Businesses everywhere are shifting their priorities to embrace social consciousness. Corporate social responsibility has rapidly transformed from mere checkbook philanthropy to redesigning entire product lines based on ideals that are good for both society and the environment.
CPG multinationals like Unilever and Seventh Generation have embraced corporate social responsibility, seeing it as the key to global growth, while major players in the financial sector lag behind the revolution. Citi and Santander have made strides, yet for all their good intentions and positive impact, such investments don’t change the way we do business.
Like most industries, banks are taking their cues from the millennial generation. Millennials will comprise the largest segment of the workforce by 2020, yet their lifetime earning potential is expected to be 23% less than those who entered the workforce in a bull economy. And on average they’re about $30,000 in debt. Behold the financial state of the generation that will change the world.
This spells a great opportunity for banks, which sit at the nexus of the millennial paradox: They’re lacking expendable income, yet collectively, they represent $200 billion in annual purchasing power. According to Viacom’s Millennial Disruption Index, all four of the country’s leading banks are among millennials’ 10 least-favorite brands. However the same report suggests that seven in 10 millennials would be more excited about a new offering in financial services from Google, Amazon, Apple, Paypal or Square than from their own nationwide bank. Unsurprisingly, banks are now counting on technological innovation to draw young people in.
Technology alone won’t revolutionize millennial banking
Technology, however, is just a vehicle – technology alone can’t retain millennials in an undifferentiated market. Seven in 10 millennials consider themselves social activists, and three in four expect businesses to create value for society. Banks need to respond to this generation’s desire for social responsibility by redesigning banking so it becomes an economic activity that creates societal value.
Some banks are digging deeper and responding to millennials’ demand for intuitive, user-centric financial solutions by integrating their core services. For instance, Simple combines automatic budgeting with their Safe-to-Spend feature, ensuring customers stick to their goals. Connecting with millennials in this way can rebuild their confidence in effectively managing their finances. In small ways, this is personally rewarding and even empowering. But this is only a step of the way there.
Banking with a purpose
We’re viewing technology’s role in meeting millennials’ need with only one eye open. Banks should take a cue from this generation’s behaviors, beyond their propensity for swiping left and right, and respond to more than just their personal demands. Technology’s potential thus far has been tapped only to transform channels and interfaces, and maybe add a helpful feature or two. Banks need to think at scale and leverage technology to enable true financial empowerment, not only by helping customers to advance their own goals, but also by enabling them to propel society forward.
To truly revolutionize banking, social consciousness needs to permeate the entire financial ecosystem. Banks need to move from separating the social impact work they do at the corporate level to incorporating this into their very foundation. This means that the very act of banking – from making deposits to withdrawals and money transfers – should create societal value. It can be a one-for-one model where every new account opened replenishes a cash card for a small business owner in India, or where a portion of every deposit helps finance a microfinance loan. It can be a system where a savings goal met by one customer activates banks to return a percentage of interest to a community pool, incentivizing healthy financial habits and making banking an activity for good.
Socially Conscious Banking can go beyond adhering to ethical practices or a CSR program. Imagine a network of banks and customers with a shared goal of saving money, while lifting up others in their local communities and around the world. For an industry that’s still blamed for its role in the 2008 crisis, this collective approach would truly be revolutionary. Millennials are waiting for banks to provide more than financial value: They expect social value. Banks can, and should, offer both.