Chris Maddaloni/CQ Roll Call via AP Images
Fourteen percent of bank branches closed between 2008 and 2020—an era when two severe economic recessions wiped out people’s wealth while driving up bank profits.
After Mark Zuckerberg announced the rebranding of Facebook to Meta, reports indicated that the tech giant planned to open brick-and-mortar retail stores to showcase its new products. Meta needs people to try out virtual reality headsets, gloves, and clothing in order to sell them on Zuckerberg’s vision for the metaverse. This follows Amazon opening kiosks and retail stores a few years ago and recently announcing plans to open department stores. After forcing its storefront competitors out of business, Amazon is taking advantage of the available real estate.
The tech giants’ rush to brick-and-mortar stores interested me. For over a decade, I’d been listening to banks justify closing branches to cut costs by contending that people preferred to manage their money via computers and phones. Online and mobile banking were supposed to be easier and more convenient, especially since everyone was presumed to have a high-speed internet connection. Tech engineers, bankers, economists, and policymakers encouraged us to accept the inevitability of digital banking and a cashless society with remarks like “Who doesn’t want digital?” and “No one goes to a bank branch anymore.”
It’s true that banks are closing their branches. Data from the Federal Deposit Insurance Corporation (FDIC) shows steady declines. Fourteen percent of branches closed between 2008 and 2020—an era when two severe economic recessions wiped out people’s wealth while driving up bank profits. The COVID-19 pandemic has hastened this decline. At the beginning of the pandemic, branches began restricting walk-in business and closing their lobbies, instead steering customers toward ATMs and online and mobile platforms. Many branches closed permanently. But many people only grasp the reality of closed branches once they’ve already disappeared.
The lines between banks and tech companies are blurring. And this makes it all the more confusing that tech companies and banks both refer to customers’ preferences when justifying their divergent corporate decisions about brick-and-mortar storefronts. Tech companies lack the waning public trust of retail banking institutions; however, they are delivering financial products and services over which banks are used to having exclusive control. Because tech companies and banks increasingly share a customer base, the apparent contradictions in corporate decisions to open and close retail stores can’t be explained away by within-industry changes in people’s preferences or consumption patterns.
Tech companies are delivering financial products and services over which banks are used to having exclusive control.
One answer is that tech and finance industries are jockeying for control over new terrains and manipulating their economies of scale to extract new forms of value. This value extraction relies on and reifies a socially constructed racial hierarchy.
Since their inception, banks have relied on a racial hierarchy for generating profits and accumulating wealth. As Angela Glover Blackwell and Michael McAfee write, “Banks have been the underwriters of American racism.” Banks have financed the slave trade, funded local development to segregate cities, denied affordable mortgages to Black and brown borrowers, and charged Black and brown customers more for retail banking services.
Banks routinely compound the racialized costs of banking by refusing to make changes that would benefit their customers. For decades, banks have ignored people’s demands for the elimination of overdraft fees, free or low-cost checking accounts, and low-interest loans and mortgages that would have come at the expense of their bottom lines. While some banks have framed their recent decisions to discontinue overdraft fees as part of commitments to advance racial equity, these decisions coincide with competition from tech companies and threats of federal regulation and oversight. In actuality, retail banks spend about $60 million per year on lobbying efforts to avoid demands from public policymakers requiring them to offer affordable products and services.
While banks often claim a causal link between customers’ preferences for online and mobile banking and branch closures, we should recognize banks’ emphasis on customer preferences as the gaslighting that it is. Just because customers may want online and mobile options doesn’t mean that they want bank branches to disappear from their communities, alongside their hospitals, pharmacies, and grocery stores. Yet banks swiftly accept a limited interpretation of customer preferences in order to justify their corporate decisions, acting only on preferences that align with increased profits.
Branch closures raise the stakes on individuals to finance their own infrastructure for managing money: computers, phones, and broadband. High-speed internet is already privatized to a large extent. There are few public spaces where people can use an open Wi-Fi connection without first purchasing a cup of coffee. Instead of a robust public infrastructure, we rely on private companies to sell us exclusive access to the internet within our homes—without the guarantee of reliability, security, or privacy.
By defaulting to this private infrastructure, banks engage in digital redlining. Residents of Black and brown communities are required to pay for the infrastructure to use and manage their money at a far greater rate than what is required of residents from white communities. A recent Brookings Institution report found persistent racial disparities in branch closures in Baltimore, Cleveland, Detroit, Pittsburgh, Philadelphia, and St. Louis, even after accounting for banks’ avoidance of doing business in majority-Black census tracts to begin with. These trends are also despite the facts that banks charge lower rates for their products and services in white communities and that white communities already fund their private infrastructure to a greater degree by having higher rates of high-speed internet within the home.
The foreclosure of banking alternatives forces a reliance on technology that aids in the expansion of the surveillance state disproportionately into Black and brown communities. The prominence of tech companies in the virtual space, combined with the retraction of banks in the physical space, creates new conditions for extractive finance and predatory surveillance. Like payday lenders and check cashers that occupy communities exploited and abandoned by banks, tech companies capitalize on the vulnerabilities and truancies of our institutions.
Not only are tech companies expanding into brick-and-mortar retail stores; they are competing with banks in the delivery of financial products and services, such as by providing checking account and payment services and loan underwriting. Tech companies’ financial products and services activities comprise a growing share of their revenue—about 12 percent of revenue in 2019 among the largest companies, including Amazon and Meta. And there is every indication that tech companies will continue to increase their revenue from these activities.
As early adopters of modern technology surveillance, white communities have on average welcomed retail banking and money management via online and mobile platforms. And, as some of the first to receive tech companies’ new retail stores, white communities are at the forefront of accepting surveillance and acquiescing to privacy loss at the expense of everyone else. Using their abundance of customer service data, Amazon made an entrée into brick-and-mortar retail stores in 2017 by acquiring Whole Foods—a grocery store known for catering to the preferences of its white and wealthy customers. Luxury clothing brands whose high prices inevitably narrow their customer base to the white and wealthy have announced plans to open retail stores within the metaverse.
In a generous interpretation, maybe the surveillance that comes with adopting modern technology doesn’t yet feel to white communities like giving up privacy. White people are used to a level of privacy that has never been afforded to Black and brown people, low-income women especially. As they willfully allow the erosion of their privacy, maybe white people doubt they will experience any negative consequences. Perhaps in a more honest interpretation, white communities are willing to subject themselves and Black and brown others to increasing levels of surveillance in exchange for the perceived protection of their own privacy and property.
Strong regulation and oversight that anticipates the shifting terrains and prohibits predatory surveillance is clearly needed. However, this has mostly been an inadequate strategy for bringing about publicly accountable and racially just retail banking institutions. Private companies operating under racial capitalism have always been able to find the regulatory loopholes, and tech companies’ operations are arguably much harder to scrutinize than retail banking institutions. Tech companies have already proven nimble at evading federal rules designed for retail banks, setting up the potential for similar conditions that have plagued payday-lending regulation for decades. And regulatory strategies have never fully redressed banks’ racial discrimination, which bodes ominous since tech companies knowingly rely on racist algorithms and data.
As tech companies and banks shift and maneuver the terrains of our economic society, we have to decide the conditions we are willing to accept for ourselves and to impose upon each other. And in a society where we are interconnected, these decisions are really two sides of the same coin. What might seem like innocuous trends in branch closures and online and mobile banking are a part of rising, virtual forms of extractive finance and predatory surveillance. We must push against claims that these trends are isolated and inevitable; the stakes are too great.
