As part of an initiative that seeks to rally banks around the theme of social financing, global financial provider SWIFT it set to announce that it is working with Bamboost, a Brussels-based start-up that is building an online social community to support entrepreneurs in developing countries.
Banks for a better world sounds like an oxymoron.
A U.S. regulator has just sued 17 large banks and financial institutions over losses on about $200 billion of subprime bonds. And consumer confidence in banks is at an alltime low: in a recent brand study surveying customers of different financial institutions 60% to more than 80% of respondents said they did not trust their bank.
No sector can expect to thrive after several consecutive years of having “its business, products and, above all, its management associated with accusations from the judiciary, politicians and society,” researcher Roland Schatz wrote in a blog post.
As if that were not bad enough, these threats are not the only ones putting the business of banks at risk.
Millions of people, in both developed and emerging economies, are not being served at all by banks. Actors from other sectors are stepping in to fill these gaps, using advances in technology. If banks do not act quickly, they risk being disintermediated.
There are no quick fixes. But Innotribe, the innovation arm of SWIFT, a Brussels-based global interbank telecommunications network, is suggesting that there may be a way to collectively improvethe balance sheets of banks by helping them repair the world. A potential bonus? A positive change to banks’ image. Innotribe will present its ideas at Sibos, an annual industry gathering taking place in Toronto September 19-23, at a session entitled “Banks for a Better World.”
The Innotribe initiative –which includes input from Ashoka social entrepreneurs – is not about charity or marketing. The Banks for a Better World idea is to explore how the core skills and accumulated experience of banks might be leveraged to better serve their existing customers and to significantly enlarge the number of people served.
SWIFT “is the neutral middle of the financial services industry maybe there is a role for us to rally the banks around social financing,” says Martine De Weirdt, the member of the Swift Innotribe team driving the initiative.
One idea being floated is the creation of a $1 billion non-profit banking fund.
But the initiative is is not just about money. The transition to serving a broader customer base with a broader arsenal of technologies will require banks totake appropriate action, as a group, to embrace and standardize new ways of doing business and new ways of engaging with a new range of customers. As a global banking organization with expertise in standard setting, SWIFT could play a role in facilitating this transition, says De Weirdt.
There is also industry-wide work that needs to be done on core values. A manifesto developed by Innotribe, with the help of Ashoka social entrepreneurs, points out that consumers are demanding more transparency and a better balance between profit and social values. If banks do not act to put social responsibility and social inclusiveness at the core of what they do, they risk being forced by governments to do so.
To this end, SWIFT is proposing to explore the benefit of collaboration on concrete initiatives that would allow banks and financial institutions to widen their focus.
For instance, SWIFT will announce at Sibos that it is working with Bamboost, a Brussels-based start-up that aims to provide an online community to support entrepreneurs in developing countries. Bamboost was co-founded by Alain Dresse, a former manager at SWIFT and McKinsey associate with a PhD in physics. Its board of directors and advisory board includes SWIFT executives, microfinance experts, economists and technologists.
Innovative entrepreneurs with sustainable businesses often do not succeed due to funding gaps, says Dresse. Microfinance institutions don’t have instruments to deal with a $25,000 cash requirement and such an amount is too small to attract traditional banks and social investors. Bamboost aims to help entrepreneurs that fall into this funding gap by tapping into the growing desire of corporate responsibility programs to become more involved in community build-up.
Bamboost is helping SWIFT develop a concrete program around “banking underbanked entrepreneurs,” inviting major financial institutions to participate. “Banks are looking for how they can have social impact,” says Dresse. “A cause that is close to their core business is financing small entrepreneurs, so it makes sense for the banks to try and get together to find a solution for that missing link.”
Bamboost, which plans to soon launch its first pilot in Colombia, will evaluate entrepreneurs through local networks and promote them to topnotch financial institutions. Employees – and potentially even bank customers – could help choose the projects and then serve on the boards or devote a few hours of time to some of the entrepreneur-led start-ups, as a means of further helpingthe young companies to thrive.
An added beneifit to this approach could be that it will change communitities' current perception of banks as being just interest in maximizing proft, “There is a great distrust of the banks, especially after the recent crash and mortgage crisis,” says Mark Dowds, a scheduled speaker at Sibos. The type of person banks will need to recruit to transform their businesses and their image will want to work for a sociallyresponsible company, says Dowds, a transformational consultant who works with a variety of big corporations.
If the industry supports Innotribe's initiative, financial institutions might indeed come to be seen as "banks for a better world", making the phrase sound a bit less hollow.