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Why banks and socials agree to disagree

SIBOS sparked two big conversations this year.

Two separate conversations both targeted at fundamentally changing financial thinking.

The first was the Long Now, which was all about how to invest for the long-term health of our planet. I’ve talked about that enough for the moment.

The other conversation has been bubbling on twitter, and is all about the future of money project that I co-funded as an executive producer, alongside Bernd Nürnberger, Anthemis Group and the Innotribe team.

Venessa Miemis led this project with Gabriel Shalom, and she writes some interesting thoughts on her blog, about her impressions of banks and SIBOS.

Who is Venessa?

She describes herself as “a holistic futurist and digital ethnographer, researching the impacts of social technologies on society and culture and designing systems to facilitate innovation and the evolution of consciousness.”

Some of you will say “interesting”, whilst others might call this “pseudo intellectual psycho-babble”.

What’s her blog about?

“I think we’re at a turning point in history, where many of the institutional structures that serve as the foundations for how we operate as a society are failing, and in turn creating a tremendous opportunity for us to make a decision to grab a hold of the reins and be active participants in creating our collective future.”

Some will say “totally agree”, whilst others will say “marijuana smoking tree-hugger”.

Why am I being so extreme about Venessa and her blog?

Because she’s created a divide between those who get it and those who don’t.

Venessa wrote a fascinating blog entry, or ‘rant’ as she called it, after SIBOS.

In the blog entry, she talks about what she wants from her bank, which I will respond to in more depth tomorrow as her blog entry is quite long and detailed, and deserves a detailed response.

For those who have not read it, the gist is that banks are missing out on the social connectiveness of society today and the opportunities this presents, by purely focusing upon making money, and asks that banks try harder to leverage her social world with her financial data.

What comes through Venessa’s rant, and the video that Gabriel produced of his views post-SIBOS, is that banks aren’t really interested in dealing with the new world of global socials, but are intent on keeping the status quo.

For example, Venessa points to SWIFT’s Deputy Chairman, Stephan Zimmerman during the closing plenary, and quotes him saying that “the prevailing values may be stronger than the new values” hit her “like a punch in the gut”.

But he is right.

And she is right.

Venessa says that the bankers came across as patronising, saying: “awwww, well that’s a cute idea! But you obviously have no idea about how the world works.”

And she got angry because she does understand how the new world works, but found that the banks do not.  Or so it seemed.

What has intrigued me is the divide the rant has created between those who go “yay, good for you girl” and those who say “naive and biased woman”.

For example, Liz Lumley of Finextra – yes, it’s her again – started a twitter debate about Venessa’s rant.

Here are a few tweets in that discussion:

LizLum: @rshevlin I was reading the blog from the Future of Money woman. She lists all the things that 'define' her & it's a list of consumerism

rshevlin: @LizLum Bankers have gotta stop asking every Gen Yer they meet "what do you want from banks?"

LizLum: @rshevlin http://t.co/6mjGsbX I like the 'peer-based vs debt-based' points-but nothing puts me off an argument more than 'U don't get it'

rshevlin: @LizLum p.s. Gen Yers gotta stop thinking they're the only ones who don't trust banks. News for Yers: Boomers are JUST as mistrustful

In fact Liz was so incensed that she wrote a blog about it: You just don't get it, do you? When did groupthink become innovative?, and tweeted that she was “going to get in trouble for this one”. 

Liz’s words show her position of being deeply entrenched in an industry that is slow to change, whilst Venessa is sharing her view which she hoped did not “preach”, but was meant “to inform, or maybe even inspire.”

Mind you, her fan club is equally as myopic, as demonstrated by Stuart Dobson’s comment on my vblog: “He lost all credibility when he mentioned MySpace and Bebo. No actually, he lost it when he said he worked in Banking.”

In other words, there is an immediate distrust of the old institutions of finance before the get-go, for those in the social world. This creates some preconceptions that are barriers to progress too.

What Liz and Stuart demonstrate is a dichotomy of views, a “them and us” mentality of extremes … which is not surprising as we are debating extremes.

This brings me to my point (at last you say).

The extremes are the bankers of the world and the global social.

These are completely different points of perspective and are complementary, not competitive.

Liz is debating the world of commerce and a bank’s role in that world.

Venessa is debating the world of community and a bank’s role in that world.

This is a subject that comes up regularly, and I’ve blogged about before.

