By Bradley Leimer, Founder, Unconventional Ventures and co-author of Beyond Good: How Technology is Leading a Purpose-driven Business Revolution
It was about a year ago that I wrote a piece for these very pages entitled “There has been blood: A summer without solace”,1 in which I argued that the financial-services industry—especially large national and global banks—could have done more for their customers and their communities during the initial chaos of this pandemic. In considering the context of this growing crisis and that of the still-lingering impacts of the Great Recession, one can connect the dots and see where mistakes were made and how opportunities for leadership were hiding in plain sight. A crisis, after all, is indeed a terrible thing to waste.
While it was very good to see so many organizations step up—institutions such as TAB Bank, Citizens Bank of Edmond, Citigroup, Cathay Pacific, Starling Bank—these actions haven’t collectively been enough of a response, as this crisis and its lessons are still very much with us. So much suffering remains. Little did any of us know a year ago that we were so far away from even the worst months of this global nightmare.
So many lives have been lost, despite ongoing efforts of social distancing, mask-wearing and societal immobility. Sorrow only continues in so many parts of the world, such as India, Brazil, Mexico, the United States and others. This despite the blessings of vaccines and coordinated efforts of caregivers across the world to better understand and control coronavirus mutations. There has indeed been little solace for so much heartbreaking loss.
A sector impervious, tangential throughout
You wouldn’t have guessed that the world was at pause at all. If anything, between global equity markets, increases in the prices of assets such as real estate [or intangible assets such as cryptocurrencies and non-fungible tokens (NFTs)] and improving economic conditions of retailers across so many sectors, one would hardly posit that so many of us were in any form of lockdown. It turned out that people found ways to be productive at home; those workers who supported and provided care to their communities adjusted to do so relatively safely; and the world’s richest, naturally, found ways to amass much more wealth. Many banks, and many bankers, have been among them as industry balance sheets and profitability have surged during the past year.
In addition to surging profitability, we have seen the ongoing evolution of the financial-services business model. Fueled by a serendipity of partnerships, new extensions of value through infrastructure, open banking and embedded banking—and by distributive credit iterations such as buy now, pay later (BNPL)—finance providers were empowered with new ways to serve up banking to the masses. Banks found savings in implementing new technologies such as artificial intelligence (AI) and infrastructure such as hybrid cloud as well as tackling long-delayed digital-transformation efforts. Through the efficiencies of working from home, coupled with a renewed focus on getting projects out the door, tireless employees were simply happy to avoid the layoffs of a decade before.
We’ve also witnessed a blistering return of record venture-capital flow into fintech (financial technology) startups, creating a steady stream of worthy competitors—and potential partners—for large incumbent banks. There were some 57 nine-figure fintech-driven mega-rounds around the world in the first quarter of 2021—about 4.5 per week. That number was 30 in the fourth quarter of 2020 and just 21 in the first quarter of 2020.2 Venture firms had set a record in 2019 by putting $168 billion into the fintech sector, and while 2020’s pandemic paused this momentum (at $105.3 billion raised), the 614 fintech deals in first-quarter 2021 were worth a total of $22.8 billion, and the second quarter has seen an unparalleled pace of both new funding and IPOs (initial public offerings).
Fintech investors, it seems, never sleep.
It appears that most everyone involved in the financial space is doing well—making hay while the sun is still far from shining for so much of the planet. Could it be that the future of financial services—despite this ongoing tragedy—holds flickers of hope for others? Perhaps. But who really gains from the success of an industry built up around the storage, movement and augmentation of money in the end? Is the long-term health of the industry truly better off if the long-term health of its customers is not? What lessons can we learn from this past year as the world adjusts to whatever comes next? It feels as if we need to talk with each other about more than just work, about how we feel about what has just happened this past year, and what that means to each of us and the role we play at work and in society. A new mindset is needed.
