I said I would respond to Venessa’s rant in a bit more detail, as she deserves a response and not just a pat on the head to say: “there, there”, which is what she implies most banking folks have done so far.
Before I get into that, it’s interesting to see the reaction to yesterday’s blog entry. Most of it is that polarisation does not help which, in this context, is where you get the ‘them and us’ mentality I referred to yesterday.
That is very unhelpful and causes wars.
What these discussions should remember is that the discussion is more about two parallel systems that run separately, complement and have overlap where appropriate.
Anyways, here’s a direct response to what Venessa wants from her bank.
First, she wants transparency.
“All I know about the way my bank works is that I deposit my money there, and then they take that money and go make money off of it. Where is that money going? Where is it being invested? Can I have control over how you use my money? Can I set a standard of where I allow you to invest my money, so I can be proud to say my money is being invested in green technology, or local initiatives, or ANYTHING that I care about?”
There are banks that do this, but they are nearly all mutuals, community banks, building societies, credit unions and such like.
Banks such as Triodos Bank in the Netherlands, the Co-operative in the UK and community banks in America and Canada, such as First Calgary Bank and Wainwright Bank.
The example best known to me is the Co-operative who make clear they would never support or provide services to any organisations that contravene their ethical investment policies: “The lender has turned down loans to firms worth £1 billion since taking an ethical stance in 1992 and after polling 80,000 customers, has now expanded its policies ... Firms connected with biofuels with a high global warming impact, companies that manufacture indiscriminate weapons such as cluster bombs, and companies that exploit great apes will be excluded.”
They allow customers to select the charitable causes the bank should give to, and crowdsource votes of which projects and causes are most worthy.
They’ve done this for almost two decades ... but remain a small bank.
If it was that worthy, why isn’t there a major global community bank? A massive mutual spanning the planet?
Because people don’t care.
This struck me when I saw this new research report by Consumer Focus which states that: “Just 7 per cent of consumers with current accounts have switched over the last two years, far behind other markets ... three quarters of consumers (75 per cent) have never even considered switching their current account provider.”
Consumers aren’t bothered about banking, they just want the hygiene and efficiency of secure transactions.
This is further explored in the USA by the BAI who commissioned research into bank and consumer attitudes and found that 70% of consumers don’t want a relationship with their bank:
Even though that’s the #1 thing bankers think they want.
This gives me the impression that banks could potentially incorporate ethical, community and societal perspectives into their marketing mix to deepen their relationship with the customer ... but that it does not make that much difference today and, if it did, all banks would be doing this.
Second, Venessa asks for intelligent investing opportunities.
“My bank knows who I am and what I care about. I’d be happy to link my Twitter account to my bank account so they can know the kind of people and organizations I talk to ... my Meetup account so they know the kind of events that interest me ... my foursquare account so they know the stores and restaurants I patronize ... Give me a service that empowers me to invest intelligently and in a way that represents the ethics I believe in, and I’ll tell everybody about it. This information will become part of ‘Social Credit Score’.”
OK, this gets interesting.
First, I cannot think of one bank that would be comfortable to allow customers to link their financial data to twitter, meetup, foursquare or any other social media. This is because the privacy and security issue arises, and they want you to keep your data secure.
We had this great conversation with First Direct on twitter recently by way of example. They are a pioneering social media user but said they would not mix bank and social data, as the former must be kept secure.
For those who want the social finance badge on their foursquare or meetup pages, these plugins will enable it.
Interestingly, these are also services that banks might offer as options to the customer who wants to wear their social credit score as a badge. However, most banks probably will not provide or condone it for the reasons given: mixing bank data with social data makes them nervous.
It's a privacy and security versus transparency and sharing debate, and most banks (and people) don't want everyone to know their balance and account numbers!
Funnily enough, on a related point, my group ended up proposing that SWIFT carried and maintained a social credit score service as part of last year’s innotribe.
The proposition was that SWIFT should help banks by using the semantic web to crawl social media, and create a ‘social score’ based upon your social activities. This would be added to your credit score and other metrics to provide a holistic view of how trustworthy you are. A ‘trust score’.
It didn’t go anywhere, even though I believe there is a strong correlation for mixing social and financial services in this way. This is where I see the overlap: if you appear to be trustworthy based upon money, can I trust that you won’t screw me?