Here’s the point: the banking industry assembled at SIBOS is there to provide the oil of global trade and commerce by allowing financial transactions to take place securely and efficiently.  It has nothing to do with enabling communities or social networks.

The industry purely exists to be a secure gatekeeper for what has most commercial value: money.

It used to be gold and other rare commodities, but today it is money and tomorrow it is data.

Think about it.

If you made a payment to a friend and it didn’t get through, you would be upset.

If the bank said ‘tough’, you would be more upset.

If the payment was for $1,000, you would be pretty angry and upset.

If the payment was for $1 million and was your life savings, you would be desperate and defeated.

If the payment failed every time and business could not work or run effectively, the world would be desperate and defeated.

That’s what banking is all about.

That’s why banking is slow to change.

Making sure money is transferred securely and rapidly every time cannot be taken lightly, or jeopardised by experimentation.

It is why banks are licensed by governments to try to ensure that we never reach a position of being desperate and defeated.

Because banks are licensed, they can take fees and make money on the money being transmitted.

Because banks are licensed, it makes it difficult to create new competition because you don’t want competition. You want secure and reliable services that allow the gears of global trade to be oiled.

This secure and reliable operation is slow to change for this reason.

It’s also nothing to do with the bad loans and high risk speculative derivatives operations that created this crisis, because the core of banking is about secure money transmissions.

If the thing we valued most tomorrow was the secure transmission of data, then that’s what banks will be.

If the thing we valued most in a century or so is cow manure, then that’s what banks would be managing.

The key is that they would manage cow manure securely and reliably, with little change or movement until society, governments, regulators and policymakers demand this change.

Is that what Venessa is demanding today?

I don’t think so.

I think she points to some interesting things that banks could do: more transparency, more information enrichment, more analysis of customer needs and opportunities. Her request is for banks to enable her to be more socially connected with people, causes, services and investments that suit her lifestyle.

Banks could, should and some are doing something about all of these areas, which I’ll blog about tomorrow, but overall Venessa is talking about something fundamentally different to banking.

She is asking for a bank that combines financial management with community management and social currency, but most banks are not interested in this. Social community involvement is just peripheral noise to a bank, as the core of their business is money management and oiling the gears of global trade.

And that’s the key extreme point here: social currency as opposed to commercial currency.

Banks do not have any role in managing, issuing, organising or transmitting social currency.

Social currency does not pay for trade and is not the oil of commerce.

Social currency is for care and welfare and is the oil of community.

Now community currencies do exist and are thriving in certain sectors.

Examples of such currencies are many, with some of the better ones including the community work in Curitaba in Brazil, the WIR in Switzerland and the Fureai Kippu in Japan.

The common feature of such currencies is that they are typically issued, managed and organised by local or central governments, rather than banks.  This is why they are trusted and used, as they still have government backing, but the banks have little interest in such schemes as they are not oiling the gears of commerce and trade.  They are instead enriching society and communities.

These currencies and why they are relevant has been demonstrated by the writings of Bernard Lietaer and Magrit Kennedy, who I’ve also referred to many times in the past.

They have tried to promote the idea of community currencies being managed via electronic platforms in a parallel world and platform to the banking infrastructure for over a decade, although this is still to happen.

The aim of social currencies is usually to create value by giving time or support to community projects or causes, that can then be traded locally or globally across the community of interest.

An example is Facebook credits, which many at the SIBOS debates speculated would become a global currency.

The question is: will Facebook credits become a global currency of commerce and trade, or just a currency for socialising and entertaining?

Probably the latter, if history dictates, as community currencies bear little relationship with commercial currencies.

One is geared to the long-term interests of the community; the other is geared to the interests of commerce, trade, wealth and investment.

As can be seen, this is why the two conversations about the future of money with Venessa and the Long Now and Long Finance overlap.  Checkout the Eternal Coin of the Long Now and the use of demurrage if you want to know more.

It also shows why I can’t be right if I’m a banker, as I don’t get social or community currency; and I can’t be right if I’m a global social, as I don’t get commercial trade and banking.

To be clear, these two worlds have overlap, but they are distinctly separate.

Commercial currencies fuel commerce and require strong and resilient, reliable and secure infrastructure, that changes slowly as we cannot be defeated and desperate; social currencies fuel the exchange of care, welfare, support, entertainment and fun to meet the long-term interests of the community, and require simple, open and transparent infrastructures that can adapt and change to suit the needs of the community.

