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The Lower East Side People’s Federal Credit Union, a nonprofit that provides banking services to New York’s financially underserved neighborhoods, launched its mobile branch in a refurbished school bus in 2014 following the devastation of superstorm Sandy, which forced the closure of its brick-and-mortar branch. It has since upgraded to a specially designed Mercedes-Benz van that serves New York’s Lower East Side, East Harlem, the Bronx and Staten Island, partnering with community groups in the boroughs.

The van provides most of the services of a traditional bank like opening a savings or checking account, securing loans and providing financial advice. It does not, however, have an ATM due to the security risks that come with storing cash in a vehicle.

Banks on wheels are an attempt to repair the gaps within the U.S. banking landscape, which disproportionately impact Black and Hispanic communities. According to a 2022 Federal Reserve report, 40% of Black individuals are unbanked and underbanked, the highest of any racial demographic in the U.S. They are followed by Hispanic individuals, 29% of whom are either unbanked or underbanked.

Adults are considered unbanked if they do not have a bank account and rely exclusively on alternative financial services that charge high fees like check cashing, payday loans, pawn shop loans, as some examples. Underbanked means one has a bank account but still partially relies on alternative financing.

To be sure, the number of unbanked individuals has seen yearly declines, coming down to 4.5% in 2021 compared to 8.2% in 2011, according to a 2021 report from the Federal Deposit Insurance Corporation. That decline correlated with a rise in online banking usage, one of the primary drivers of brick-and-mortar consolidation.

But given existing digital divides, if online banking fully replaces access to in-person branches, financial equity in the U.S. would remain under threat.

Banks on wheels aim to offer at least a partial solution to the increasingly deserted banking landscapes in minority communities. But even the people driving the efforts do not see them as a permanent fix.

“A physical branch is the solution. The mobile branch is a temporary thing to try and build up the physical branch – to build up membership and to build up partners,” said Alicia Portada, a spokesperson for the FCU.

Still, Portada cannot ignore the value of the mobile branches as credit unions and banks shut down faster than they open annually: “It is absolutely needed to have other options.”

BankonBuffalo, a regional bank located in Buffalo, New York, debuted its own bank on wheels this winter.

Darnell Haywood, community responsibility officer at BankonBuffalo, said that at one point, Buffalo had a bank “on every other corner within the city.” Now, Haywood describes an emptier banking landscape. The nearest bank branch is more than two miles from the city center, which, he notes particularly impacts the area’s Black and brown residents.

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Historically, banks on wheels tend to make their appearance after disasters like Hurricane Katrina or public health crises, when brick-and-mortar branches are forced to pause operations. In 2022, the Lower East Side FCU mobile branch saw membership grow even higher than it had during the earlier days of the Covid pandemic, according to Portada, the FCU spokesperson.

And as online banking takes off, boosted by the pandemic, more brick-and-mortar locations are closing their doors. In 2021, U.S. bank closures reached a record high. That trend has made a lack of access to banks more than a temporary problem.

Bank deserts are any areas where there are no bank branches within 10 miles of its center, according to the U.S. Census Bureau. To be sure, many areas that do not meet that formal criteria still lack considerable access to financial services.

Nearly 10% of all U.S. bank branches shut down between 2017 and 2021 – one-third of those closures were in majority-minority and low- to moderate-income neighborhoods, according to a report from the National Community Reinvestment Coalition. When the pandemic began in March 2020, the closure rate doubled from 99 to 201 per month.

The acceleration of bank closures has only worsened preexisting gaps in Black and minority neighborhoods.

The Bronx, for example, which is predominantly populated by Hispanic and Black residents, has the fewest bank branches per household of any New York borough, according to the Association for Neighborhood & Housing Development. The borough currently has 123 bank branches, according to a national bank branch location database, down from 144 in 2018.

A Brookings analysis found that in 2017, Black-majority ZIP codes nationwide had substantially less banking competition than non-majority-Black ZIP codes, meaning that there were fewer bank branches within those areas. Less banking competition often leads to higher interest rates and lower saving rates for customers.

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