Robert F. Smith, the Founder, Chairman, and CEO of Vista Equity Partners, recently joined John Rogers Jr., the co-CEO of Ariel Investments, the oldest Black-owned asset management firm, on Roll Call’s Fintech Beat podcast. Together, the two financial sector leaders discussed everything from the rise of digitalization to the importance of supporting Black-owned banks with the host, Georgetown law professor Chris Brummer.
Outside of his leadership in financial circles, Rogers is a notable philanthropist and community investor, as a board member of the University of Chicago, Rainbow/PUSH Coalition and the Chicago Symphony Orchestra. In February 2008, he became the first Black winner of a Woodrow Wilson Award from Princeton University for his service to Princeton, Chicago, the African American community, and the financial community.
Rogers and Smith had a robust conversation on digitalization, the Black community, and our country’s economic future.
Closing the Racial Capital Gap
“The critical part of being in business in America that is missing in our community is access to capital,” Smith said on the podcast. “John and I fight literally every day to access capital, and we have businesses of size and scale and capacity.”
Banks are key to accessing credit, home loans and small business loans. But Smith noted that nearly 70% of Black neighborhoods in the U.S. do not have a branch bank. A 2020 McKinsey report reiterated this claim, showing that nearly half of Black households are underbanked or unbanked in the U.S. Moreover, Black-owned banks that are open have struggled in recent years, further exacerbating this gap of access to credit and capital. “Nearly half of Black-owned banks have closed in the last decade,” Smith said.
To help solve this issue, Smith has lent support to Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs), which he deems “critical” to the future. In 2020, when the health crisis hit Black-owned businesses hard, Smith successfully worked with Congress and the White House to make changes to the Paycheck Protection Program (PPP) to increase the relief funds allocated to Black small business owners.
Modernization, Technology, and the Digital Divide
A primary theme of the podcast was the rapidly modernizing American economy: a trend which has increased prosperity for white Americans while leaving many communities of color in the dust. On the podcast, Rogers referred to this digital economic divide as a “modern-day Jim Crow.” Construction, retail, and catering – all industries replete with Black employees – were hit disproportionately from the ongoing health crisis, compared to white-collar office-based industries that could provide liberal remote work policies.
Smith argues that improving the technological capabilities of CDFIs and MDIs can help bridge the divide. “When you have a community that doesn’t have a branch bank, modernizing that bank actually gives you reach,” he said. “When you actually implement an enterprise software solution in a small business, there’s about a 900% return of investment. There aren’t many other investments on the planet with that sort of return.”
In addition to helping improve technological resources for Black businesses, Smith has helped close the growing digital divide. He is a founding board member of the Essential Digital Infrastructure and Services Network, or the EDISON Alliance, a cross-sector initiative founded to work with governments and industries to accelerate digital inclusion and end connectivity deserts.
Smith and Rogers: Black Banks Are Smart Investments
On the Roll Call podcast, Smith and Rogers were both asked by Brummer if Black-owned banks are wise investments for the everyday investor.
The duo agreed they were good investments, encouraging others to invest in expanding capital and supporting the growth of Black banks. “The market is there, the opportunity is there, but you have to have the modernization, and you have to put capital in the right forms and the right places,” Smith said.
As the U.S. experienced a racial reckoning in the summer of 2020, companies like Netflix and Yelp agreed with Smith’s advice, investing directly in Black banks. While the companies’ strategies differed, their goals were the same: to do their part to help close the country’s racial wealth gap and improve access to capital for all.
Learn more here about Smith’s efforts to expand PPP loans to small Black-owned businesses.