As can be seen, this is why these are different and distinct, and why Venessa felt disappointment at SIBOS and why Liz felt antagonised by Venessa’s rant.

And the one good thing is that Venessa’s rant at least created Liz’s reaction and my observation, which hopefully adds a little useful commentary to this debate.


This article links to four others this week, in a series challenging the future of banking.  The series of articles are as follows:

  1. Why banks and socials agree to disagree
  2. Where banks and socials can agree
  3. If banks are like oil, build better vehicles
  4. So is there a chance of getting rid of banks?
  5. Can banks be trusted?



About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Thank you, Chris, for your useful commentary to this, um, debate. I appreciate your mastery of not taking sides and aiming to make this a conversation as opposed to debate. On the other hand, if Guy Kawasaki is right, great ideas shine by polarizing people.
    I have a nit to pick with the metaphor of money as oil in the gears of commerce. If money works this way to reduce friction it reeks of palm-greasing.
    I prefer to model money and especially the payment system as hydraulic oil. Push some in at one end of the long piping and the same amount emerges at the other end – assuming the oil is incompressible (money is, short term) and the hydraulic system is tightly sealed except for the working ends. Current payment systems are lossy-leaky, though. They take a toll, mostly because they can charge for the convenience.
    Social denominations and complementary currencies can be modeled the same. So, if banks have a low-loss information verification and transfer system, why should they not be able to add value to society by doing the unthinkable and deal in complementary social currencies? Just another symbol on the ticker, no? And another license to obtain, this time not from government but from the authors or community of new currency. This is almost personalized money, issued to meet needs and wants of a group. To me, diversity grows resilience.

  • Chris Skinner

    Two points here Bernd
    One, if you read Bernard’s book on the Future of Money which explores social and community currencies in depth, it is clear that banks have zero interest in this as it does not make money, and that is their sole aim in life.
    I’ve talked about Bernard’s work for over a decade and cannot find one commercial bank that is interested.
    Having said that and as I’ll blog tomorrow in a detailed response to Venessa’s points, there are banks that do have interests in community but they are all mutual banks, not commercial banks.
    Second, the reference to ‘oil’ came from BP, sorry RBS at SIBOS. Stephen Hester at the main plenary said that the world had seen a ”crisis but not reacted by turning in on itself, but recognising instead that globalisation is still the model that creates the greatest wealth for the greatest group of people, so it must be continued. This means the financial system has to maintain its place as the oil in the globalisation process and for information exchange.”

  • Yes, Chris, I did read Bernard A. Lietaer’s Future of Money, albeit in German, so may have lost some nuance. The whole topic may be largely lost on me, as I am electronics engineer, not a finance specialist. Naively, I also read Freiherr von Bethmann’s Interest Rate Trap and got it that we can all create money. In various forms, as soon as we agree on a deal and price and mode of payment – in whatever the participants accept as medium of value exchange = money.
    I respect the decision of institutions to focus on designated forms of currency – fine with me if it earns them trust and profits.
    It is just, and here we see the sizzling message Venessa highlighted on-stage, for those who wish to deal regionally or even globally, using complementary currencies, other institutions will grow to fill those needs. Could you recommend any?
    Thanks for the Stephen Hester quote. I smirk at calling globalization a model, with such wide variety and trial-and-error being the prevailing mode of exploration, it strikes me as a bit reductionist. I appreciate the idea that global trade has likely the biggest potential for win-win deals and like the way Hester uses “oil” remains neutral.
    Looking forward to your post tomorrow.

