Do you love your banker?

“The first thing we do, let’s kill all the lawyers”

Judging by the comments sections on news websites following wave after wave of scandals that have come to light since the GFC (synthetic CDO/MBS fraud, Libor rigging, FX rate fixing, tax evasion, sanctions breaches) not to mention vulture hedge funds buying up distressed debt, the quote “the first thing we do, let’s kill all the lawyers” could easily be transposed to bankers in 2014. The two lynchpins of success as a banker, sentiment and trust, have long been understood. Yet when it comes to its relationship with society as a whole, financial services is short in both.

People don’t like bankers just like they don’t like lawyers, estate agents, tax collectors, politicians or traffic wardens. People might come around to the idea of liking their lawyer (or estate agent or politician) once they need them, at which point the lawyer is able to do a great job and the customer ends up loving them. But the opportunity to deliver a direct service of value is often absent in banking; we transact with financial services corporations so have no one person to thank for the business loan, the credit score, the emergency overdraft. People might not like bankers but they still want (and need) to use the financial services the provide.

Bankers are a frequent target of criticism as the public face of unscrupulous behaviour, but also because they employ a specialised, exclusive and impenetrable jargon apparently to defend their position of advantage. The negativity towards bankers in the eyes of society is a shorthand for social frustration with excessive pay packets, failure to add social value and the lack of public accountability and transparency in the industry.

“99% of bankers give the rest a bad name”

But banking is such an intrinsic part of the fabric of society that this social cognitive dissonance benefits no-one. So how do we fall in love with our bankers again?

Perhaps the answer is to change the expectations of bankers and accept that you’re never going to be loved as a banker. You might be wanted, or even needed, and if you do a good job you might just be thanked. But just maybe, you’ll never really be loved for what you do.

Or perhaps the answer is to find a way for society to connect with financial services institutions in a more human, relationship based way; people trust other people, they don’t trust faceless corporations. Of course, humanising financial services is a huge undertaking but it has been achieved, notably by some of the co-operative banks including credit unions, mutual savings banks, building societies and cooperatives. And the German Volksbanken, Landesbanken & Sparkassen as well as public banks globally are being successful, in part by the nature of their corporate structures. There’s more though; new players in the market are getting it right. CaixaBank in Spain has a home banking app on Facebook aimed at broadening contact with its clients. Denmark’s Nykredit answered clients’ calls for a more accessible bank, introducing core offerings including skilled advisors who provide in-branch personal interactions to complement a self-service digital platform. Turkey’s Aktif Bank delivers financial services to its customers through local retailers rather than branches.

But there are things that all retail bankers could and should be doing today, regardless of their structure or degree of innovation. For example, would (should) you tell your customer if there is a better product available, even if that product is offered not by a competitor but by your own bank? The opportunity for bankers is to put the “service” back in to financial services.

“Banking is essential to a modern economy. Banks are not”. Ed Furash.

In the case of investment banking there would initially appear to be fewer direct contact points with the public. Reducing complexity, improving transparency and responsibility of banking in relation to overall societal impact inevitably builds trust. The counterbalance is that because banking thrives on information asymmetry, reducing complexity can potentially reduce the bank’s financial opportunity. Despite this, individuals inside banking are often discouraged from considering the impact of the overall chain of events that they may be involved in; a good starting point is to invest time investigating and reflecting on the social impact of the transaction you may only play a very small part in.

However, investment banking has a far greater social impact and far more indirect touchpoints with society, and more frequently misses the opportunity to create social trust. Understanding and publically disclosing capital flows, and engaging with the actual social and environmental impact of global finance empowers everyone affected to make informed choices. Financial services organisations are (rightly) obsessive about fiduciary risk, yet often fail catastrophically at managing their own reputational risk, quietly enabling highly destructive (environmental and social) activity, all the time hoping to avoid the public scrutiny of NGOs and activist investors. Yet in today’s digitally-connected, post-Wikileaks world, such hopes are likely to be in vain.

Most customers (counterparties, clients) of a bank are in fact more-or-less agnostic to the bank itself, focusing on the value and impact of the transaction. And so bank’s currency has become the transaction itself; yet all too often, such value is measured in terms of the financial impact. The sooner that banks attend to the idea that the new model of currency is trust itself, exercised in a “trust transaction”, the sooner banks will find renewed relevance, more successful relationships, and ultimately a more sustainable purpose in today’s world.

Footnote

The title of this blog post, “The first thing we do, let’s kill all the lawyers” comes from Shakespeare’s “Henry VI, Part 2" and is spoken by Dick the Butcher, the dopey henchman of rebel leader Jack Cade. Shakespeare’s point was perhaps slightly deeper than might be at first apparent; he did not intend to portray all lawyers as evil and to be dispensed with, but as the guardians of the rule of law who protect society from the mass tyranny of the fanatical mob or from those in power.

“As a careful reading of that text will reveal, Shakespeare insightfully realised that disposing of lawyers is a step in the direction of a totalitarian form of government” US Supreme Court Justice John Paul Stevens, 1985

So bankers, faced with a self-inflicted, persistent assault on their relevance, are starting to see the emergence of new, alternative models of finance from outside the traditional financial services industry. Not startups but innovation plays nonetheless from global organisations that have cracked the “trust-as-capital transaction” with their customers. Companies such as Apple (with the launch of Apple Pay) has shown what organisations with a surplus of consumer trust can do. We may also see Facebook and Amazon moving into position in financial services in 2015/6, starting with digital natives. Each of these institutions are notorious for their walled garden ecosystems, not vastly different from the threat of such imbalances of power that Shakespeare warned us of more than 420 years ago.