Header image: Adeolu Eletu on Unsplash
More than 500,000 people joined Greenwood’s waiting list in its first 100 days. The global neobank market size is estimated to be 39 million users, and over 0.01% of it has already reached out and signed up for Greenwood even before its official release. But, what is Greenwood, and why has it made such a large footprint so quickly?
Founded in 2020, the Greenwood digital bank focuses on providing equitable service and support for small businesses and personal users, developing local communities, and cultivating Black and Latinx entrepreneurs. Named after the once-thriving Greenwood district, the “Black Wall Street” of Tulsa, Oklahoma, the startup has caught the U.S. largest banks’ attention and convinced hundreds of thousands of early adopters of their social mission’s strength.
- Andrew Jackson Young Jr. – former Atlanta Mayor and U.S. Congressman, former U.N. Ambassador, today dedicates his life to solving social issues.
- Michael “Killer Mike” Santiago Render – activist, rapper, entrepreneur. Killer Mike is a big supporter of people who strive for change, founded Grind Time Official Records, and started the #BankBlack movement that encourages African American families, businesses, and allies to utilize Black-owned banks.
- Ryan Glover – serial founder, made a name for himself excelling in product delivery, focusing on the African American community.
Although the product rollout is still anticipated, features will include digital savings and spending accounts, P2P transfers, and mobile deposits. Here’s how Greenwood aims to differentiate itself:
- Providing access to funds two days ahead of receiving paycheck;
- Facilitating integrations, enabling brick-and-mortar minority-owned banks to provide additional products and services to help strengthen historically Black banks;
- Offering accessible lending products at non-predatory rates;
- Enabling capital recirculation and reinvestment into the communities. One of the issues that Black communities face is the significantly lower circulation of money inside their communities (6 hours on average for 1 U.S. dollar, compared to 20-30 days in other racial groups), which prevents Black-owned businesses from supporting each other.
This is how the enterprise plans to give back:
- For every customer sign-up, Greenwood will provide five free meals to a family in need;
- Users will have an option to make a donation to UNCF for education, Goodr to feed the hungry, or NAACP to support civil rights with every card swipe;
- Once a month, Greenwood will provide a $10,000 grant to a Black or Latinx small business owner that is a Greenwood customer.
According to Federal Deposit Insurance Corporation’s (FDIC) report, 17% of Black households and 14% of Hispanic households were unbanked in 2017, compared to 3% among white households. It is fair to assume that this proportion persists today, and those Black and Latinx households made up a lion’s share of the 100 million Americans who had to receive stimulus checks by mail due to lack of bank accounts.
Greenwood’s values and smart social growth model may be able to reverse this trend.
Partners
Six of the seven largest U.S. banks and the top two payment technology companies – Truist, Bank of America, PNC, JPMorgan Chase, Wells Fargo, Mastercard, and Visa – contributed to Greenwood’s Series A funding round in March 2021, led by Truist Ventures. Other noteworthy participants include Banco Popular, the largest Hispanic-owned bank in the U.S, venture capital firms SoftBank Group and Lightspeed Venture Partners; and All-Pro NFL running back Alvin Kamara.
Future
The bank does not need to obtain its own license, but rather partner with a license-holding bank to underwrite financial products and satisfy the regulator’s requirements. This front-end model gives Greenwood unmatched scaling opportunities: following its local success, the bank will be able to spread its values and provide support to communities across the U.S., allowing more brick-and-mortar banks into their network and using them as channels to distribute their services.
Its mission to assist individuals and enterprises of color can be enhanced with the built-in crowdfunding functions to raise equity for businesses. A direct donation feature can also be added to support organizations within the community.
Once mass adoption is achieved, the group insurance products can be offered with discounted premiums, using entire communities’ pooling power, mimicking Lemonade’s premium payment “refunds.” Companies (Black or Latinx-owned) could adopt products to process their employees’ paychecks, insurance services, similar to the white-label Banking-As-A-Service services provider Green Dot.
Many of the products that Greenwood’s users could benefit from have been made into reality by other fintech startups that tasked themselves with overcoming the archaic and, at times, prejudiced way financial and insurance products are structured and underwritten. Car and health insurance, personal and small business lending, transaction handling, and other areas of finance have been revolutionized in recent years by startups that targeted the underbanked demographic because that population suffered the most from predatory price practices and lacked trust in established institutions. Greenwood’s early success in attracting users shows that there still is a large addressable market that other startups were not able to reach. Best of all, targeting specific issues that disproportionately affect those communities and being explicit about its values helped to convince early adopters that this startup does have a social mission that extends far beyond capitalizing on the digital financial services disruption.
About the writer: Ravil Rakhmatullin is a Business Researcher at Inside who writes Inside Business and Inside VC. He has worked on developing complex data-intensive products that transformed the core way the businesses are run. Passionate about moving the needle when it comes to the adoption of deep AI that informs business strategy and transforms enterprises, instead of running specific functions in secondary tasks. Morbidly interested in following the continuous evolution and growing economic and social importance of platforms/marketplaces and FinTech. A big believer in using self-learning algorithms for the good of humanity, fostering transparency in decision making, holding people and institutions accountable, and fighting institutionalized inequality and injustice.
