practical takeaways such as:

• Prioritize establishing and maintaining bank branch locations in low-income and racially marginalized neighborhoods
• Direct interventions toward communities with the greatest gaps in banking access rather than higher-income or resurgent neighborhoods. 
• Expand and strengthen minority depository institutions as a community-rooted response for reducing banking deserts and improving financial inclusion.