‘For us, Pride never stops’: Financial services emerge to serve the LGBTQ community
- Despite years of being underserved, the LGBTQ community has new banking options.
- Incumbent and fintech firms are creating products and services focused on the specific needs of the LGBTQ community.
LGBTQ banking and financial services are increasingly emerging among challenger and traditional banks. Banks are recognizing the financial significance of targeting LGBTQ consumers who hold massive spending power, estimated to be around $1 trillion. Despite recent advances, financial institutions and the banking industry still struggle with systemic bias and discrimination.
“LGBTQ people have to make compromises to operate within a financial system that wasn’t designed for them, and as a result, excludes them,” said Billie Simmons co-founder of America’s first LGBTQ digital bank Daylight. “Within the banking system itself, we face three to eight percent lower mortgage approval rates, indicating systemic LGBTQ bias. We pay higher fees, up to $86 million per year more than non-LGBTQ people, and financial institutions struggle to build products tailored toward our needs.”
Created by members of the LGBTQ community, Daylight offers an array of financial management tools such as access to finance coaches who specialize in LGBTQ life events and money management, a unique finance feed tailored to fit individual needs, advice on spending habits and options for customers to select their preferred name on their Visa card. The LGBTQ community has to deal with a lot of circumstances that put considerable financial strain on people — things like lower incomes and workplace protections, higher debt and expensive transitioning, family planning and HIV health management costs. LGBTQ millenials are less likely to feel confident about their current finances and retirement prospects as compared to straight and cisgender millennials. 50 percent of straight millennials expect to feel financially secure during their retirement, compared to 38 percent of LGBTQ millennials.
Daylight wants to redeem LGBTQ banking experiences. “We’re rethinking and redesigning the relationship our customers will have with their bank,” said Simmons. “Why shouldn’t your banking partner help you navigate access to surrogacies, partner with you to improve your financial literacy, or ensure that your travel insurance doesn’t reject your claims when you’re travelling in countries with anti-LGBTQ laws?”
In the same vein as Daylight, startup LGBTQ financial services site and credit union Superbia is planning on releasing banking services for its customers. The company is also expanding into health insurance, life insurance and money management services to counter discriminatory practices in the financial services industry against the LGBTQ community.
“A slight change in manner occurs during a traditional banking experience, when the representative becomes aware that you are part of the LGBTQ community,” said Superbia’s founder, Myles Meyers. “Overall, the experience lacks an affirming environment for people in our community. So, the experience feels different, looks different and is different – creating estrangement. 60 percent of the community feel that financial institutions don’t want to help people like us. Superbia is changing that.”
Although the financial industry hasn’t fully embraced serving LGBTQ clients, some banks and other financial firms offer LGBTQ centered products, policies and advocacy.
Banks are starting to target the LGBTQ community both as customers and employees. “Given the higher disposable income among LGBTQ professionals, many financial services and banking firms have started targeting LGBTQ customers with advertisements or sponsorships during Pride,” said LGBTQ finance blogger, John from Financial Freedom Countdown. “They have also begun offering equal benefits to their LGBTQ employees to attract and retain talent. These trends are a step in the right direction.”
Wells Fargo has a 30 year record of commitment to LGBTQ equality through its work with LGBTQ organizations like the Trevor Project, GLSEN, Point Foundation and SAGE. The bank has provided more than $50 million in support to LGBTQ organizations. In 2009, Wells Fargo established the Accredited Domestic Partner Advisor program with the College for Financial Planning to educate financial advisors on meeting the financial needs of same-sex couples.
“Our initiatives to support LGBTQ customers are part of Wells Fargo’s overall commitment to diversity, inclusion and equity, and our drive to help all of our customers reach their financial goals,” said John Lake, Wells Fargo’s senior vice president for diverse segment marketing.
“We recognize that all diverse customers, including LGBTQ customers, often face unique needs on their financial journey.”
Life insurance company MassMutual was one of the original signatories for the repeal of the Defense of Marriage Act (DOMA). The company also has a 100 percent rating on Human Rights Campaign’s Corporate Equality Index. In 2015, MassMutual released its Vow to Protect digital marketing campaign featuring same-sex couples discussing the significance of marriage to demonstrate its comitment to marriage equality.
In 2019, BMO Harris Bank rolled out its True Name feature with Mastercard, which allows transgender and non-binary customers to use their preferred names on their personal debit cards without a legal name change. In June, the bank extended this functionality to include personal and small business credit cards.
LGBTQ inclusion in the banking and finance sphere parallels the move towards greater minority representation within banks and fintechs. The Fintech Equality Coalition was recently created by challenger bank Betterment as a reaction to the Black Lives Matter movement. In July, HSBC pledged to double the number of its black staff in higher management. Goldman Sachs recently appointed 60 new women and ethnic minority partners.
With all the positive changes, critical consumers are often wary of businesses paying lip service to minority representation in attempts to appear woke, despite workplace policies and culture moving in the right direction. ‘Rainbow washing’ is recognized as the appropriation of LGBTQ culture as a marketing ploy to appeal to LGBTQ sensitivies without actually improving comitment to LGBTQ customers or causes.
“For us, Pride never stops,” said Superbia’s Meyers. “It is not one time a year to wave a flag or have our logo shown. Each action traditional banks make on behalf of the community is measured against financial return, brand reputation risk, and shareholder reaction. Continuing to support the community is fully welcomed, but they need to add genuine impact, not just help throw a parade,” said Meyers.
According to Daylight’s CEO Rob Curtis, rainbow washing can be countered by focusing on customer needs beyond just marketing to them. “Our internal mantra is ‘no rainbows on cards’, as a statement of principle that we need to go further than just getting the marketing right,” said Curtis. “We describe ourselves as ‘queer geeks solving our own problems, no matter how small’ as we believe this is the right attitude to have to address the LGBTQ wealth gap.”
“Banks that deliver half a solution and run ad campaigns to shout about it are missing the bigger picture.”