My good friend Andrew and I had a chat about purpose a couple of weeks back.
In a recent piece, I wrote that banking is simple. What we do is simple. We store and move things of value in time and space and keep records of all actions. How we do it all is complex and creative.
This complexity and creativity is how we make a big and profitable business out of all this. It is how financial services has become a huge vertical in the economy. It is why some of the best and brightest seek to join its ranks. It’s simple work, but the doing of it isn’t simple.
And Andrew rightly asked about the why of the work; beyond the what and the how. If what we do is set and simple and how we do it is complicated, where does purpose come into it all?
And it gave me pause. Andrew has that effect on people: making them think.
What about the why? Why we do this should matter the most.
He is right of course.
But if we are honest with ourselves and look hard at the work we do, there is only one ‘why’ in our business.
I am not being mock-deferential here. It’s the truth.
Unless you are Scrooge McDuck, financial instruments aren’t an endgame. Nobody gets a loan for fun. Mortgages aren’t an end in themselves. Even the most complex trading instruments are usually a means to an end. Yes, wealth. Of course wealth. But usually there is a stepping stone before that. Financial services are about access to money, not the money itself. They are about leveraging money to do stuff. The stuff may be about public infrastructure, commercial growth or personal enjoyment. But the role of our industry is never at the end of the equation. Even when money is the endgame, the financial instrument isn’t.
It’s important to know our place.
Mortgages are a means to an end.
Syndicated loans are a means to an end.
Derivatives are a means to an end.
After that, admittedly the why gets iffy.
So here’s an idea:
Banking is a ‘so that’ business. That’s our why.
We are here to help keep assets safe, to provide liquidity for business and financing for infrastructure projects.
We are here to provide children with access to the means to secure an education; their parents with access to the means to access healthcare; and the owner of the corner-store on the way to school with access to bridging loans and invoice financing that secures their livelihood. Even in countries where education and healthcare are free, money helps with access, not to mention helping the state with the funds to build the school and hospital through sovereign bonds, lending and investment vehicles.
I guess what I am trying to say is money makes the world go round, and that ‘going round’ part is the so that of our business. The reason we exist.
We exist so that money can move in space and time to enable living, commerce and growth. And we do it in a way that allows the doing of it to be a business. I.e., we do it for money.
OK. Great. That’s what financial services do today.
No transformation needed.
No digital overhaul required. We fulfil our purpose. Albeit inefficiently and often with pricing that is confusing and predatory, and with access being a problem for people, businesses and states alike. Because this is not a charity.
But actually, that’s the point.
The transformation is needed not in order to help finance find its purpose, but in order to help us fulfil it.
We know our raison d’être. We just need to get better at doing the doing.
That’s where the digital revolution comes in. Allowing us to align a sense of purpose and ethics with a business that can do good and do well at the same time. Reducing obstacles to access and fairness without compromising on the need to stay business-relevant. Making money is a given. It’s business. How you make money is a choice.
So a lot.
If we agree that financial services is a ‘so that’ business, there to enable lives and businesses and civilisations while making a profit, then that’s our purpose and how we do it becomes our mission. How we do it becomes our differentiator ethically as well as operationally. It also allows us to draw a line and look at all activity that doesn’t fall in this category separately and say: OK, you there are not part of this. I don’t know what your purpose is, but it isn’t this.
Legislators tried to apply similar heuristics to this in the aftermath of the financial crisis. They spoke of casino banking and tried to ring-fence retail banks in function and geography to protect consumers. A noble cause, but it would help to understand how money flows before trying to draw lines.
Some ring-fencing is futile.
Money flows across borders, consumer loans are backed by money coming from capital market accounts (credit card debt appears in repacks and asset-backed securities may very well include your house) and often affordability of consumer instruments is premised on trading revenue downstream.
And that also applies to the instruments traded to make sovereign debt investable.
The way money flows is highly integrated. Right or wrong. To change it, you need first to understand it. There isn’t a direct line connecting bond issuance to dams or schools but the line is there. We need to remember it. And we need to keep it in mind: bankers, techies and policy makers alike.
If you can’t trace a line of how an activity pumps liquidity into commerce or underwrites mortgages or whatever else then put it in the sin bin. I don’t mean scrap it. But treat it as a thing apart, because it may well be.
There are some seriously obscure investment vehicles. There are businesses that trade for the thrill and profit alone in closed circuits that are only loosely connected to the real economy. Treat them as a thing apart, because they are.
Everything else is part of the ‘so that’ business. The business that is there precisely to serve life, commerce and development. And yes, make a profit doing it. But doing it is the non-negotiable part. If that’s not what you are here to do, you are in the wrong business. Please leave.
It isn’t that simple, but it should be.
We have a lot of work ahead of us. We need to use what we have learned and the technology we have built to make this ‘so that’ better: more robust, more scalable, more profitable and affordable, as digital connectivity reduces cost allowing you a bigger, more nourishing pie. You won’t have it and eat it and yet you will eat it and others will eat too and some will still be left to be had later.
So that’s the why, as far as I see it, to do better at the thing you are here to do.
We are a ‘so that’ business.
So we are here to serve. And that means that when we are not of service, we are just in the way.
Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.
She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem. She is chief client officer at 10x Future Technologies.
All opinions are her own. You can’t have them – but you are welcome to debate and comment!