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What’s next, after digital?

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I was invited to do a keynote for a Canadian conference the other day, but on a subject different to my normal digital stuff. The theme was sustainable finance. I decided to take a different tack and talk about my other big passion: purpose-driven banking. Here's the presentation and transcript. Trust it makes sense ...




Introduction to purpose-driven banking

I am presenting today about the whole role of banking in society. I’ve spent a long time studying this area and it is an area that intrigues me in that, when you think about banking, it does control society; it controls economies; it controls governments. That’s a critical point, which is why it’s so heavily regulated and why it’s so systemically important.

When we had the last financial crisis in 2008, one of the key issues was that the banks had been operating purely for shareholder interest and profit. There were a lot of questions asked about why it had driven the banks to behave the way they did, and what their behaviours meant for societies, economies and governments.

There was a statement in 2009 from Lord Adair Turner, the then Chairman of the Financial Services Authority in the UK, that a lot of banking was “socially useless”. Bankers were quite offended by that statement, because it was something that felt uncomfortable. Yet, when you think about how many banks behaved that way back then, and many still do today, they are driven by shareholder return and by purely financial results. As a result, their principle aim is to sell credit to companies and corporations and citizens who don’t necessarily need to have that leveraged credit.

This pure profit focus also created huge issues which led to even more headlines like the Payment Protection Insurance (PPI) scandal in Britain, the Wells Fargo account opening scandal in America, and the Royal Commission into the banks of Australia finding that they were even charging monthly premiums for dead people’s subscriptions.

That’s something that is wrong.

It’s morally wrong and I think this is the big question: if a bank is morally wrong, if a bank is socially useless, can it really play the right role in society, economies and governments? Does the bank’s moral compass need to change fundamentally to something else?

My personal view is that it has to over the next decade and that will be turbocharged by two major issues. The first is the coronavirus we’re in right now. The second is the climate emergency that we have been hearing headlines around for the last few years.

Digital due to coronavirus

Let’s start with the coronavirus pandemic. That has completely driven banks to think about whether they were ready for digital. Were they ready for digital employees and digital customers? Many were not.

I’ve talked about digital transformation and digital banking for over a decade, particularly when the last crisis hit in 2008. That financial crisis was where we were bailing out the banks. This crisis we’re bailing out the people.

When the last crisis hit, I had a strong view that banks would be challenged by technology, and they really have been for the past twelve years. The last crisis spawned the whole FinTech industry, which is now massive. Year after year, the amount of money being invested in FinTech has been doubling, although obviously not this year. What that’s meant is that we’ve seen thousands of start-up innovators challenging bank structures, and they do that in many ways. They do that around APIs, apps, analytics, platforms, ecosystems and everything that is wrapped into today’s Open Banking, In particular, it’s around data. Data analytics, Artificial Intelligence, Machine Learning and such like.

But more than this, it is around processes.

Specifically, processes are an interesting area to focus upon in that the process-driven financial structure is one that is now here to stay. You see massive breakout companies like Stripe creating billions of dollars of value from automating and making a process easy. In this case, merchant checkout online.

Their last valuation was at the end of Q1 2020 for $36 billion, just as we got into the coronavirus pandemic. $36 billion for a nine-year-old company that’s doing innovation around payments through APIs. That valuation is around seven Commerzbank’s or three Deutsche Bank’s to put it in context. So, Stripe with a few lines of code and a nine-year history is worth seven times more than a bank with centuries of history and huge amounts of infrastructure.

For me, it’s been fascinating seeing the financial technology markets and how they’ve changed the nature of finance. They haven’t disrupted the banks. They’ve tried to in many ways but, right now, they’re still small beans compared to the big banks. In ten years, maybe we’ll have small banks and they’ll be the big beans.

We’ll wait and see.

The clear thing that’s been happening for the last twelve years is a revolution of financial services through technology. Cloud computing drove that, smartphone has driven that. We couldn’t have apps and APIs without those platforms and services.

The cloud computing companies have been hugely influential on the digital transformation journey, and this leads to where we are today in the coronavirus pandemic. Where we are today, with everybody in lockdown: customers, employees, companies.

Were banks ready for this?

Not all of them. In fact, there were two sorts of banks: those that were ready and those that were not.

