Black Banking Startup Raises $40 Million
According to a press release, "Greenwood, the digital banking platform for Black and Latino individuals and business owners, today announced it has closed $40 million of Series A funding from six of the seven largest U.S. banks and the top two payment technology companies: Truist, Bank of America, PNC, JPMorgan Chase, Wells Fargo (Its still time to Clean House at Wells), Mastercard, and Visa."
The investor group also includes the largest Hispanic bank in the US, Banco Popular. (Looks like the crisis has finally forced the realization that, as MLK noted, "we must 'live together as brothers or perish together as fools." )
FIS, TTV Capital, SoftBank Opportunity Fund, Lightspeed Venture Partners and All-Pro NFL running back Alvin Kamara were also listed as investors.
For a startup to receive funding from six of the seven largest firms in its industry is significant. The key question is why and what will they do with this funding?
Greenwood started out of the BankBlack movement, an effort to redress years of neglect and discrimination.
We have observed a remarkable increase in the performance of minority bank stock: these stocks (blue line) have outperformed the S&P 500 (green line).
The S&P 500 Index (green) returned 74.73% over the past year. The Minority Bank portfolio (blue) returned 112.27% over the same time period.
At the Federal Reserve Bank of Kansas City in 1994, I suggested the Federal Reserve purchase mortgage-backed securities (MBS) originated by Black banks as part of open market operations. The Fed, then under Alan Greenspan, refused, reversing course only in 2008, when large non-minority banks got into trouble.
We still believe the Fed will need to create a Black bank liquidity pool totaling at least $50 billion by conducting repo and reverse repo transactions, purchasing Treasury, MBS securities (and/or SBA PPP loans) from Black banks, asset managers and fintech firms with a record of actually making loans to the Black community.
Greenwood may very well be one of these. We will see.