A hastened return yields fewer lessons learned
So many things feel rushed with the way we are now trying to return to a normal that can never be that. Something feels amiss as various regions open up, and the talk shifts to how best to rebuild. So many leaders of our industry’s largest organizations seem to think this is over without accounting for what was lost—and what opportunities there are as we move forward. Those that have been hurt the most during these past 15 months are still hurting—physically, mentally, emotionally and economically. So many of us are simply exhausted from coping with the health risks, caregiving, homeschooling and laboring without respite.
And yet there is talk of returning to our old world as if it could ever be the same.
As banks are now openly discussing going back to the office, there might even be consideration—driven by technology companies such as Facebook—of salary recalibration for workers who wish to retain the flexibility of remote work. This is on the heels of leaps in productivity and profitability as workers have adjusted to a new reality. Is there also talk of reining in the bonuses of chief executive officers tied to stock prices driven by these same workers? And what of the bank board members and C-suite, safe and sound in their remote vacation homes? Front-line, often lower-income workers are the ones preserving the connectivity to customers through these trying times, and they need to be recognized as such (and paid). Just as all workers deserve reparations for the efforts of the past year, we must have thoughtful discussions around the future of work and the impact of thinking any of this has been normal. We all need a genuine pause to plan for a better future.
Throughout the pandemic, the industry has largely failed to reimagine a better normal, just as it did during the Great Recession. While its workers and customers struggled, the industry collectively used its standard playbook in response. After the Great Recession, economic and regulatory pressures—coupled with the energy of pure enterprise survival—drove strength and common sense into balance sheets and credit decisions. Post-pandemic, we can also have a much stronger, healthier, economically viable global financial system than before—and one that takes care of more of our communities. Will banking-industry leaders step up to this crisis in ways they did not before to make financial services more inclusive? Can we reimagine a society that is more resilient to the next global shock?
How can banks help create this better future? By acknowledging the connection between wealth and health and the industry’s part in creating this gap.
Addressing banking’s systemic transgressions
A disproportionate number of lives lost during this pandemic have largely mirrored those long neglected by the traditional banking business model—those with lower incomes, communities of color, immigrants, caregivers, transient workers and older adults. Active, healthy lifestyles and access to quality healthcare and appropriate personal protections from this virus are economic burdens that often separate those who survive and those who do not. How can banks possibly help in areas outside of finance, such as health? By giving out masks? By helping more people get vaccines? It goes much deeper than that.
Banks must be part of making poorer communities wealthier.
The connection between health and longevity and wealth has long been established. This impacts every country, even those with forms of universal healthcare. Wealth inequality is a wedge in society that the industry had a part in creating and perpetuating. There are many sins of banking’s forefathers for which we must collectively make up: systemic financial exclusion, support and development of racially driven policies that directly or indirectly drew red lines around communities of color, barriers making it more difficult for those with lower incomes to gain access to traditional banking services and build wealth.
While the United States’ exclusionary practices curtailing the creation of wealth for generations of people of color is somewhat unique, there is not a single country that does not have a legacy of some form of financial oppression by a minority wealthier class, whether directly upon its own people or through its historically extensive efforts to colonize. We have much to learn from each other’s histories. Not to belabor my own country’s origin story of exclusion, but I would highly suggest these books to learn more: The Color of Law: A Forgotten History of How Our Government Segregated America (Richard Rothstein), The Color of Money: Black Banks and the Racial Wealth Gap (Mehrsa Baradaran) and Caste: The Origins of Our Discontents (Isabel Wilkerson).
This is one of the painful legacies of both the industry’s historically less-inclusive business model and the predominant global economic system. Trickle-down economics never worked to right these wrongs. Neither did executive teams filled with one race and one gender. Inherent white-male privilege is a pillar of our infrastructure that we need to tear down. To build back better means to abandon a business model that fulfills the needs of the few and expand deeper into the framework of the communities we are privileged to serve. To build healthier resilience against future pandemics and create lasting financial equilibrium between our communities, every financial institution must be part of the dismantling of these existing walls.
