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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, TheFinanser.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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