I have dealt with quite a few that were not ready. A good example is a UK bank that I deal with who have their call centre based in India. With India locking down with four hours’ notice, and no setup in the UK for any call centre, I haven’t been able to talk to them for months, which is quite ridiculous. They weren’t ready for digital. They weren’t ready for lockdown.

In fact, most business continuity planning around physical operations was to have another office. If there’s a terrorist attack on the major office, then they have another office. They didn’t have this idea of a lockdown of a building, and having a purely digital reach. This is why we see all of the big banks committing to cloud computing now, after years of thinking and talking about it.

I’ve seen so many announcements recently about banks committing to Google Cloud, Microsoft Azure, IBM Cloud and Amazon Web Services. Finally, the big banks are moving to the cloud as they finally recognise this is the way to digital transformation and digital reach, and they are doing this because they have to. If the all of the employees and all of the customers are locked down at home, how can they operate? How does this work?

This is the biggest change that we’re seeing: the rapid move to digital transformation.

I’ve just written a book about doing digital, which is quite timely because I spent three years researching what banks were doing to be digital. These are some of the biggest banks in the world – DBS, ING, BBVA, JPMorgan Chase, China Merchants Bank – and I found a lot of lessons they could share. There were really interesting lessons around doing digital. Therefore, unsurprisingly, if you are trying to do digital transformation, and you want to understand cloud and APIs and apps and open banking, I recommend you read the book. Shameless self-publicity.

Ethical due to the climate emergency

Moving on from there, what’s going to happen post this crisis, coronavirus?

We’ve had to move to a digital transformation really quickly. 2030 was delivered in 2020. What happens once we get past 2020? What happens when we go back to the new normal? What is the new normal?

In building up to this coronavirus crisis, we had a lot of issues, with a lot of discussion around the climate emergency and climate change, which is my second big thing.

Digital transformation, the 2008 financial crisis, the big recession that’s coming right now in 2020 because of the coronavirus crisis, is what we are dealing with right now. After all of this, it’s all going to be around going back to the challenge about how to reset Planet Earth.

About 71% of the carbon emissions that have been destroying Planet Earth are created by just 100 companies. They are the companies you would expect. They are the Exxon’s, Shell, and BP’s of this world. The fossil fuel firms. The sellers of oil, gas and coal.

They’re the companies that have been destroying Planet Earth, because they’ve been taking our resources and burning them. That’s what we have to deal with in the future, if we want to do a great reset of our planet. We may all admire people like Elon Musk, and the fact that he’s trying to move us to battery and electricity fuelled transport and maybe even moving to Mars, but the bottom line of what’s happening is that the banks are the companies that control the activities of these 100 companies.

If you narrow it down further, about half of those emissions came from just 25 companies. We can’t close down those companies overnight. This point is well illustrated by the fact that I’m living here in Poland, and Poland is fuelled by coal. You cannot just withdraw the funding of coal companies tomorrow, because Poland would shut down. What you have to do is create a way of enabling Poland to move to a green economy, and the banks can encourage that activity and provide the encouragement towards green projects against the projects that are destroying Planet Earth.

The banks can provide this encouragement to energy providers to reset the climate emergency.

That’s a great point. This is not something where you can just flick a switch and shut down overnight. You have to do it slowly but surely. But you have to do it. Otherwise our children and our children’s children won’t have a planet to live on.

I was at a recent event where a pension fund manager said he’s really worried he won’t have anyone to pay pensions to. As a result they’re focusing on investing in companies that do well for Planet Earth, and avoid destroying this world that we live in.

One of the great companies that I’ve dealt with, surprisingly for some, is a Chinese company called Ant Financial, part of Alibaba Group that provide the Alipay services in China.

I’m a big fan of what they do, and I was very struck when I walked around their office that they had a sign that said: Do good for society and good for the planet. This is a key message and cultural value.

They don’t just talk it, they walk it.

By way of example, the Ant Financial Alipay app has this amazing thing within it called Ant Forest.

It is one of the biggest multimedia playing games in the world within an app, played by hundreds of millions of people, and it encourages people to be green. It gives you rewards if you walk to work, or cycle to work, instead of catching a bus or taxi or driving. It gives you rewards if you recycle, instead of just throwing things away. It gives you rewards if you use sustainable products versus non-sustainable products.

