The Shared Value of Banks

(3BL Media/Justmeans) - In the wake of the financial crisis, banks have been under fire from all fronts. While the industry continues to struggle economically, society’s growing suspicion of banks’ intentions is resulting in tighter and more complex regulation. It is clear that this industry needs a new approach and fast. As we emerge from this global economic meltdown, it is clear that the time is ripe for banks to reimagine their role in society: they need to recognise their potential to create shared value and generate business value by creating social value. We know that banks can play a pivotal role in driving social and environmental progress. They are essential to fostering the growth of every business from financing housing and education to enabling the development of tomorrow’s clean energy infrastructure. Yet these roles have largely been forgotten.

A new study, Banking on Shared Value, highlights the fact that banks are leaving value on the table, as shared value holds tremendous potential for banks of all types and sizes. This report explores the barriers and myths that prevent banks from pursuing shared value opportunities, but also how leading banks are innovating to embed shared value at the core of their businesses. Traditionally banks operate under three common myths that prevent them from pursuing shared value: a profit vs. purpose trade-off mentality, low return on investment (ROI) expectations, and insufficient scale.

Banks do recognise the potential to create shared value, which can help to recast their role in society, and that there’s an opportunity for them to increase long-term profitability while leveraging the unique financial capabilities of banks to drive progress. Shared value defines a new role for banks in society—some financial institutions are now capitalizing on these new ideas.

Positive examples include Barclays, which has realigned its businesses to reach unbanked populations. By working with not-for-profits like Care International U.K. and Plan U.K. its ‘Banking on Change’ program leverages the expertise of each partner to provide people with the skills needed to effectively manage money and provides access to basic financial services. Since 2009 it has provided savings accounts and financial education to 513,000 previously unbanked individuals who live on less than $2 per day; it plans to open 5,000 group accounts by 2015. 

Bendigo Bank is a prime example of banks finding business opportunities by revitalizing local economies. In 1998, in response to thousands of branch closings in rural areas by large banks across Australia, it partnered with local communities to create a new model—the Community Bank. These new approaches will enable banks to capitalise on new prospects and leverage their biggest asset—their core business— to address some of the world’s toughest challenges.

Photo Credit: The Shared Value Initiative