Better Banking

Banking has an extraordinary influence on the world. The global financial crisis, now over a decade ago, has cast a long shadow, and public trust in banks remains low. (1) But imagine a future in which banks leveraged their immense influence for positive world impact. How would the world be different?

Welcome to our vision for Better Banking.

Imagine if banking products were designed to raise 14 million people in the UK (2) out of poverty and to support the 1.5 million unbanked. (3) Imagine products that encourage and reward the shift in public behaviour that the world needs to tackle the climate crisis. Imagine products that enable more diverse and fair societies through targeted investment. Imagine the increased engagement of bankers who are making society safer by proactively seeking out new data sources to prevent catastrophic terrorist events, and cleaning up our cities by controlling drug trade, modern slavery and human trafficking. 

Why do we believe in this vision for Better Banking? 

Data shows that customers want this, as do employees, investors and regulators.

Customers: A soon to be released Deloitte survey reveals that social and environmental impact is a deciding factor for customers choosing banks and banking products. 65% of UK & Ireland bank customers would move their money if they discovered their bank was financing industries they considered unethical. (4) Conscious consumer behaviour is a trend we already observe in other retail sectors; in the last 20 years, ethical consumer spending in the UK rose almost 4x to £41bn in 2019. (5)

Employees: 85% of the global workforce are not engaged or are actively disengaged. (6) Deloitte insights tell us that employees want to have meaning in their work, beyond the creation of financial value. (7) A purpose centred on social and environmental impact, that each employee could make a personal connection to, would likely dramatically improve engagement levels and as a consequence, we could expect increased productivity too.

Investors: More and more, investors are looking at the non-financial impact of investments, as well as paying closer attention to the risks associated with social and environmental issues, such as climate. The growing impact investing market, now globally valued at $502billion, is an indication of this. (8) As Larry Fink predicted in his 2020 Letter to CEOs, “In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”

Regulators: Governments are realising the urgency of the climate crisis, and institutions are likely to put more pressure on the banking sector to play its part. Global businesses in all sectors are becoming increasingly aware of the UN’s 2030 Sustainable Development Goals, and banks are among those who have already begun to report against them. The UNEPFI are in the process of developing Principles for Responsible Banking which a number of banks globally have already endorsed. The FCA has stated its intention to be tougher on greenwashing, and next steps include new rules to improve climate-related disclosures. (9) We would be foolish not to anticipate future regulation, in particular relating to climate.  

How will our vision for Better Banking become reality? 

We can already see positive changes happening; from green mortgages that offer lower interest rates for lower carbon emissions, to banking apps that enable people to better manage addictions, and bank cards made from recycled ocean plastic. But for the majority of UK banks, social and environmental impact remains “niche” or side lined from the core business in CSR or marketing.

We believe that banks need to transform their core businesses around a re-focused purpose centred on the role the bank plays in serving society and preserving our planet for future generations. We imagine a future in which strategies will be written around real world impact, and goals measured in terms of sustainability and not only short term returns. A bank’s brand for both customers and employees then becomes about its position in the market in terms of its impact on the society it serves. Thanks to Open Banking technologies and increased transparency, customers will choose banking products not only on interest rates but on impact. We predict that banking employees will experience an uplift in engagement thanks to a greater sense of purposeful empowerment and connection with meaning in their work, leading to lower absence rates and increased productivity.

This may be the change that the banking sector needs to finally rebuild the public’s trust.

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Footnotes

(1) Edelman Trust Barometer 2019 – Financial Services remains the least trusted sector measured by the Trust Barometer

(2) UK Poverty 2019/2020 Report – Joseph Rowntree Foundation

(3) Financial Inclusion Commission

(4) Deloitte Better Banking Customer Survey 2020

(5 )Twenty Years of Ethical Consumerism Report, Co-op 2019

(6) Gallup State of the Global Workplace report 2017

(7) Deloitte 2019 Global Human Capital Trends

(8) GIIN Sizing the Impact Investing Market 2019

(9) FCA Climate Change and Green Finance Feedback Statement 2019