Editor's Choice Ethical Banking Fintech for Good Thought Leadership

Is Ethical Banking Changing How the Whole Industry Operates?

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.

Sustainability isn’t a trend – it’s here to stay. Three in five consumers are more mindful of their impact on the environment since the pandemic and 85 per cent are willing to take personal action to combat environmental and sustainability challenges.

With demand for ethical banking and purpose-driven brands tempting the less value-driven companies to benefit from this trend, we ask: is ethical banking changing how the whole industry operates?

David Lais

David Lais, co-founder and CPO of Ecolytiq, which leverages publicly available and payments data to enable sustainable banking, suggests ethical banking is forcing many banks to take stock of their assets and analyse their portfolios in ways they have never had to before.

“No longer is risk measured solely in financial metrics – ESG (Environmental, Social and Governance) factors now play a significant role. The rise in ethical banking has also gotten the attention of policymakers.

“In Europe, North America, Asia and Oceania, we are seeing the rise of new regulations and proposals addressing climate-related disclosures. But there’s still much work to be done. The market needs to mature quickly and there is hope for this.”

James Wilkinson Zuto
James Wilkinson

Meanwhile, James Wilkinson, co-founder of car financing marketplace Zuto, wants to see more businesses from every sector to become more aware of their impact on society, the environment and culture.

“We routinely look at our partners including our lenders, and how ethical their businesses and their processes are, making sure they are treating customers fairly,” says Willkinson.

“As the market starts to change and more businesses embrace standards such as ESG, we hope to see an increasing number of organisations become more community minded, including being more aware of their ethics and their impact on the environment.”

Nicolas Weng Kan,
Nicolas Weng Kan

For Nicolas Weng Kan, CEO of Yolt, the smart payments and data enrichment platform, open banking can positively impact other sectors.

“Transparency, security, and fairness are all important aspects of ethical banking, and questions which open banking was set up to tackle,” he says. “Open banking helps address these critical concerns in many ways – through cutting out middle parties in payments to lower costs and increase security, through making access to loans fairer and based on objective data, and through kick-starting a range of different services to benefit consumers.

“Open banking certainly has the potential to change payments, lending, and unlock innovation across many other verticals. We see rapid growth in the adoption of payments with open banking in particular right now, and over the coming years expect it to be a standard payment method alongside cards, wallets and BNPL, except with lower costs and a higher level of security.”

Charles Radclyffe, CEO of EthicsGrade
Charles Radclyffe

The signs are there that banking moving towards sustainability could be the key to unlocking dramatic changes in other industries but it is still early days, according to Charles Radclyffe, CEO of EthicsGrade, an ESG ratings agency

A recent paper, for example highlighted that many companies in the payments industry from the large players like Mastercard all the way down to the startup challenger banks shared something in common – that they recognised that their position in the market was unique in their ability to nudge consumers towards different outcomes.

“If this idea really starts to get a firm hold then we might see other adjacent industries also start to discriminate based on sustainability criteria. We’re starting to see the first signs of this in the insurance market, for instance.

“It might be too bold to really make this claim, but if we can move towards market forces and incentives that promote ‘ethicalness’ rather than ‘shareholder returns’ then urgent major global issues like climate change stand a chance of being resolved in time. If not? Well, if banking can’t respond to issues that threaten our planet’s survival, then what hope do we have?”


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