Now is the time for ethical leadership in Financial Services

Fusion Animation

Earlier today I read a post from 11:FS, How the Coronavirus Pandemic Will Affect Banking. It paints an unsurprisingly bleak picture.

We’re amidst unprecedented government stimulus. In some countries, these actions are akin to wartime measures. A notable example of our current situation is The Reserve Bank of Australia. They’re engaging in quantitative easing (printing more money to buy treasury bonds) for the first time in history. In the USA and EU, policy measures are much the same. Whether the ‘right’ move or not isn’t an issue for this post. The point is that this is unprecedented. Right now banks and other Financial Institutions have an opportunity to close the trust gap. By becoming worthy of trust, these organisations might cement themselves as ‘essential’ public institutions and pillars of a healthy society (whatever that means post the COVID-19 downturn).

Before going further, let me introduce you to our broader perspective. This will help you empathise with the actions proposed at the end of this post.

Trust(worthiness) = >Value

Greater Than X was founded (three years ago) based on the belief that the most verifiably trustworthy organisations will become the most valued. These organisations will develop the most valuable, meaningful and engaging relationships with their customers (by gaining access to and effectively using the data that is shared with them). They will deliver superior propositions. They will ‘win’ their market.

What we’ve observed over the past 7 or so years is that this ‘thesis’ is very likely valid. The 2020 Edelman Trust Barometer has demonstrated that ethics is 3x more important than competence when it comes to trust. A systematic review of the performance of 7,030 companies demonstrated that trust disproportionately impacts performance (opens as PDF). A 2019 study highlighted that ‘easier to understand terms and conditions’ was the number one thing consumers believe can restore trust.

Although this is unlikely to surprise you, the timing is perhaps more important than ever. Individuals all around the world have lost faith in the system. They actively distrust many of the organisations that collect and use their data. When it comes to people’s privacy, there is a tradeoff fallacy. Many organisations are cultivating digital resignation. Individuals have become apathetic. They feel powerless. They have learned to actively bypass the agreements they’re supposed to be entering into.

We’re tackling this head on

Our Data Trust by Design (DTbD) Toolkit was born out of the frustration we had for this status quo. Too often privacy notices, terms and conditions, in app privacy controls and consent experiences are poorly designed, inaccessible or even coercive in the form of ‘dark patterns’. Data Trust by Design enhances people’s ability to make informed decisions about how they interact with digital products and services. It helps make data trust a competitive advantage for motivated, values driven organisations.

“Years ago I urged people to embed Privacy, by Design. With trust at an all-time low, it’s now time to ‘design for trust.’ And the best way to overcome the trust gap is with Data Trust by Design. This is an essential ingredient to enabling user empowerment.“

— Ann Cavoukian, Ph.D., LL.D. (Hon.), M.S.M. Inventor, Privacy by Design

Over time, Data Trust by Design has become an evidence based toolkit that helps organisations quickly and effectively design trustworthy product and service experiences. The toolkit consists of:

1. 6 guiding principles
2. A series of qualitative and quantitative metrics
3. A series of research, design and collaboration practices (a little about the practices in action here)
4. A design system that consists of reusable components, example design patterns and contextual guidance to support implementation, and
5. A set of canvases (such as the Better Disclosure Canvas) to help make these new approaches more visible, accessible and actionable

This toolkit supports existing organisational practices, such as Privacy and Security by Design. It ‘embeds’ into existing tools, workflows and behaviours to quickly enhance ways of working, outputs and customer outcomes.

So far the results are pretty good:

What this is demonstrating is that consumers are more capable of making informed decisions about data sharing than ever before. It’s also demonstrating that, when this is done well, the organisations delivering these experiences are far more likely to gain access to the data they need. This is very much aligned to the thesis I described above.