Placing bricks more thoughtfully as we rebuild
While banking has never been mistaken for the noblest of professions, many of its leaders are indeed making a difference. Just as the Great Recession brought in a massive influx of fintech startups and new business models for incumbents to consider, we have to reinvent how we can bring the value of banking to more people as we start to emerge from this crisis. This sense of community (and a need for greater purpose post-pandemic) is stronger than ever. As discussed, there is a need to help rebuild those groups that we have long forsaken, as well as others perhaps less disproportionately impacted by the health implications of this virus but equally long overlooked by banks: women and LGBTQ (lesbian, gay, bisexual, transgender, queer) communities.
Consider some of the following fintech startups and their approaches to serving their communities: Daylight (LGBTQ community), Cheese (Asian Americans), First Boulevard and Greenwood (African Americans), Qwil, Lili and Stoovo (gig workers and freelancers), Sunrise Banks (immigrants), Aspiration (climate-conscious consumers), Stretch (recently released prison inmates), TAB Bank (truckers and transportation workers) and Purple (people with disabilities). These are all underserved communities that represent tremendous opportunities to serve and help build back better.
These are companies that understand that how you define and serve your community matters. As more community-focused fintech startups grow and demonstrate how technology can scale and help connect us through commonalities, incumbents will be able to partner or attempt to replicate this renewed sense of service toward more people of our society. And through new technologies and new services, the ability to create more value for more community stakeholders will become a critical table-stakes capability in the future.
How will you be part of rebuilding an equal society?
Addressing the greater needs of society through for-profit businesses is nothing new but rarely undertaken. It turns out that you can indeed do well and do good at the same time. This was the premise of a new book I co-authored, Beyond Good, focusing on how technology is helping lead a purpose-driven business revolution. It comes down to decisions that we all make as leaders to understand the opportunity costs of exclusion.
Long term, being more inclusive and serving more members of our communities can help alleviate systemic issues such as poverty, hunger and wealth inequality. By lifting those in need, we uplift our whole society. Profit without purpose, without inclusion, should no longer be spoken. That is the voice of a dying tongue. Jamie Dimon, chairman and CEO of JPMorgan Chase, wrote this in his recent Letter to Shareholders:
As for Jamie and other like-minded leaders, if you are serious about these words and about changing your bank’s culture; if you are steadfast in addressing the racial inequalities that arose from the very beginnings of this country—start by changing the heart of your organizations. Leaders like you (and Larry Fink and others) have a unique capability to discuss topics and enact the changes critical to our future. You can help shift the mindset and direction of the financial-services industry and the impact it has.
But the responsibility is on us all to ensure a better future for everyone in the beautiful fabric of our communities.
(Jamie, I’ll gladly send you the book to help you continue that conversation.)
You’ll find you are far from alone in your call for change.
1 International Banker: “There Has Been Blood: A Summer Without Solace,” Bradley Leimer, June 27, 2020. (https://internationalbanker.com/banking/there-has-been-blood-a-summer-without-solace/)
2 TechCrunch: “Fintech startups set VC records as the 2021 fundraising market continues to impress: New data indicate Q1 2021 was the biggest fintech VC quarter ever,” Alex Wilhelm and Anna Heim, April 29, 2021. (https://techcrunch.com/2021/04/29/fintech-startups-set-vc-records-as-the-2021-fundraising-market-continues-to-impress/)
Bradley co-hosts One Vision, a podcast on fintech, technology, and innovation. He speaks about banking and technology trends, advises startups, accelerators and key industry conferences in the financial services space, and writes for publications like International Banker, American Banker, Journal of Digital Banking, and Irish Tech News. Bradley’s mantra is simply to make banking better.
As the former Head of Innovation at Santander, his team connected the bank to the fintech ecosystem and served as an observatory for the global organization for trends originating in the U.S. that have potential to expand and accelerate globally. He adds additional perspective leading marketing and technology teams and projects within the bank and credit union industry and from a decade driving database marketing and analytic programs for community and regional financial services organizations.