If you were setting up a new bank today, as many are, how would you seek to stand out from the crowd? Why has no one taken the ethical route and added to the currently relatively sparse UK offerings?
The bulk of the would-be new entrants on the UK market look remarkably like what’s already there. They certainly should have lower overheads and should be more flexible than the incumbents. Sometimes they claim a whizzy product or two that supposedly no one else has. Occasionally they are adopting leading edge technology. Beyond this, there tends to be just vague aspirations such as listening to customers, as though this isn’t something that all banks claim to do already.
Where are the ethical banking entrants? Wouldn’t this be a means of genuinely making a splash and offering something different? The UK has limited ethical banking options that surely underserve a large middle tier of the market that would bank more ethically if it could.
There is the lovely Triodos Bank, which is long standing but low profile in the UK. It remains limited to savings accounts, ISAs and investments, so you still cannot do full banking with them (unlike in its home country of the Netherlands). It is interesting, by the way, to see the profile of the newly appointed UK MD, Dr Bevis Watts (https://www.triodos.co.uk/en/about-triodos/news-and-media/media-releases/first-environmentalist-to-lead-uk-bank/), the first environmentalist to be appointed to run a UK bank. Charity Bank has filled a niche for many years but again has a limited product set.
There’s the mutual sector, comprising credit unions and building societies. The former are a mish-mash but include a few innovative ones, such as the relatively new Your Credit Union which I met a couple of years ago and has, of late, been able to accept customers beyond those who live, work, study or volunteer in The Royal Borough of Kensington & Chelsea, Hammersmith & Fulham, Westminster and the City of London - http://www.yourcu.co.uk/news.asp?ID=95.
Building societies are also rightly seen as a more ethical option than mainstream banks, with arguably the Ecology Building Society in pole position for ethical banking. For many, the waters have muddied with the Co-operative Bank, traditionally the closest the UK had for mainstream ethical banking but now owned by hedge funds after its turbulent last few years. It retains its traditional ethical policy and this continues to evolve, as reflected in early 2015 when it committed not to finance any organisations involved in irresponsible gambling and provision of payday loans. It also extended this commitment to exclude organisations that take an irresponsible approach to the payment of tax in the UK or elsewhere. Nevertheless, that ownership means it doesn’t hack it for some consumers.
In parallel, crowdfunding and peer-to-peer lending offer a more ethical route for consumers as well, of course.
And that’s pretty much it. Mostly, the large banks make the headlines for the wrong reasons. In the latest Mossack Fonseca-derived Panama Paper leaks, 367 of the Fortune 500 companies are shown to have offshore subsidiaries, with the large banks featuring heavily on the list. As Luke Harding wrote in the Observer, this no longer looks like a ‘shadowy, minor part of the system’, it clearly is the system. And it is often British lawyers, banks and company formation agents that are oiling its nasty wheels.
Increasingly, banks are being targeted by campaigners as the facilitators of socially and environmentally damaging activities. For instance, JPMorgan and Crédit Agricole are currently being hounded for financing the proposed Rampal coal plant in Bangladesh next to the world’s largest mangrove forest, one of the few places on Earth with over a hundred Bengal Tigers. So the double-whammy of ‘planet frying’ and threatening a unique biodiverse ecosystem. Barclays is in the fracking firing line for its ownership of Third Energy, the company that has been given permission to frack in Kirby Misperton in North Yorkshire. And then there are all of the regular headlines related to mis-selling, manipulating the markets, money laundering and other murky business.
Isn’t this a gap that new entrants might seek to fill and might not this be rather more in line with the UK government’s intentions when it decided to create more competition? There are clearly other entrants on the way that have not yet shown their hands so we can live in hope. Existing mainstream banks are not going to improve their standing with the public any time soon, it is fair to conclude, and that seems an ideal opportunity for the current ethical few to step up or for others to join in.