Our work is playing an integral role in Open Banking

• The CX Guidelines for the Australian Consumer Data Right (a video overview of the research that led to these guidelines here)
• The upcoming CX Guidelines for the UK’s Open Banking Implementation Entity. Miles Cheetham and I will be speaking about this work at the now remote Open Banking World Congress in May
• The first accredited Data Recipient (as part of the Consumer Data Right), Regional Australia Bank (you can view a video overview of some of this work featuring RAB’s Chief Digital Officer here)

But Data Trust by Design is just the beginning.

It’s actually about ‘designing’ a future worth living…

Last year, off the back of a bunch of work we’d been doing to support Open Banking and Consumer Data Right implementations globally, we developed a new report, Designing a humanity centric digital economy.

In the report we propose a vision for the future and a strategy to help us get there. These actions will help empower individuals, whilst fostering innovation and meaningful competition.

This keynote from Curious Thinkers covers the core content of the report.

Although much has changed since we authored the report, the idea that we must come together to navigate the complexity, nuance and uncertainty of current times remains valid. We now have a collective responsibility to support those around us and question the sustainability of our systems of living.

Strategic actions for Ethical Financial Services Leaders

We’ve written about these actions extensively in our Rebuilding Trust in Financial Services Playbook. Since publishing this playbook, limited action has been taken. As a result, they are more relevant than ever today.

Action 1: Rethink and redesign incentive structures

Incentive systems are broken. The Hayne Royal Banking Commission highlighted this clearly. They lack alignment. As a result, too many trade off decisions are made at the expense of individual consumers.

For Financial Service ecosystems to play an empowering role in the future of our civilisation, we need to collectively design incentive structures that align consumer outcomes with business outcomes. We need to overcome the shareholder primacy bias that plagues global markets and reduces people to numbers.

Action 2: Make the right information accessible and easier to understand

Financial Services is confusing. There are derivatives of derivatives of derivatives. Somehow they end up making a small group of people a lot of money. But for most, all of the stuff that drives ‘value’ is meaningless. Financial Services must become about individuals, families, groups, communities and society.

Financial Service propositions need to be designed to help people achieve the outcomes they value, assign meaning to and have fun in the process of achieving. Financial Services must evolve to become Lifestyle Services.

This information must be salient. It must be verifiably comprehensible. It must be easy to interact with. And it should valuably contribute to people’s Financial Services experience (rather than detracting from it).

Action 3: Become verifiably ethical, by design

Ethics is the process we execute — in a given situation — to make the best possible decision. A decision that aligns to our purpose, our values and our principles.

Too often organisations focus on acceptability. Their decision-making process is optimising for acceptable outcomes. In other words, they focus on what they can get away with. This is a perspective that is less useful than ever before. Instead of selling things short, firms must focus on preferability. This means designing products, services and business models that your key stakeholders overwhelmingly support. This means operationalising ethics.

You’ll note that both action 1 and 2 actively contribute to (and enable) action 3.

Strategy with the support of tactics

Let me draw your attention once again to data from the 2020 Edelman Trust Barometer.

No institution is seen as both ethical and competent. This should sound the alarm bells.

Interestingly, Financial Services consistently performs well on different competency measures. Roy Morgan’s Net Trust research is a good example of this, demonstrating that Banks have a negative Net Trust Score (a combination of trust measures and distrust measures). This is the result of the view that banks are self serving, dishonest and lack integrity (see Roy Morgan reference).

Putting it simply, Financial Services fails at ethics. For Banks and other Financial Institutions to play a meaningful role in whatever our collective future holds, this needs to be taken seriously. Ethics, and a formal Ethics by Design strategy, must become a board level responsibility. It needs to become part of the authorising environment that enables people to do their daily work with clarity and confidence. It needs to become part of a brand’s DNA.

Crises are an opportunity to demonstrate leadership. COVID-19 — for all the pain, suffering, fear uncertainty and indecision it’s causing — is still just that, an opportunity to demonstrate ethical leadership.

We’re watching attentively. We’re waiting to see who makes the first move.