The Bebanking talk I nearly gave at TEDxCheltenham

Having confessed my dilemma, the audience was fantastic at willing me over the line.

But, despite the goodwill and support in the theatre, it’s not an experience I’d encountered before, and it’s certainly not an experience one that I hope to endure again.

In fact it’s why – only now, eight months on – that I have put the experience behind me and, finally, published the text of the talk I’d memorised. So here it is: ‘The Bebanking talk I nearly gave at TEDxCheltenham’.

Just over a week ago, the UK Government published draft legislation which should pave the way for the ring-fencing of retail banks – where you and I have our bank accounts – from the investment banks – the ones that gambled and lost causing near-collapse of the global banking system.

All along, the banks reaction to the idea of being sort-of broken up is probably worthy of Dr Tanya Byron’s casebook.

They’re not all that keen on the idea. They’d rather leave things pretty much as they are while they change the culture of banking.

So that’s the kind of cultural change that’s conducted by an industry which, culturally, is inclined to say: ‘Could we leave things the way they are please?’.

Perhaps we’ll never know how close we all really came to the brink of personal financial ruin but what we do know is that

  • the banks have received more than a £trn pounds from the Bank of England to keep them afloat, and
  • that we’re enduring the kind of social and economic upheaval which does not just affect us today but may well blight the lives of generations to come.

Meanwhile, the banks appear relatively unscathed because we’ve all bought the line that they are too big to fail.

I’d suggest that that may well be a macro-economic truism today, but there’s no reason to accept that idea as lore in the future.

Here’s the thing…I don’t think it’s the banks that are too big to fail that’s the problem, it’s the *idea* that the banks are too big to fail that has grown too big.

And I’m not convinced that re-forming banking is going to change the culture of banking in Britain.

In fact, I’m fairly sure that the only thing that’s going to change banking in Britain is changing the way that Britons are able to bank.

And we could start that now by answering the call of the Move Your Money campaign. We could close our bank accounts today and move our money somewhere else.

So who here has a bank account?

And are you going to close your bank account later?

And where are you going to move your money to?

There are building societies, for example, that are founded on mutual principles. But even many building societies don’t provide services solely for their members these days.

No. I’d prefer a bank in which I had a stake. A bank that only serves the interests of the people that actually bank with it. And there is another option like that which I’ll come on to shortly.

The reason I started thinking about this was when the leader of the UK Labour Party, Ed Miliband, said in a speech to the Labour party conference last year that he wanted a new bargain, to break up the vested interests that are holding our country back.

He was talking about irresponsible behaviour in elements of corporate life but, in the context of the speech, he had the banks in mind.

I interpreted what he said as a call to arms so I thought: ‘Right Ed. There isn’t a bank out there that I *really* like to bank with so let’s start a bank.’

So How do you start a bank?

So I Googled ‘How to start a bank’, obviously.

And there’s not a lot out there.

There’s no ‘Starting a Bank for Dummies’.

And that’s probably because banks don’t get started too often.

In fact, the last bank to be authorised in Britain was Metro Bank, which launched in 2010. And that was the first new bank in Britain in more than a century.

So a new UK bank isn’t just a once in a lifetime experience, it’s a once in two lifetimes event.

So why is that?

Well I got in touch with Metro Bank and I asked them ‘How do you start a bank’?

And they said: ‘No problem. You just need £75 million. But that’s just to be authorised by the Financial Services Authority.’ In other words you need a banking licence, issued by the FSA, because – quite rightly – the regulator needs to be sure that

  • if you go bust, your depositors – in other words people that use current accounts – can get their money back;
  • that you’ve got enough cash in case people want to withdraw their money at the same time; and
  • to make sure that you’ve got all the right insurance and things like that to trade.

So I thought: “£75 million? Right, we’re well on our way to breaking up vested interests here then.”

You see, the problem with breaking up vested interests in banking is that the odds are stacked against anyone -other than institutions or individuals who have loads of cash – investing. And, because they’re investing, they can’t help having vested interests.

But then, one day, when I was mooching around on Facebook, I started to idly think about Facebook’s brand. And then I realised that the problem with banking may not be the banks but the fact that the only way to design banking services in the 21st century is in a 19th century way.

You see Facebook’s brand isn’t a social network, its a means for its users to connect in order to create their own social network. The value of its brand depends entirely on its population of users, the way they connect and what they do.

And that’s the key transforming the way we design banking services in Britain, rather than simply re-forming what we already have.

To illustrate…before my talk, I had the chance to ask you a couple of questions just to test out an idea.

First, I asked you to raise your hands if you had a bank debit card. Most of you raised your hand.

And then I asked, in turn, for you to put your down hand if you were part of the population of bank card holders from Barclays, HSBC, LloydsTSB and so on. And you did.

