GAO: Community Development Financial Institutions Need Tech Help
CDFIs, MDIs are losing customers over lack of online, mobile banking
Community Development Financial Institutions and Minority Depository Institutions are losing customers because they do not have the resources or training to provide even the most basic digital services, the Government Accountability Office said in a report issued late last week.
“Many CDFIs and MDIs have limited technology capacity that may constrain their growth and ability to fully meet their mission,” the GAO said. “Small CDFIs and MDIs disproportionately reported lacking capacity to provide digital services, such as online and mobile banking, which their officials said limited their ability to reach more underserved consumers.”
The GAO recommended that the Treasury Department ensures that its CDFI program develops training materials that would improve the institutions’ technology capacity. The department’s efforts should particularly address the specific challenges faced by smaller CDFIs, the GAO said.
The GAO sent surveys to 656 random CDFIs between June and July 2023 and received 187 responses.
The GAO reported that:
About 30% of small CDFIs and MDIs reported that they did not have the online and mobile banking technology to meet their needs. By comparison, almost all larger institutions had that technology.
At least half of the institutions that responded to the survey wanted technology for automated loan underwriting, but did not have it.
61% of the CDFIs wanted software that would allow lenders to track customers’ credit history, credit scores, services history and products for which they might be eligible.
An estimated 50% of those institutions responding said that cost had frequently or always prevented them from obtaining the technology they needed.
An estimated 76% of CDFI and MDI officials said that financial assistance for technology was needed.
Responding to the report, CDFI Fund officials said they were aware of the need to provide resources to help improve institutions’ technology capacity but added that they do not have the resources or expertise to accomplish that goal. They said that the Treasury Department intends to implement a pilot grant program for CDFIs that want to improve their technology and cybersecurity efforts.
“While the planned pilot program and other new technical assistance grants may help additional CDFIs improve their technology capacity, broadly, they do not address the development of training or other materials, specifically,” the GAO wrote.
The GAO noted that the CDFI program’s strategic plan states that it will develop training programs targeting CDFI needs, but it has not produced any new training or materials since 2020. Fund officials indicated that they do not have a timeline for developing such materials and services.
Addressing credit unions, the National Credit Union Administration said it had provided ten grants to help MDIs with digital services and cybersecurity in FY22. Those grants were capped at $10,000 for each credit union and NCUA officials said they were considering increasing that cap due to increasing technology costs.