In the final sermon of his life, Dr. Martin Luther King Jr. made a request of the parishioners at Mason Temple: to take their money out of the well-heeled banks of downtown Memphis and deposit it in a local Black-owned institution.
Dr. King’s ‘bank-in’ was a response to the reality communities of color had endured for more than a century. The American banking system was designed from the outset to exclude non-white consumers, and throughout its history, new practices were contrived to continue this discrimination. Redlining, predatory subprime lending, and a host of other racist banking policies have hamstrung countless communities of color—eroding their trust in the financial system along the way. Black and Latino consumers are disproportionately forced to rely on lower-quality, higher-cost options to meet their basic financial needs, which limits their chances of moving up the socioeconomic ladder or passing down wealth to their children.
While this legacy of discrimination still looms large, some digital financial applications promise an empowering new start—a chance for historically excluded communities to finally bank on equal footing. But too often these services tear down barriers with one hand, only to erect new risks with the other—all behind the sheen of progress.
Just look at peer-to-peer (P2P) payment apps like Zelle, CashApp, or Venmo, which offer seamless financial transactions and an easy way to make payments and transfer money—sometimes without a bank account. It’s no surprise that people are drawn to these apps, particularly in many Black and Latino communities where bank branches are shuttered at higher rates, leaving check cashers, money transfer providers, and title and payday lenders to fill the void.
Buy Now, Pay Later (BNPL) apps like Klarna, Affirm, and Afterpay are also redefining everyday purchasing power by breaking payments into interest-free or low-interest installments, and they are increasingly used by younger, Black, Hispanic, and female users, with lower incomes and credit scores than the general population.
On its face, the appeal of these tools is simple—money at your fingertips, right when you need it. For communities with limited credit access, these apps bring the promise of a bridge to financial inclusion and power.
However, behind the allure of increased access can lie other threats. The unchecked exploitation of consumer data is a distressing hallmark of these apps. Going far beyond what is necessary— and without meaningful disclosure—these platforms routinely amass and share users’ data, including friends lists, messaging habits, voice/video recordings, and GPS coordinates. Having been promised at long last to be welcomed into the financial system as customers, users of these apps have instead become the products—wellsprings of data to be mined, exposed, sold off, and potentially left open to predatory abuse.
Inadequate financial safeguards and oversight of these apps also exacerbate consumer vulnerabilities and inequality. A Consumer Reports investigation found that several popular P2P apps lacked protections, leaving victims of scams and certain fraudulently-induced transactions in the dark, to the tune of over 70,000 complaints and $130 million in losses in 2021 alone. There’s nothing preventing these companies from providing the basic protections that come with traditional financial services—they simply choose not to.
The stark reality is that digital finance tools like P2P and BNPL apps, while promising financial inclusion, may be further entrenching systemic injustices by adding to the challenges marginalized communities face, not only when it comes to data privacy and consumer security, but also around hidden fees, confusing terms, and bias in algorithmic decisions
This doesn’t have to be the future of digital finance. To build a system that is truly inclusive and empowering, companies behind these apps need to take several actions prioritizing consumer rights including strengthening security to prevent breaches, improving user control over their own data, and ensuring that all fees, interest rates, and terms within the app are clearly transparent—not hidden among 30 pages of fine print.
But we can’t simply rely on digital services companies. Modernizing vital consumer regulations, so they encompass the full range of digitally-driven financial services, is crucial for ensuring that these apps equalize access. Additionally, the long-awaited Consumer Financial Protection Bureau (CFPB) data privacy rule will give Americans better control over what data financial apps can use, and make sure payment apps are held to the same standard as other financial institutions. Our government must build on the CFPB’s work by enacting strict limits on data sharing, giving consumers ways to contest data inaccuracies and misuse, ensuring fee transparency, compelling companies to evaluate and address algorithmic bias, and strengthening accountability in how companies’ automated decisions affect people’s financial lives. This moment demands specifically addressing the role technology plays in worsening consumer harm.
The injustices that Dr. King warned of still echo today, but they don’t have to remain with us tomorrow. The long road to financial fairness demands a delicate balance between innovation, accountability, cooperation, and regulation. We must rally for a just financial system that transcends background and income—embracing the promise of technology while protecting the rights of all consumers. Together, we can shape a new financial landscape that justly serves us all.
Delicia Hand is the senior director for digital marketplace issues at Consumer Reports. Dr. Marta L. Tellado is the president and chief executive officer of Consumer Reports. CR is a nonprofit consumer research, testing, and advocacy organization, headquartered in Yonkers, N.Y.
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