Transitioning finance and the role of technology
Since the start of the financial crisis, interest in alternative financial institutions and models has exploded.
In part this is motivated by anger at the big banks for their role in causing the crash. Often this anger is exacerbated by the intransigence of the banks’ executives and investment banking staff, who continue to cream off astronomical pay even when their employers are mired in scandal or their profits are non-existent. In the face of gross mis-selling, rigging of key interest rates, and huge public bail-outs from the public, business as usual is no longer an option.
But the other reason for the rise of interest in alternative finance is that people feel more empowered to enact change themselves. Whilst politicians refuse to innovate and instead cling to failed economic models and policies, voting with your feet becomes an increasingly viable response.
That’s why we’ve launched our new Switch & Tell campaign at Move Your Money, where we encourage people to switch who they bank with, and tell their MP why. We hope to harness the power of online and social media to build momentum around the Banking Reform Bill, to pressure MPs to enact real and fundamental change in the UK banking sector.
By switching your bank to a more ethical provider, you can send a powerful message about the kind of financial system that you want to support — and the kind that you don’t. But switching banks is more than just a protest, because in doing so you are helping to diversify the UK financial sector, which is one of most important things we can do to protect ourselves from another financial crisis.
Online platforms such as Facebook and Twitter have made the world a more interconnected and communicative place, making it easier to spread information and pressure policy makers to enact reform. This opens the political process to people who might not engage in more traditional ways, and allows the voices of real people to be heard in the banking reform debate.
Using these online platforms to press for political change is one example of how emergent technologies can help to shape society for the future. But banking and finance are providing their own notable examples of the power of technology to help enact change, such as peer-to-peer and crowd-funding platforms.
The huge growth in the popularity of these platforms shows that people are more willing than ever to take personal responsibility for their own wealth investment. But more than this, it also shows that people feel increasingly empowered and confident enough to do so.
The move away from the big banks has been enacted not only through emergent technologies, but also with more traditional financial institutions as well. Building societies, credit unions and other co-operatives have seen huge uptake since 2008, reflecting a growing commitment to organisations that specifically invest in their local communities.
The continuing appeal of the localism agenda is also suggested in the success of local currencies in Bristol and Brixton, which revert to a more simplistic financial mechanism. In these systems currency stays in the local area and value is determined comparatively, which more closely represents a bartering system than the fractional reserve banking model that the wider economy uses.
Bitcoin lies somewhere in between them all. The stateless, online-only currency represents another means of technology entering the world of finance and trade, whilst its peer-to-peer value is similar to bartering but without the localism agenda.
At its heart, the growth in alternative finance is about repatriating economic power away from irresponsible banks, and putting it back into the hands of individuals. People want to take responsibility for their finances and to make positive decisions about what their money supports, rather than leaving their money in the hands of opaque, unresponsive and bloated institutions. Emergent technologies and traditional financial institutions are helping people to take back control of their money, as well as enabling people to put their money where their morals are.
Research from Move Your Money shows that over 500,000 people switched away from the big banks in the first half of 2012 alone. With regulatory changes coming this September, it will be even easier for customers to change who they bank with — with up to 14 million customers expected to make the switch.
With such a dearth of political leadership in driving real banking reform, it is more imperative than ever to demand change, by switching who you bank with and telling your MP why. With such a plethora of viable options currently available, now may very well be the best time to do it.
This story was originally published at moveyourmoney.org.uk in 2013.