But what if we ignore the brand which issued the card?

What if we de-branded them?

What have we really got in the room?

A population of people with bank cards.

And what’s the difference between the bank cards in the room once they’re debranded?

Absolutely nothing.

In fact, what we have in the room is not a bunch of bank customers but a population of people with the means to use banking services.

And that doesn’t require a bank, it just requires access to banking technology.

Because, as the great philosopher, Hopper, observed in A Bug’s Life: “Those puny little ants outnumber us a hundred to one, and if they ever figure that out there goes our way of life!”

We should get together to start a bank.

In fact, we could start a sort-of bank. We could start a credit union – the option I didn’t mention earlier when I talked about moving your money. Credit Unions are founded on the idea of thrift but they allow individuals to join together to save and borrow money and, in some cases, use a current account too.

If we formed a credit union, we all own it and, if the Union’s in profit at the end of each year, we can all receive a bonus in the form of a dividend.

We could all get bankers bonuses!

There’s a drawback though. In order to establish a credit union, you have to be able to prove that its members share a ‘common bond’ – like a location.

Which means that, even if you wanted to join a credit union, unless you fall within the orbit of its common bond, you’re not really allowed to become a member.

If you want to set a credit union up, you can, but you’d need enough people who would be willing to form a Union and it might take anything up to five years to gain approval from the FSA.

So establishing a credit union isn’t easy which is why there are about 600 authorised credit unions in the UK compared to at least 9,000 bank branches in the UK.

And that’s a pity because the more members a credit union has, the more assets it has. And the more assets it has, the greater its ability to offer good rates of interest on both savings and borrowing. Not only that but the larger it is, the more likely it is to be able to offer services we’ve come to expect from a traditional bank – like current account banking.

In some of our big cities, credit unions can compete toe-to-toe with high street banks and beat them on rates. In addition, they offer a vital service to people in areas where banks have closed down branches or won’t provide bank accounts at all.

Running them isn’t easy. Larger credit unions are run with staff but many are run by volunteers. The Government has recognised this and has pledged to invest £38 million in the modernisation of credit union technology.

In fact, the Government and the FSA would like to see smaller unions merge in order to form bigger credit unions with more modern back-office systems based on a broader common bond.

I am in no position to question the merits of that initiative. What I am suggesting, however, is that the ability for technology to enable people to cleverly connect ought to mean that joining a credit union isn’t limited by postcode.

So here’s the idea:

  • Just imagine if we were able to give all the existing credit unions in Britain the ability to connect so, using technology, they could pool their assets if they wanted to?
  • And imagine if there was a way in which the platform that held those assets had all the tools for transactional banking – like a current account and card issuing – baked in?
  • Just imagine if the process of regulatory and legal requirements was embedded in the platform so you could establish, step-by-step, a credit union on your street, in your town, village or city – like a more rigorous version of setting up a Facebook page;
  • And – finally – just imagine if the common bond was extended so that being a British citizen was considered a common bond?

That would allow individual credit unions to remain as large or small as they want, for new credit unions to be established more easily, or for any British citizen to be able to move their money to one big credit union built on common technology.

Best of all, though, we would be our own bankers, we’d receive our own bankers bonuses and our money wouldn’t be put at risk by other people squandering our money.

Is it a cloud cuckoo land idea? Possibly.

But the FSA has agreed to meet me so I can float the idea that – if we could pool the assets of credit unions in the UK – wouldn’t we already have the £75 million pounds needed for a banking licence?

And I’ll be suggesting to them that there is a precedent elsewhere in the financial services world which may mean it’s possible.

In the past decade or so, something like £100 billion worth of assets held in pension products sold by the big insurers have been transferred – via technology – to a new breed of investment platforms.

These platforms have all the underlying compliance with legal, regulatory and data protection measures baked in.

They enable savers, or savers and their advisers, as well as institutions, to access information and funds, and execute transactions no matter how geographically dispersed.

In other words, these days, technology gives people the ability to put together their own pensions, rather than buy a pension product that’s put together by someone else.

The effect of this movement is causing once grand old insurers to reconsider how they design services in order to appeal, once again, to former customers.

So being cleverly connected via technology is transforming the culture of the pensions industry.

And I think the same principles that could transform the culture of banking.

But here’s one final thought: you don’t need the permission of the banks to start a bank. You need the permission of the FSA whose powers are decided by legislators in Parliament.

So we need our parliamentarians to have the imagination to contemplate ideas which allow new ways of designing banking services.

Because I’m fairly sure that the only thing that’s going to change banking in Britain is changing the way that Britons are able to bank.

In other words, let’s quit banker bashing and be positive – let’s be banking instead.

Thank you.

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