A question I’m sure Tyler and Cameron Winklevoss would like to have had answered before they invested in Mark Zuckerberg.
Three, she would like better visualisation tools to show the flows of her finances and gives the example of Mint as the only firm that comes near today. This is probably because the tools are early days still, but again they will get better with banks like BBVA and Banco Sabadell showing this is definitely on the radar.
In fact, as apps on Android, iPad and iPhone become more pervasive, I fully expect financial visualisation tools to become a hot development area.
Fourth, social network analysis.
Venessa says that she needs “a bank that understands that I’m connected to the web and my network pretty much all the time, and ... want to be able to find more people who share my visions and interests so that we can take action together.”
This is a tough call for a bank, apart from the trust score discussion on point two above.
Why is it a tough call?
Well, banks as enablers of action groups gets into fine lines over money laundering, terrorism and crime. Potentially this could be good, as banks could probably have far more insight into dodgy dealings of politically exposed persons by analysing their social network activity, but Venessa’s point was more to do with banks connecting like-minded people.
I think they could and should do this for financially focused communities, for example connect me with people who invest like me, but for the rest?
It’s probably back to the community bank.
For example, Caja Navarro has a great late night opening policy where each week they give customers lessons in Indian head massages and flower arranging and other hobbies. So enabling the Sunday Night Knitting Club to meet via the bank’s hosted channels through analysis of who shops at ‘Get Knitted’ regularly, could be a good thing for such banks.
But not really for a global machine like Citi or HSBC ... unless customers left in droves because they didn’t offer this.
Finally, complimentary currencies for local economy.
“Why is it not simple for individuals and communities to implement local currencies in order to exchange goods and services, and build trust, relationships, and resilience? Could a bank help with this?”
Again, I discussed this at length yesterday and previously on the blog and the answer is again, banks would do this if customers needed it.
A good example is the Lewes pound, which Barclays bank support. Interestingly, on their website, they give a great 10-step guide to creating community currencies which is worth reading as a conclusion to this discussion (below).
This article links to four others this week, in a series challenging the future of banking. The series of articles are as follows:
- Why banks and socials agree to disagree
- Where banks and socials can agree
- If banks are like oil, build better vehicles
- So is there a chance of getting rid of banks?
- Can banks be trusted?
10-step guide to creating community currencies
In March 2007 Transition Town Totnes launched the UK's first Transition Currency - a complimentary currency, backed by Sterling, that strengthens the local economy. Since then three other Transition Towns have followed. The value of these projects is that they raise the profile of local businesses and start community-wide conversations around issues like the fragility of the international banking system, climate change and peak oil. Lambeth council estimates that the positive media coverage generated by the Brixton Pound is worth around £100,000. And since systemic risk is still alive and well in the international financial system, having an alternative currency could play a useful role in plugging the gap when the dominant system fails.
So if you want to do this in your own locality, how would you go about it? Just follow our ten-step guide...
1. Start a Transition Initiative
Starting up a local currency is an ambitious undertaking that is best built on a strong foundation. If your neighbourhood has launched a Transition Initiative you will have a ready-made pool of people who will understand a lot of the issues involved and are ready to get going on a project. If you don't have an established sustainability network, consider getting one going first. Also consider whether skill-shares, time banking or a Local Exchange Trading Scheme (LETS) might be more suitable models for your area.
2. Organise an open meeting on a topic related to money
This will bring in interested people and start seeding the idea in your community. The evening could include a speaker (from a group that has already launched an alternative currency or from a thinktank such as the New Economics Foundation), a film showing (see end of this blog entry) and then have a group discussion. Start thinking about the kind of people you want to get involved and make sure they are amongst the targets of your publicity. Take people's email addresses so that they can be kept informed as the project develops.
3. Identify and engage your stakeholders
Your main stakeholders are likely to be local residents and local traders - the two groups of people who make the currency work in practice. Lewes had the idea of signing up 100 members in advance in a scheme they called the '100-Club'. The scheme was so successful that 300 people took the pledge to buy a certain amount of Lewes Pounds and to give periodic feedback on how the scheme was working. Then Brixton went one better with their '1000-Club'. Get traders involved early so that there is plenty of choice about where to spend your money when the scheme goes live. Brixton had 70 traders signed up at the time of their launch. Securing the support of the local authority can be useful in giving credibility to the initiative and helping with profile-raising. In Lewes the town council publicly endorsed the project and the town hall became one of the issuing points for the currency. In Brixton, the local council has given £6,000 in start-up funding.
