“The big banks want granny to put her pension in their bank so they can buy credit default swaps, but they’re not interested in lending to a window cleaner,” says Dave Fishwick, millionaire minibus business owner and, more recently, the founder of Burnley Savings and Loans.
Fishwick put millions of pounds of his own money behind the belief that there’s a demand for ethical banking now more than ever and opened Burnley Savings & Loans in Burnley town centre in 2011.
Fishwick’s model aims to link local savers with small and medium-sized enterprises (SMEs) in need of finance, run by a locally based bank manager who makes lending decisions based on deep personal knowledge, rather than an algorithm that spits out an automatic “no” without any personal understanding of the business involved. Burnley Savings & Loans trades under its advertising slogan “Bank on Dave” and while the business is currently only authorised to lend, he is hoping to get a banking licence from City regulators next year.
“We’ve been badly served by the banks in the past and we need change. We need ethical banks – small, simple, honest banks run by the community to serve the community – that see the people they’re serving,” he says.
His business will, he believes, challenge a banking sector that “lost its way and started buying financial weapons of mass destruction,” instead of supporting the small businesses that drive the economy.
The banking sector is slowly starting to shrug off practices that have brought the established financial services industry into disrepute. But Fishwick is not the only entrant to offer customers a different, more sustainable and ethical approach.
When former financial services PR Lisa Stanley set up Good with Money – a review website comparing sustainable financial products – it was obvious to her that her own business banking would need strong ethical credentials. Stanley looked into banking with a large building society but discovered that “it was owned by a bigger bank we weren’t keen on”.
She also explored the offer from Triodos Bank, which claims to make “ethical and sustainable” decisions when investing its customers’ money – and to be totally transparent about it. You can, for example, visit Triodos’ website and see the full list of who the bank lends to, mainly in sectors such as environment, culture, and social projects. But Triodos didn’t offer free business banking – and, crucially, provides no debit or credit card. For Stanley, that was a deal breaker.
She ended up with the ethically concerned customer’s standby: the Co-operative Bank. It offered 18 months free banking for new business customers, plus a debit card. But she felt it was “clunky” to set up, and although it “did the job,” it was perhaps not exactly what she wanted. Many customers have opted to bank with the Co-op because of its ethical investment policy, which has prevented it from investing in industries like tobacco and weapons. Whether that commitment will survive long-term, after the selling off by the Co-operative Group of its final 1% share, is yet to be seen.
The need for new approaches addressing SME banking has been recognised by innovation group Nesta’s Open Up prize, which challenges people to come up with new apps and services that improve banking for small businesses. The project aims to shake up traditional retail banking by promoting financial products that offer “greater transparency, choice, quality and innovation” to small businesses desperate for services that understand their requirements.
Challenger banks aim to operate differently and are often founded on principles of integration with a defined community or locality. Ford cites Metro Bank which, he says, “is trying to reinvent banking, collecting money from local people as savings, which then get lent out in their community”.
He also mentions Civilised Bank, where employees can be seen online making a pledge called the “Banker’s Oath” committing each employee to conduct their business relationships with integrity and “in a manner that impacts positively on the wellbeing of people both inside and outside my enterprise”.
Another financial operator vaunting its principles is the Greater London Mutual, which claims to be “working for, controlled by and answerable exclusively to London and Londoners”. Not that having a commitment to customer service with integrity is new – Swedish bank Handelsbanken, which has operated in the UK for the last decade, offers retail and business banking with an emphasis on “trust and respect”.
Banks that promise integrity in their dealings, via initiatives like the Bankers Oath, widen the scope of ethical banking to include not just where your money is invested but how a bank behaves – towards both you the customer and the community you live in.
Stanley believes there’s a growing appetite for ethical business banking, but says the industry must change in how it communicates with customers.
“The reason ethical finance hasn’t grown as much as it might have is because it’s been a bit niche and a bit preachy,” she says. “And there’s this whole issue about the ‘ethical premium’, that [ethical banking] is costing you more money: well actually, it doesn’t cost you more money, but explaining how that works needs some investment from the banking industry.”