A lot of people would agree when I say that the financial services industry is flawed.
There is a fundamental issue that sits behind all these problems, driving the financial crisis as we speak.
This problem is that the financial services industry is so closed up that the public has lost trust in the businesses whose activity contributes to the financial stability of the UK.
The first rule of banking is to avoid risk. The second rule of banking is to avoid risk.
I believe that the pressure to avoid risk is at the heart of this problem and fuels a lot of resistance within the financial services to open up.
But by avoiding risk, are financial services also avoiding opportunities?
Chris Skinner tweeted the other day;
“The more I hear about risk, the riskier everything seems.”
This is exactly my point.
With the emphasis on risk there is more stuff to consider, more guidelines to follow and more documentation to comply with. In return, decision-making becomes slow and the business becomes much less flexible and durable in a time of crisis.
In an environment with too much focus on risk, there is no room for mistakes and, therefore, little room for growth.
Who’s getting it right?
Banks already have useful data (e.g. consumer spending habits). But by opening it up, they could help journalists and PR teams, internal teams and customers.
This is already happening in some financial service companies. Halifax used existing economic data and came up with their mortgage rate index, for example.
The World Bank is leading the effort toward openness and transparency in development by offering a wealth of tools and knowledge to “provide people with the resources they need to help solve the world’s development challenges”. Furthermore, in 2010, the World Bank Group launched a new Open Data website offering free access to more than 2,000 financial, business, health and economic and human development stats.
The World Bank president said; “It’s important to make the data and knowledge of the World Bank available to everyone… Statistics tell the story of people in developing and emerging countries and can play an important part in helping to overcome poverty”. His three key beliefs are; “open data, open knowledge and open solutions”.
How can banks take all this and turn it into something useful, offering value to the community and their customers in particular?
Overall, I think the financial services industry has a lot of catching up to do. It’s about learning from their customers and giving something back.
I think it’s fair to say that this sector is falling behind the rest of the world in the way of being open and transparent.
Other industry sectors are always discovering ways they can offer value to their customers by becoming more open. The Bureau of Transportation Statistics, for example, published tremendous amounts of data on airline on-time / delays, airfares, fuel costs etc.
Following on from this idea, Umair Haque sums up what he, as a customer, would like to see from banks opening up;
“Banks shouldn’t be opaque swamps of disinformation–but providers of real-time info about which funds are going where, when, and why.” (Umair Haque)
Despite the heading of the blog post which this quote is taken from – “reimagining – not – repairing – banking”- I am not talking about banks needing to be “reimagined”. For me, it’s as simple as telling the truth, which can benefit everyone.