A fast-changing world and a strong commitment to positively transform the communities they serve, has obliged values-based banks to engage with topics that would not normally be considered their ‘natural domain’.
CEOs from the GABV are therefore confronted with new and often conflicting realities in which innovation and resilience are imperative. With more than 40 members of the Alliance network, having an honest and common language to discuss the future of values-based banking is crucial. More so when the task at hand is to identify and understand its different dimensions. Over several exercises the CEOs had the opportunity to share their work and actions as values-based bankers, as well as the questions that demanded their attention. In one exercise, the CEOs were given two questions containing four hypothetic, but certainly possible scenarios.
- Will the financial world grow in national/local ways, or will it become easier for banks to move across borders and adopt a more global/transnational character?
- Will banks be fast in adopting new social, financial and business model innovations, or will conservative forces and regulation limit the amount of innovation possible in the coming 10 years?
So, how do values-based bankers look to the future? GABV CEOs offered us some perspectives:
|A. National/Local + New Models of Banking and Financial Services||• Tech domination is the label for this scenario.
• Less human (in person) interaction, and highly integrated and customizable products are the norm.
• Emergence of partnerships between financial institutions and IT companies, maybe even the amalgamation of both.
• Data driven environment.
• The definition of “relationship” will continue transforming.
|B. New Model of Banking and Financial Services + Global Transnational||• New generations are defining the way in which financial institutions do banking.
• They do not require financial services per se, but are looking for a great customer experience that is frustration free, fun and represents the values they stand for. All of this provided by a player they can trust.
• Challenges in this scenario come from the imminent and drastic change that technology and especially financial technology will bring.
• Questions around the role of the regulation/regulator seem to be the order of the day.
|C. Global/Transnational + Banking as We Know It||• In a globalized environment the question is how do we differentiate ourselves?
• Strengthening the synergy amongst GABV members and making a significant effort together to add value to the whole system.
• We are presented with the issue of choosing and encouraging values-based technology rather than values-free technology.
• Using our products and our clients to make the shift happen.
|D. Banking As We Know It + National/Local||• This scenario is highly political, and has a predisposition to change the status quo in some ways.
• We are likely to see an emergence of new forms of currency and ways to use information.
• Retreat of players from international markets, bringing unknown levels of instability and a draw back on globalization.
• Risk for regulators to use regulation as an amplifier of national priorities.
• The big questions revolve around the issue of security, impact, and the role of confidence and customer relations as an antidote to hyper-locality.
The use of technology to shape business is an issue that overarched all scenarios. Some of the reflections on this issue from a values-based bank perspective are:
- Striving for product differentiation – creating innovative products that will put values-based banking at the forefront
- Connecting values and technology through our products and services. Allowing our products to achieve our goal.
- Possibility of another financial meltdown – resilience of values-based banking
- The notion that we want to be close to real economy should be reinforced: being liquid vs. being close to the real economy. Changing the concept of resiliency and making the case for the stability of our banks.
- How do we involve our communities in our work? Building trust in our institutions should start by approaching trusted members of our communities, giving them space in our banks.
- In the end we have to learn to stretch our minds to scenarios in all directions. This creates flexibility, because you always see variety. And scenarios never happen exactly as envisaged.
Our banks are working towards building resilience and changing the financial landscape where they operate. During the meeting, we focused in some of the issues affecting our members, and asked them to share their biggest successes and challenges. Here are some of the conclusions:
How do we foster innovation from a values-based approach?
We are the digitalization of the banking era. This will mean less human interaction with customers, fewer bank branches and an evolving definition of “relationship”. A highly-customized consumer experience will be provided through a digital technology (likely mobile technology) that is readily accessible, convenient and easy to use. The enhanced speed of these digital products and services will be supported by the use of data driven decision models.
The values-based bank of the future has some distinct advantages, including its authentic brand. This will not only differentiate it from its competition, but attract new customers and new employees. The specialty niche of a values-based bank will clearly identify its target markets to effectively communicate to prospective customers.
CEOs in this group discussed the value of innovation in a values-based context, and how developing innovation processes within their bank has allowed them to connect in a different way with the communities they serve. An important part of the discussion focused on the introspection necessary to develop such processes; how to innovate in a values-based context, and how we learn and groom the main questions.
Sunrise Bank’s CEO David Reiling led the discussion of this group and shared how his bank has relied on their innovation process – the Sunrise Banks Dream Accelerator – to design and implement new programs. This process has four phases: Cultivate, Propel, Govern, and Nurture. These phases allow Sunrise to strategically use the skills of their team and their collaborators to drive human-centred design.
How women’s empowerment creates systemic prosperity?
One of the departure points for this discussion was the level of empowerment of women in countries at different stages of economic development. of the discussion was about the percentages of female staff members in individual organizations compared to percentages of women in management roles. These were clearly much higher in the Netherlands and the UK compared to Bangladesh and Palestine.
CEOs agreed to focus on the issue in two different ways. Firstly, looking at co-workers within the bank itself, and secondly looking at banking services targeted at women clients. There is quite clearly a case for both. A need to enhance the capacity and capability of the bank by empowering and encouraging women, and a business case for building women friendly banking services. The target of ‘achieving parity’ is not so simple as there are cultural sensitivities and challenges that both genders must overcome in environments which are very different from Europe for example.