These are key activities and I could talk about this game for ages, but the gist of the game is that you get a tree planted for when you achieve a level of points, let’s say 1,000 points, and you get those points by behaving and paying in a sustainable way versus non-sustainable. You can get points that you can take off other players in your friends’ community if you see them doing something that is unsustainable. So, China is moving very quickly towards being a sustainable economy through sustainable finance.

There’s a number of layers in here that are really important but the most critical point is that Ant Financial, Alibaba, has a purpose: do good for society and do good for the planet. This purpose is something that’s going to develop into the nature of how our world looks over the next decade. Not just within Ant Financial Alibaba and in China, but within every company. What is your purpose? Is your purpose something that I can relate to? Does it do good for society and good for the world, or is it just about shareholder return and profit? Is it socially useful or socially useless?

In the latter case, you’ll find many employees and customers are going to walk away. I’ve said many times that banks and financial institutions that were not ready for digital would find customers will walk away over time, and this crisis and the lockdown is going to turbocharge that feeling.

During this lockdown, with my bank I couldn’t talk to for months, I’ve switched to a new bank. A digital bank. It was really easy and took me about ten minutes. It’s all within the app on the phone and really simple to do.

Post-pandemic, if I see a bank that’s only focused on shareholder return, profit and greed, then I believe – and it’s purely my belief backed by Greta Thunberg and millions of other young people – that that’s unsustainable. If you invest in and lend to fossil fuel companies that are destroying this planet and don’t encourage them to do good for this planet through offsets and moving to green, then that’s unsustainable. If you destroy the environment for our animals and wildlife so that orangutans, elephants, whales and other wildlife are all going to die out, then that’s unsustainable.

We need to protect the beauty of what we have in this world, and financial institutions are at the heart of that. That is their job.

If they think their job is just making money, then that’s unsustainable because this world will disappear. Our children, our grandchildren and our pensioners will have no pensions. There will be nothing.

So, sustainable finance sounds like a really boring subject, but it’s absolutely critical to the future of everything. Their purpose is critical to the future of everything.

This is the new project I’m working on – beyond digital – and I’ve not spoken about it before in a public environment. This is the first time.

I’m firmly of the belief that the more a company has clear values about doing good for the planet, good for society and being socially useful, the more attractive they will become to customers and employees.

We’ve had ethical banks in the past and they haven’t been so attractive. They haven’t gained the traction of customers. I guess it’s because the customer has not been that bothered. Are they bothered now? Would they be bothered if there was a clear statement of intent and action about this? It mustn’t just be lip service.

There’s a really interesting action that happened at the end of 2019, organised by Jamie Dimon, the Chairman and Chief Executive Officer of JPMorgan Chase, which was the Business Roundtable’s stakeholder manifesto. This stated that we have to be focused on all stakeholders in the business, not just on shareholders. Almost 200 American businesses signed up to this manifesto and, within days, we saw several of the companies signed up to the manifesto laying off staff in order to focus upon shareholder return and looking after their investors.

You have to deliver the action, not just say the words.

You have to walk the walk and not just talk the talk.

This is one of the big things that upset me when I saw that stakeholder manifesto, in that it was just words.

Around the same time, November 2019, the United Nations issued the Principles of Responsible Banking, which almost 200 banks had worked on and signed up to. Yet several of those banks I’ve seen clearly doing actions that are in shareholder return and not in stakeholder return interests. They are not being responsible. They are being irresponsible.

One of these banks is leading the investments in fossil fuel companies, and not encouraging those companies to go green. Another is leading the investments in fracking, for example. It’s a fracking bank. I don’t want to deal with a fracking bank. I want to deal with a green bank, an ethical bank. I want to deal with a bank that’s protecting the future of not just me but, more importantly, of my children and grandchildren and of the planet and of society.


Being socially useful, not being socially useless.

This to me is the most important, fundamental thing of the next decade, post-pandemic.

The pandemic has driven us to be digital rapidly. It has forced banks to move to cloud quickly. It is making closed banks become open banks. It is forcing banks to do all the things they were prevaricating about before. It has forced banks to make decisions they didn’t bother about before, because it wasn’t important. They didn’t make these decisions as they didn’t understand the technology, because they are bankers.

The next decade, we move past digital and look at being ethical, socially useful and environmentally good.

This is the most important agenda of the next decade.

I hope you get it.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, 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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