  • hi chris,
    thanks for the thorough response. i’m regretting the “over their heads” comment…. i didn’t mean to be insulting. as you pointed out, it’s more that we’re talking about different things, but that there is an overlap between these two worlds.
    it’s’ the ecotone – a place where ecologies are in tension. http://en.wikipedia.org/wiki/Ecotone
    i think this is where the opportunities are. complementary systems aren’t going to replace what is…. but i think it’s worth understanding the ethos to see how to participate in those marketplaces.
    in the past year, i started a blog and a twitter account, and worked hard at observing what is going on in the world and writing commentary in a (hopefully) clear and digestible manner. i’ve spent a lot of time building relationships online, and meeting up with these people offline. every cool opportunity i’ve gotten this year has been a direct result of these efforts, so if i come across as a social currency or social media evangelist, it’s because i’ve gotten direct proof that it “works.” i’m still learning every day, but i can extrapolate how this is going to be so fundamentally important as time goes by. understanding how to leverage networks and interact online is a literacy now, a digital literacy. those that don’t understand how it works will be at a detriment compared to their peers who do.
    i don’t have my process anywhere near ‘streamlined’, and this is where i think that having new tools available to manage all the data and information and identity and reputation is going to be vital. maybe a ‘bank’ can help with that information storage and flow. maybe not.
    i guess the message really wasn’t supposed to be “here’s what you should be doing, banks”, but “here’s what people are doing, here are the new social behaviors that are changing the way people think about thinks… in case you haven’t picked up on these weak signals yet, here is what is happening.”
    what this comes down to for me is really about destroying the illusions of what people tell you reality is, and instead determining a moral compass for oneself. it’s about a shift in values, and goes into the land of emotions and spirituality, which is not something that is acknowledged as relevant in the business world. i think i was invited exactly for those reasons, to inject something new into the conversation, though, as you know, i didn’t really directly broach this topic during the innotribe sessions because i didn’t know how you bring that up in the context of a banking conference.
    what would have been fun for me would have been some backcasting exercises, where instead of talking about how we can innovate banking, we have a session where we imagine what we want the world to look like in say, 20, 50 or 100 years. how would a global society function that had the highest and best intentions for all its people and for the natural systems of the earth? paint that picture first, and then determine what steps can be taken now to move in that direction. then the innovations becomes ‘easier’… as there’s a higher purpose than just how to make more money, but how to do something that resonates at a deeper level and benefits life and humanity and evolution.
    – v

  • This idea that we have to separate what makes money, from what makes social good is a little too binary & black and white for my tastes.
    To give it some context, let’s take Brett King’s idea that a “bank” as we know it today, is defined by owning the wires, the buildings and the infrastructure. They have a banking licence (a BIN number) and sell financial products almost tangentially into the economy.
    The idea that this is an olde worlde view, and that these bankers are purposefully risk averse folks is accurate… The only type of innovation they really entertain is financial innovation. Which usually means off-loading the risk and keeping the reward. Bill Gates has written some excellent articles on how he believe’s this has led to the steady decay of entrepreneurship in the West from it’s heyday in the 1900s.
    The big difference this time around, is the very thing the banks counted on is being challenged. Their scale, their network & their licence are all being attacked at all angles.
    Take away the network and you’re left with an oversized, poor service company.
    Now let’s look at print. Takeaway the distribution monopoly (paper printing presses), and replace them with the internet & you’re left with a journalistic qualification & a declining readership.
    What about the Music business? Take away the technology (CD) and distribution (Retailer) and replace them with something more convenient (iTunes)… and look what happens to sales.
    Consolidation at the technology side, and distribution of access at the network side. Your only remaining weapon to distinguish yourself from the market is your product itself… Is that service, or features?
    Personally I can see larger banks (HSBC, Santander) & possibly payment processors or networks (Visa, Mastercard, First Data) consolidating their technology base. We’ll have a few trusted wholesalers of payment services, and a slew of companies packaging those products to the consumer. Low cost cloud based operating models, as well as higher cost financial services (human) operating models.
    Some of them already see mileage in chasing the consumer Social Good. If the dis-intermediation of brand and product continues the person you buy your banking from will not be the person who owns the Mainframe the 1s and 0s sit on… but they will quite likely have the same values as you.
    We’ll see creeping social good in some banking brands & a back to basics approach from others. Depending on their client base both strategies may well be effective short term. Longer term, centralised BINs means we’re probably going to see more outsourcing & brand splits.

  • Chris Skinner

    Hi Sy, or should I say Simon,
    I agree I’ve split it into social versus commercial, but I didn’t say it’s mutually exclusive. There are many overlaps, but the focus of each is binary, e.g. one is for individual good (wealth) whilst the other is for community good (social).
    Your comment: “The big difference this time around, is the very thing the banks counted on is being challenged. Their scale, their network & their licence are all being attacked at all angles.”
    I would like to think so, but I’ve thought this 100 times before and each time new competitors fail because this industry is cocooned in protection by governments and licences.
    Whilst banking is protected as a monopoly, any competition just adds more clutter to the network, e.g. PayPal sits on top of the banks, it does not replace anything.
    More detail/explanation tomorrow,

  • The kind of money banks create isn’t gold – an asset to some and liability to no-one. It’s credit money: an asset to some and liability to others, and every 5-7 years, a liability to everyone except bankers.
    Credit money is social. I can pay my debt because and until others want and get new loans. It’s not just an overlap between social and individual, it is fundamentally social.
    I agree banks are interested solely in the kind of credit money that government can backstop, and as long as that works, why on earth would they do anything else!!. But because of the social nature of credit money and the fact that Governments also have limits, this idea that they can make money by solely focusing on individual wealth is really debatable.
    I think that it’s high time that banks become business ecologists embedded in the economic environment they play in.
    That does not mean giving away money to charities (although it can be a small part of it).
    It means acting again as business social networks: promoting commerce, investment and knowledge exchange between their customers/members.

