The world is dependent on global finance working towards a fairer financial system for people, the environment and culture with a focus on sustainability, climate change and social justice. This July at The Fintech Times we are putting the spotlight on ethical finance/ethical banking, including environmentally and socially-conscious practices.
Nine out of 10 consumers predict ethical finance will become mainstream, but nearly half don’t trust that sustainable finance products do anything meaningful, according to research. As consumers increasingly look to ‘make their money matter’, providers will need to step up.
Today we ask, how will consumer adoption change ethical banking?
Chris Dean, CEO of Treasury Prime, the banking-as-a-service firm connecting fintechs and banks, says consumers are increasingly ‘reading the label’ when it comes to so much of their behaviour, such as where they shop, what they buy and even where they bank.
“They want to know whether the businesses they support share the same values and principles they do. Do they have a focus on sustainability? Where do they stand on key social issues? What politicians do they support? These questions and others play into so many consumer decisions. And with so much recent social unrest and subsequent interest in environmental, social and governance (ESG), growth of this market is likely to continue.
“Treasury Prime has certainly seen this demand in our own business. We work with several mission-driven enterprises, including Purpose Bank and Guava. Purpose Bank is driven by the philosophy that ‘banking can be a vehicle for innovation and social change’. Guava is a digital banking and networking platform for Black creators, entrepreneurs, and small business owners. Both of these firms, like other banks and enterprises we work with, have a bigger mission at play.
“The more ethical and mission-driven businesses that see success in the market, driven by consumer demand, the more we expect to see emerge. What it also might mean, depending on the outflow of assets from traditional banks, is it might force these banks to reconsider some of their own policies and take on a more ethical approach to banking. Our estimation is that ethical banking is on an upswing and we expect to see growth in the sector for some time to come.”
Fujitsu UK & Ireland
Traditional and neo banks have rushed into the gap with new products, says Krista Griggs, head of financial services and insurance at Fujitsu UK & Ireland, but suggests the market is now exploring the use of AI and machine learning to validate and rate responsible business credentials of public companies in preparation for incoming reporting requirements.
“What’s more, we’re already seeing a genuine change in behaviour from banks and companies alike to measure their businesses not just in pounds, but in carbon as well.
“More than ever the industry will have to collaborate to share relevant data and instil trust in a converging digital ecosystem. Consumers will want some level of choice and control over where their money is invested and with the availability of more granular data, we will see different ethical products emerge.”
Leaf Global Fintech
For Nat Robinson, CEO at Leaf Global Fintech, based at Sci-Tech Daresbury in the Liverpool City Region, now is probably the best time for banks to change.
He says: “This is probably the greatest opportunity for banks to change. If customers begin making banking decisions based on the social responsibility of banks that could dramatically push the rest of the industry to adopt ethical banking as a new norm.
“This would apply for institutional banking clients and investment funds as well (not just consumers). Larger companies and funds can make commercial banking decisions along ethical banking criteria.
“Transparency around ethical banking practices will become the next point of conversations as standards and best practices start to emerge.”
Consumers are looking for more from their financial service providers, according to sustainability platform Ecolytiq
David Lais, co-founder at Ecolytiq, says: “Consumers have driven and will continue to drive the future of retail banking. And many of them are looking for more from their financial service providers.
“Consumers don’t care about what their banks can sell them; it’s the kind of lifestyle that these products and services allow for that really matter to them. Many also believe banks aren’t doing enough to address these issues.
“Research states that over half of all consumers think banks are absent from debates around sustainable living and conscious consumerism despite having a key role to play.”