Wole Coaxum, a 50-year-old African-American native of Cleveland and former managing director at JPMorgan Chase, had seen enough.
More to the point — he had not seen enough.
Frustrated by the lack of attention that banks and financial advisors paid to the working class, low-income people of color, and particularly the 22% of New Yorkers without a savings or checking account, Coaxum in 2015 founded Mobility Capital Finance, a firm dedicated to providing low-cost mobile banking that builds credit and strengthens underserved communities.
The 2014 shooting of Michael Brown in Ferguson, Missouri, which foreshadowed George Floyd’s killing, vexed Coaxum. Brown’s death sparked protests, raising questions about how police treated African-Americans and the role minorities play in American society.
“As I watched those images, for me as an African-American, it was like watching the documentary ‘Eyes on the Prize,’ which I would argue was the best documentary that chronicled the civil rights movement of the 1950s and 1960s,” Coaxum said. The 14-part television series first aired in 1987 while he was attending Williams College.
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In 2014, nearly 50 years after these protests, Coaxum concluded, “We’ve made little financial progress.” So, despite being married with two children and owning a house in Westchester County, he quit his job at JPMorgan Chase to launch Mobility Capital Finance, commonly called MoCaFi. The firm, based in Harlem on 125th Street just down the block from the famed Apollo Theater, provides low-cost banking and ATM cards, among other services.
At most financial services companies and advisory services, Coaxum says, “The business model doesn’t support low to moderate income people,” who are often overlooked or ignored.
The results affect people of color in two profound ways, he says. “They either get charged a disproportionate amount of fees, or the banks leave their community altogether.” In New York City, there are four bank branches for every 1,000 white households, but only one branch for every 4,000 people in areas predominantly minority. He quotes author James Baldwin who once said, “It’s expensive to be poor.”
Coaxum notes that 10 New York City neighborhoods account for almost 35% of unbanked households. And those residents live in areas where Blacks and Latinos predominantly reside, mostly in the Bronx, Brooklyn, and Queens. These residents are most likely to have no credit scores and carry debt.
He describes his goal in launching MoCaFi as “putting communities of color on a level-playing field with white customers, so they can access and create intergenerational wealth for themselves and their families.”
To accomplish that, Coaxum outlined several strategies including encouraging people to open bank accounts to avoid costly check-cashing and other fees as well as improving people’s credit scores, given that 26% of Black people have credit scores above 700 compared to 58% of white people. With a higher credit score and bank account, home ownership becomes more likely, as does intergenerational wealth.
MoCaFi generates revenue from interchange fees, which merchants pay to accept debit cards, and partnership and referral fees whereby customers are offered products that it itself doesn’t sell, such as mortgages and auto loans.
For example, MoCaFi offers a demand deposit account through its mobile app, which can be opened at any of 85,000 outlets nationwide including Walmart, CVS, 7-Eleven, Family Dollar or Dollar General with no minimum balance. A customer can enter a store, open an account, and make a cash deposit into their account with immediate availability of funds through MoCaFi.
“If you live in a banking desert, like Hollis, Queens, with these Walmarts or CVS, you have the equivalent of a bank branch,” Coaxum says.
Opening a bank or checking account provides free ATM withdrawals and deposits. “Issuing checks is a core capability. Most people of color are nickeled and dimed and we offer free cash checking,” he points out.
Financial service firms, advisories, and asset managers can be part of the solution, Coaxum insists. For example, larger banks can open branches in largely minority communities such as Washington Heights and East New York, which they’ve avoided in the past. They can also hire a more diverse group of senior managers, who will then attract more people in minority communities. And they can partner with organizations such as MoCaFi “to create a blueprint that gets products and services to every resident in every community.”
The Wall Street Journal reported today that JPMorgan Chase and other banks are working to issue credit cards to people without credit scores.
When Coaxum worked at Smith Barney, one team identified and attracted a slew of Cuban entrepreneurs who became highly valued clients. “Not all Black people are low and moderate income,” he says, suggesting that a bevy of Black professors, teachers, doctors, high school teachers, and entrepreneurs are waiting to be discovered.
Today, MoCaFi has about 30,000 customers across the country. It has partnered with cities such as Honolulu, Los Angeles, Newark, New Orleans and Columbia, S.C., to promote opening mobile banking accounts and access to no-fee ATM locations, including for undocumented youth. Consumers receive quarterly spending reports to track their spending. The partnership generates revenue for each city and MoCaFi.
Coaxum said “We have helped people buy homes, improve credit scores, and get more people banking. It’s a validation of the business model. With that, we are now trying to scale up.”
Michael Sherraden, the founding director of the Center for Social Development at the Brown School at Washington University in St. Louis, and co-author of Assets and the Poor: New American Welfare Policy, clarifies what financial services can and cannot do regarding overlooked and often unbanked customers. “Not many poor people show up in that world,” he says. “These are profit-driven entrepreneurs; it’s hard to serve a population that won’t generate much of a profit,” he adds.
Furthermore, he says, most advisors don’t have the necessary expertise to help people whose net worth is between $20,000 to $200,000 and aren’t their target audience. And some of these clients carry debt and have minimal assets.
“A better question might be,” Sherraden asks, “what’s the potential source of advice for people who don’t meet their minimums? Who’s a source of advice for people who don’t have a half a million or people who might not have $5,000?”
Minority and female financial advisors “could get their firm interested in supporting some alternative advising structures aimed at people of low income,” Sherraden says. For example, his organization, Center for Social Development, has been training social workers, who interact with these unbanked people on a regular basis, to offer financial expertise to assist their clients.
Hence, Sherraden suggests, overcoming the wealth gap, entails having “fintech tools combined with human beings that can make connections to reach everyone.”
Coaxum says MoCaFi aims to offer “mobile first banking that enables customers to build their credit, buy homes, and become entrepreneurs; and in doing so, provide communities a pathway to closing the racial wealth gap.”