Fintech’s Role in Exacerbating or Reducing the Wealth Gap

Research shows that Black, Latinx, and other minorities pay more for credit and banking services, and that wealth accumulation differs starkly between their households and white households. The link between debt inequality and the wealth gap, however, remains less thoroughly explored, particularly in light of new credit products and debt-like banking services, such as early wage access and other fintech innovations. These innovations both hold the promise of reducing racial and ethnic disparities in lending and bring concerns that they may be exploited in ways that perpetuate inequality. They also come at a time when policy makers are considering how to help communities of color rebuild their wealth, presenting an opportunity to critique policy proposals. This Article leverages that opportunity by synthesizing research about the long-term costs of debt inequality on communities of color, adding an in-depth analysis of several new advances in banking and lending, and proposing several key principles for reducing debt inequality as an input to the wealth gap.

a Professor of Law, Indiana University Maurer School of Law.

b Frederick M. Hart Chair, University of New Mexico School of Law. The authors thank Ernesto Longa, Claire Gardner, Grace Allison, and Rameez Burney for their research assistance, and Rory Van Loo and Stewart Paley for their comments.

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