Can we make banking truly social (again)?
“The Bank was very unwilling to mix itself up with the affairs of the company; it dreaded being involved in calamities which it could not relieve, and received all overtures with visible reluctance. But the universal voice of the nation called upon it to come to the rescue.”
- Charles MacKay (from Extraordinary Popular Delusions and The Madness of Crowds, 19th Century)
We've all seen the headlines. I wrote about them this time almost two years ago when the "last recession" reared its ugly head. Then, the message was the same as it is now: we could have just as easily prevented this. Well, sort of. My answer at that time was to use story as a mechanism for change. The sentiment is the same, only now people have furiously begun to take matters into their own hands - the meta-narrative has become a meta-movement.
The moral majority waves their arms, quite literally, in protest. There's a national groundswell, one that's arguably been coalescing for decades, and already crossing continents. Meanwhile, financial institutions bemoan quarterly losses, as they administer meaty bonuses to upper management and lay off their workhorses by the tens of thousands.
History is repeating itself, belaboring what should be obvious to us all by now. Perhaps this time, however, the stakes will produce a far different set of outcomes.
Our economy – once again forced into seemingly irreversible tracks created by huge fluctuations in currencies, housing, subsidies and a gratuitous lack of market oversight - is now truly global. Banks have been nationalized. Governments have purchased the toxic debt of their neighbors. Large CPGs are choking on their own fumes, as commodities used to produce their products suffer from inflationary hikes that throw their supply chains out of whack, not to mention the trade lines.
Capitalism is being shoved into redefinition as the veritable pig with lipstick. And amidst the chaos, financial services, as a business and a discipline, has become a looming hypocrisy.
And technology will most certainly not save the day.
Yet there’s an all too familiar scenario, and perhaps, simultaneously, a silver lining: A financial institution, replete with all the perceived resources, necessary infrastructure and, well, funds (hidden or not), is faced with inevitable task of being more than a bank. Communities and local economies find themselves in crisis, turning to the nearest reliable source. They seek relief. They rely on trusted hands. And it comes in the form of something that even money can’t fix.
Some banks have decided to give homes away, after seizing them from families who could no longer afford their mortgages. Credit entities have changed rates, but deny even the gainfully employed access to loans. Major corporations have pulled away from goodwill efforts as their bottom line has shrunk and margins begged for mercy from their “shareholders”, all the while pushing reams of messages out to the masses speaking about their greenfield visions and best intentions.
The connected customer is left downright confounded, angry and disenchanted with his or her financial future. Survival becomes an act of true grit.
Enter Facebook, its social ilk and the promise of a new day.
The top banking institutions have opted to increase their digital IQ to better connect, to better penetrate the nerve centers of their customers, their conversations and their living spaces. Some have coined this as their own version of “social currency”, creating rewards programs so that credit holders can distribute credits amongst their social and interest graphs.
But this does not solve human problems, nor does it account for the problems that arise out of those temporary solutions.
Remember: we live in a world of great complexity.
Meanwhile, alternative currencies are being developed, using Internet gateways as the supply chain. The Amazons of the world have met their warehousing challenges by commoditizing, shortchanging, their own workforces. The outputs seem even worse: Artificial scarcity, the bastard progeny of post-industrialism, has an even shorter half-life within web economics. The implication is that monetary, taxation and welfare systems will need to be redesigned, all based on the demands of – hold your breath – the people.
Perhaps the world is changing, a nobler by–product of evolution. Yet, we must still wonder if the current systems can be repaired, or, if they’ll continue to buckle under their own weight.
Make no mistake about it, as people, customers and “consumers”, there is a sobering cultural dictum and glorious paradox we face here – the same institutions we’ve built up, invested in, sunk our money into, bet our life savings and retirement plans on, have become our Achilles heels in times of great need. This isn’t just an infrastructure problem; in fact, the major banks have all the pipes, supply chains and eddies they need. Rather, this is an issue of how to embrace complexity, and, to a large extent, finding ways to mitigate the staged battle between goodwill and greed. More important, it calls into question what we, as people, are willing to do for each other in the midst of adversity, and how banks can facilitate movements that are not only inevitable, but the keys to our own financial freedom.
It boils down to a single equivalent in the lifecycle of any bank or financial system: value.
So what is value? How does it change? Why does it change?
Is it something that can be co-created between financial institutions and their customers?
What is banking as a life function in today’s social technology era?
What is the role of a bank to the individual? To groups? To governments?
What is it about banks that not only create value between people, but improve their lives?
Before we answer these questions, perhaps we should look at what banking was initially conceived of as a life function, and how these very principles can be directly applied to the markets of today.
In the simplest of terms, money or tender used to serve as a social contract between people, and to memorialize an exchange of like goods and services. Not only did this mark the essence of the Mercantile Period, but it was the linchpin of American democracy. And while mass industrialization has the turned the tide of our collective intent somewhat sideways, we do have an opportunity to go back to basics. To be altruistic. To be social. To be true capitalists that compete over value. It worked at formative points in the 18th century, and it might as well work now.
And just as a 21st Century company like Zappos considers itself a customer-happy company that happens to sell shoes, banks should consider themselves people-driven outposts that happen to use money as a unified form of currency. The BankSimples of today.
Perhaps now, we should entertain the notions that:
Financial services institutions should act where functions of government cannot (not the other way around).
They should create restorative value in infrastructure, particularly within education.
They should facilitate emerging markets as the new growth opportunities.
They should return to being goodwill centers as the drivers of service relationships.
They should make interactions the hallmark of transactions, keeping the exchanges of goodwill and services ongoing.
Oh, and the list goes on. Lots of business and market opportunities at play here.
If banks and other financial entities can make these imperatives real, an active part of their daily practices (such as they have done so in the past, believe it or not), there are great, sustainable rewards also at play, and a demonstrable return to posterity.
But first, we must understand what value means to the self, what value means to an institution and what it takes to sustain a meaningful relationship between institutions and customers… Nevermind "market", "brand", "engagement" or "messaging" for a moment. No, we've got to get our collective story straight. Further, we must identify and improve upon the great disparity, and huge white space opportunity, between being technologically connected to customers and being emotionally aligned with them.
We must walk and talk in our own shoes again.
“There’s no reason in the world the incentives of the banks shouldn’t be better aligned with the interests of the country and its citizens.”
- Joseph Stiglitz, Columbia University