The ethical alternative to banking
As an interminable stream of banking scandals hit the press, consumers are falling head over heels to move their money away from the outdated institutions that they feel have failed at the basic task of adequately protecting their customers’ interests. At the other end of the spectrum, commentators and dictionary manufacturers are falling head over heels to formulate new words to adequately describe the practices of bankers from the board room to the trading floor.
Step into the fray the new breed of ethical banks, attempting to lure savers to deposit their hard earned cash with institutions that promise to deliver more than an interest rate; institutions that genuinely have an interest in the advancement of society, for purposes extending further than simply lining the coffers of the Chief Executives.
Louis Brooke from the Move your Money campaign said “Since January we estimate that half a million people have switched their current accounts to ethical alternatives.” The Move your Money campaign was launched earlier this year and drew inspiration from the US-based “Move Your Money Project”, which has seen over 10 million accounts moved since 2010. The focus of the campaign is to raise awareness about the broad range of financial institutions available to customers in the UK, and firmly believes that consumers can make a real change by moving their money away from the failed banks; certainly more of a change than is likely to be enforced by any government or regulating body in the near future.
However, consumers will need to be convinced that they are not simply moving their deposits from one moral black hole to another, and so the ethical banking sector is going out of its way to convince its potential customers that they are different.
But what does this mean for the major banks? This shift in consumer attitudes has some major implications which they will have to address or will potentially lose market share to these alternative financial institutions.
There are some very well established banks in the UK with credibility as ethical players, such as Co-Op, Nationwide and Triodos. If major high street banks are to attempt to play the ethical card, they will gain most from targeted campaigns linked to the social benefit of specific products rather than seeking to change perceptions about the bank as a whole.
Furthermore, if savers are to make their deposits based on ethical motives, they will need proof of results if they are to be convinced of a product’s positive purpose. This would be best achieved through focused, local initiatives that can show the impact of channelling customer savings into loans.
The combination of consumer mistrust of the big banks, and new entrants offering viable alternatives for consumer deposits, could potentially disrupt the status quo
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