BRAC Bank Bangladesh shared how they set up an internal ladies forum, called TARA (Bangla for star), to encourage and empower women. BRAC Bank has approx. 1,300+ women with a 13 percent female to male ratio and a 6 percent ratio for women in management.
Colleagues from the Bank of Palestine explained how they put together a women’s banking product suite and launched it very successfully. You can see a short compilation of this program here.
CEOs came away with a better understanding of what the challenges are in different environments and it was good to hear that different banks are resolving these challenges in different ways.
Merging in a Values-Based Bank
Fostering systemic change and sustaining values when merging and transforming
Clear-eyed anticipation of the dynamics that arise during acquisitions represents an opportunity for values-driven banks to change the type of merger as well as of banking. Some insights offered by bankers from their M&A activities were:
Mergers almost always bring up integration and conversion challenges. In some cases, break penalties bordering on extortion and are charged by the core processors. These can be hard bargained to decrease the costs of an acquisition either in the price or the integration costs. In any case, service interruptions due to integration glitches often lose more customers than any perceived limitations based on the mission.
While all eyes may be on changing the signs and website banners after merger, more focus on internal branding before or as you build external brand is necessary. In this way, you do not undermine the exterior signs of integration. One bank noticed a whole month into integration that the acquired bank branches still had their old name and logo on the door mats. It can help to create a Brand Council company-wide to be ambassadors, agenda setters, and early warning agents of unrest or discord. There can actually be a larger opportunity to attract talent amidst change. These opportunities stem from the power of alluring human capital based on both values and growth.
Another important consideration could be shareholder protection – such as B Corp status, poison or “benefit” pills, etc. – before or during acquisition if undertaken with new and/or unaligned capital. These defences can provide a deterrent to accumulating majority ownership because B Corp status provides a defence against a private shareholder suing for failure to maximize profit. The bank might also instil a supermajority requirement to undo B Corp status. Interestingly, no one found that B Corp had deterred capital formation so far; in fact, it can help attract aligned capital.
It seems relevant to carefully consider in advance whether the bank has the capacity to absorb acquisition from the managerial, cultural and competitive landscape standpoints. There can be additional intangible support from regulatory agents asking your bank to help acquisitions in order to save community banks, solve capital, take on MOUs, etc. And those regulators often like the values-based discipline to protect the bank from risky rogues, like some private equity companies.
CEOs found it necessary to be cautious about the pace of culture change in rapid acquisition series. Nobody wants change in the first place, much less over and over again. But one the other hand, the passion of the newcomers from the acquired bank can help overcome aversion to change. Get your house in order, your process down, your brand solid, and go as fast as is bearable.
The downside of aggregation is the loss of local flexibility – recognize shortcomings as you scale and take care of your people. There will be product and service belief differences – reverse failed efforts quickly and take the earnings hit if necessary. Product fit can go the other way too – slightly higher CD rate for seniors to fund subprime auto loans is a nice bargain. Employees will advocate for the continuing all services but may have to find another way to achieve that user experience.
Facing Catastrophes: resiliency lessons
Making systemic change happen in persistent challenging human conditions
Countries with an inclusive green economy can not only become more resilient to environmental or climatic risk and more able to rebuild should the worst happen, but they can also secure energy, jobs and better health for their people. The discussion of this group also explored the particular challenges and the role of financial institutions, particularly values-based banks in situation of natural or human catastrophe. The discussion was led by NMB Bank and Integral Apoyo Integral, two banks that have recently had to phase the catastrophic consequences of natural disasters. For the purpose of this discussion NMB Nepal offered some perspective on their immediate reaction to the 2015 earthquake in Nepal.
While Nepal was recovering from decade long insurgency, there was a destructive earthquake measuring 7.9 on the Richter scale in April 2015 which shattered not only the shelter of the people but also their confidence. The financial sector was no exception and faced major challenges from the catastrophe. When the earthquake struck, the immediate challenge for the bank was its business continuity. Power outage, connectivity breakdown and severe damage to the bank’s infrastructure, made continuity of the banking operation a big challenge
NMB is a responsible Bank and acted quickly by activating a business continuity plan within 2-3 hours after the earthquake. To fulfill immediate cash needs, the majority of ATMs were brought back to operation within few hours of the first major jolt. Badly hit branches were operating within 48 hours of the second major jolt. Some of the branches were badly damaged, making the branch infrastructure irreparable. The continuous aftershocks created havoc and continuously threatened the safety of bank staff. Despite this horrendous work environment, staff worked tirelessly and managed to operate the bank and provided the best possible service to the needy customer.
The entire team of NMB and its CSR wing, NMB Social Initiative, were actively involved in the rescue efforts to get life back to normal in the severely hit areas around the country. The bank also provided immediate financial assistance to its staff who lost their homes.
NMB also played a key role in arranging to distribute and channel financial assistance provided by the government of Nepal to people affected by the earthquake in remote areas. The bank offered an innovative solution; agency banking through card and point of transaction (POT) devices to reach out to the remote population. It actively played an important role in distributing financial assistance in 14 earthquake hit districts. A responsible banking philosophy, staff persistence and resilient attitudes have helped introduced branchless banking channels in the extremely challenging working conditions of remote districts.
Overall, NMB Bank maintained its reputation of being responsible bank, ensured the safety of its staff and customers while providing uninterrupted essential banking services in a very challenging environment. The bank also helped its SME, microfinance clients whose businesses were impacted by the earthquake by providing bridge gap financing, relaxation of repayment terms, restructuring of debts, etc.