  • Is there no situation whereby having a Socially Good brand, generates wealth? (Whole Foods, Rainforest Alliance, Innocent Foods (UK Example))…
    A case can be made for both, but I see no value in separating them.
    Paypal want an open payments network, and until we get there, they’re willing to sit on top of whatever exists at the moment. They would be just another interface or management tool. By being the common thread between POS, Virtual currencies, Mobile & bill payments they hope to be well placed when that happens.
    Some of the industry is moving in the right way. Products like ZashPay from FiServ & the move towards SOA from Deutche and Clear2Pay are siren songs for where this industry is headed.
    At the core of the issue, is that banks made more money from focussing on the goal of making money than they did from focussing on social good… and I get that I do… but as a system gets older it becomes more complex and diverse.
    The pure ROI focus cannot last or be the only measure of success any more & we the public will gravitate to those who understand that.
    PS. Anyone know anyone high up at PayPal X?

  • Perhaps another way to put it is that banks – at least as most SIBOS participants define them – are about securely moving money between pretty much any senders/recipients.
    As I read Venessa’s post, it seems to me that the opportunity for the next generation of banks will be to help people identify ventures that are aligned with their values, and to then securely move financial resources to them in profitable ways.
    Mark Frazier
    @openworld (twitter)

  • Chris Skinner

    Great responses all
    Maybe checkout today’s commentary before concluding these points

  • Wow, great discussion.
    Actually I see the committed bankers’ view of the world and the social view as competitive and NOT complementary. That’s not to say that banking and social finance won’t co-exist – innovation doesn’t ‘kill’ anything. But the views that power each phenomenon are starkly competitive.
    The bankers’ view rests on the belief that the financial intermediary exists to create wealth and must exploit commercial and retail scenarios to derive as much margin as possible for itself. But the social view rests on the belief that an intermediary exists to solve people’s problems, not its own, and will be better off if it restricts it’s margin to a reasonable minimum.
    Banks do indeed exist solely to create wealth. But we are learning that the less fettered or contained that quest becomes, the more extreme the booms and busts – and the ‘collateral damage’ – it creates. This learning process has been too slow to match the speed of banks’ innovation in wholesale financial instruments, in which they hold a virtual monopoly. Our challenge is to try to contain the mayhem to wholesale markets and their participants. Never again should rating agencies and investment banks be able to order up a steady stream of 100% LTV mortgages for people with no income no job or assets, just to create ‘investment grade’ securities with a more attractive nominal rate of return for themselves and their institutional clients.
    Yet while banks have an effective monopoly on the creation of most wholesale financial instruments, they certainly do not have a monopoly on security and efficiency in commercial and retail financial activities (other than ‘deposit-taking’). For instance, there are corporate members of SWIFT who move money securely, yet faster and more cost effectively than banks; and there are plenty of other non-bank competitors who exceed banks’ performance in virtually every other retail or commercial financial activity.
    New forms of currency aside, increasingly, these non-bank competitors are social finance ventures, where people – not the intermediary – are in day-to-day control of the management of their money.
    So we are seeing banks gradually being beaten out of the retail markets into the ‘back office’ or the wholesale markets, where we hope (probably naively, but it’s worth a try) that wealth creation can be conducted in a more contained fashion, while socially-oriented businesses can get on with the business of solving people’s problems rather than lining their own pockets.

  • Pragmatist sums it up quite nicely, but I’m an instinctual type. As sure as BP returned to profit after the oil spill, I’m sure we’re going to see the current banking system continue for a while.
    What many won’t notice for a while is the gradual erosion of that business in percentage terms to socially backed or influenced businesses. Banks overall wealth will continue to grow for some time to come, but not at the same rate.
    You touch upon a key point though. Having the tools and ability to manage our own financial products (Like Mint.com or Blippy) means possibly a greater role for wholesalers… or a greater need for the human element of value add in the banking sector.