MBN USA

October 24, 2023

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Financial firms help create economic opportunity for MBEs

By Tonya McMurray

The financial services industry is large and varied, offering a range of opportunities for minority business enterprises (MBEs).

“The financial services market includes a wide range of company sizes, and with that there are varying levels of operational complexity, different geographic footprints, and different needs when serving customers and clients,” said Ted Archer, global head of business partner diversity at JPMorgan Chase & Co. “While the financial industry doesn’t manufacture goods, it’s made up of businesses that have similar needs to other industries.”

In addition to providing goods and services to the financial institutions, one growing opportunity for minority businesses is within the broker-dealer and investment management space, he said.

Reuben Essandoh, director of supplier diversity for Capital One Financial Corp., said the bank tries to include diverse suppliers in every sourcing opportunity, including marketing and branch collateral for banking services, branch couriers, ATM services and professional services.

Technology is changing the financial service market, and that opens up many opportunities for MBEs, said Kevin Cohee, co-founder and CEO of OneUnitedBank, the nation’s largest Black-owned bank.

“The whole sector is radically changing,” he said. “Consumers want financial information right here, right now, 24 hours, seven days a week, and they want to be able to spend their money all over the world. Technology offers a superior way to both deliver financial services and products as well as creates products.”

Unique challenges

In addition to the usual challenges of running a small business, MBEs targeting the financial services sector face additional challenges, including meeting the strict regulatory requirements of the industry, said I. Javette Hines, director, global head, supply chain development, inclusion and sustainability for Citi.

JPMorgan Chase’s Archer notes that meeting the financial service industry’s stringent minimum requirements can be daunting for smaller minority businesses.

“Our team has found that satisfying prerequisites such as cybersecurity, insurance and bonding can cost a typical business somewhere between $100,000 and $500,000, creating a very real barrier to entry to doing business with the financial services industry,” he said.

To help MBEs address the cyber-readiness gap, JPMorgan Chase partners with KY3P by S&P Global to offer MBEs a full assessment of their control environment, pro bono consulting services and a connection to KY3P’s customer network and decision makers at four other financial institutions.

Another way MBEs can address the stringent requirements is to engage with corporations as Tier II suppliers, Capital One’s Essandoh said. This helps them get to know the business and understand what it’s like to work for a large financial institution.

Cohee said collaborations are key to success in the financial services market.

“You can’t see a business as something that you alone are trying to put together,” he said. “You have to create collaborations that give you a unique set of skills.”

One way OneUnitedBank has leveraged collaboration to better deliver services is by partnering with JPMorgan Chase and Citigroup Inc. (Citi) to access their ATM networks. Because of that, OneUnitedBank has the largest number of surcharge-free ATMs in the United States.

Minority participation in the financial services industry is critical not only for minority businesses but also for continuing to close the income gap for minority communities, Cohee said.

“Products are evolving from utilitarian products like checking and savings accounts into financial technology-driven products,” Cohee said. “To the extent that historically underserved minority groups don’t have access to this technology for this new generation of products, then income inequality gaps are just going to get wider.”

Supporting MBEs

Most large financial institutions are committed to providing support to help MBEs succeed in the financial services market.

“Minority-owned businesses are flexible, innovative and driven,” Essandoh said. “By including them in our Capital One supply chain, we maximize the power of different perspectives and unique ideas to deliver exceptional products and services to our customers as well as create more economic opportunities in our communities.”

Capital One offers several development programs for minority businesses. A Supplier Diversity Mentoring Program provides Black and Hispanic business owners in Texas and Virginia the opportunity to work with Capital One associates to develop roadmaps to accelerate year-over-year growth, profitability and key operating metrics. Catapult, an immersive, six-month program, helps businesses bridge the digital skills gap. SAGE is an educational program developed in partnership with the Women Business Enterprise Council — Greater DMV and Metro New York that helps women-owned businesses create a three-year business plan.

At Citi, the institution partners with the New York and New Jersey Minority Supplier Diversity Council (NY & NJ MSDC) to offer educational programs, supports the NMSDC Emerging Young Entrepreneur Program, and works with the NY & NJ MSDC cohort of the NMSDC Centers of Excellence Certificate Program. Citi also conducts international “Doing Business with Citi” sessions and has partnered with prime suppliers to pilot a mentoring program.

Citi’s Diverse Financial Institutions Group (DFIG) has developed an Executive Loan Program and a Mentor Protégé Program, which includes a partner training program that serves as an MWBE broker dealer intern development program.

JPMorgan Chase uses its Advancing Black Pathways and Advancing Hispanic and Latinos Fellowship programs to deploy young professionals to help solve challenges faced by Minority Deposit Institutions (MDIs). Over the last two years, the financial institution has invested more than $100 million in 16 Black-, Hispanic- and Latino-led MDIs and Community Development Financial Institution Funds (CDFIs) and plans to spend an additional $750 million with Black- and Latino-owned firms by 2025. The company partners with Ariel Alternatives LLC, an offshoot of Ariel Investments LLC, on Project Black, an initiative to scale larger and more sustainable MBEs. In addition, JPMorgan Chase’s Diverse Supplier Grant Initiative offers affordable loans to support diverse suppliers seeking capital to meet the costs associated with fulfilling contracts with large corporations. The bank’s Empowering Change program provides a recurring revenue stream to MDIs and CDFIs to help them pursue strategic acquisitions, expand their footprints, hire key talent, improve technology and advance new business ventures.