4. Set-up a management team
Oliver Dudok van Heel of the Lewes Pound team recommends a mixed team of traders and residents. Although the team will move forward collaboratively, he suggests that individual members take up responsibility for the roles of treasurer, trader liaison, community liaison, press liaison and design. Peter North also recommends a facilitator, directory producer or webmaster, events co-ordinator and a secretary.
5. Decide on the model
Take your time to research the various models and engage your stakeholders as much as possible in a public discussion about this. The most straightforward and user-friendly option is to make your currency exchangeable on a 1:1 ratio with Sterling. You will also need to consider what denominations to issue, how much total value to issue and how long the notes will be valid for.
Think about where to draw the line with traders. The four English Transition Currencies so far seem to welcome all traders as part of the scheme without them being required to fulfil any particular ethical criteria relating to local sourcing or environmental impact, although Josh Ryan-Collins, co-founder of the Brixton Pound and a researcher at the New Economics Foundation does see a case for ruling out corporations that are publicly listed and accountable to shareholders.
6. Launch a design competition
This is another opportunity for engaging the local population and for generating publicity. Brixton held an online 'Vote the Note' poll to choose which local figures should be celebrated on the different denominations.
7. Decide on your legal structure
You can launch a currency as an unincorporated association but if you are serious about this endeavour, at some point you will need to incorporate. Stroud chose the co-operativeroute to allow for democratic control and management of the currency by residents and traders, but this does necessitate administering a membership fee. Lewes chose theCommunity Interest Company (CIC) route because they felt it offered a modest administrative burden, gave the ability to trade the currency and eligibility for Government and foundation funding.
8. Generate start-up funding
You'll need money for publicity materials and for printing the notes. Security measures to avoid forgery can mean the latter gets expensive. In Brixton, the council gave a grant of £6,000 and four or five local businesses put in a couple of hundred pounds each in a sponsorship deal. Lewes also sold collector's packs to raise money and both groups have dabbled in souvenirs such as t-shirts, badges and posters.
9. Organise a memorable launch event
This is the big one. You've done all that work - you might as well celebrate, capitalise on your biggest publicity and marketing opportunity and design a memorable, preferably historic, occasion.
10. Nurture and develop the scheme
'After the honeymoon effect the key thing is what you put in place to keep things going and maintain the enthusiasm,' says Josh. 'Having somebody paid is vital for that. We have a development manager, who works three days a week.' Local councils sometimes have pockets of money that can be tapped into if you approach the right person in the right department.
How big can a local currency grow? Bernard Jarman, co-founder of the Stroud Pound, says that the Steiner-inspired Chiemgauer in Southern Germany has an annual turnover equivalent to €500,000. 'It's a similar sized town [to Stroud] and there are 600 business involved. They're able to employ a full-time administrator to run it. If we could do that we'd have cracked it in some way.'
The Schumacher-inspired BerkShares scheme in Great Barrington, Massachusetts, is said to have the equivalent of $2M in circulation and 12 local banks issuing the money.
How else might your scheme develop? Would electronic transactions help? Could the reserve generated by a currency issue be used for ethical lending? Would making currencies more regional make them more effective? What about intra-regional trading? Would an energy-backed currency be more useful in future than one backed by a national currency such as sterling?
For a further round up of social money, check out this series of blog entries:
- Banks ignore social media at their peril
- Social networks don't need banks, they need friends
- Social finance is right here, right now
- Social money – what’s all that about then?
- Mobile social money, the final frontier?
- Should we challenge our trust in money?
And if you like movies, here’s a few goodies:
Films made by established local currency projects, such as the Brixton Pound story (two minutes):
Film by Michel Cartier that was referenced in comments on Venessa’s blog (seven minutes):
The Financial Reformation by Sean Park (4 minutes)
Video on the Future of Money by Venessa Miemis and Gabriel Shalom (7 minutes 32 seconds)
Money as Debt (47 minutes long):