UK Edition
Bankers must learn to behave or fintech will tear them apart, warns Barclays’ ex-boss
Britain’s bankers have not yet convinced the public that they are reformed characters – and if banks do not change their ways, fintech companies will poach their customers, Barclays’ former chairman has warned.
Sir David Walker fears that banks are taking too long to rebuild their reputations, at a time of fearsome technological and industrial change, which means they are losing out to new competition.
“Despite all the efforts at reform that have been initiated and are currently in train, trust in banking is still at a very low level,” he said in a speech at the Chartered Institute for Securities & Investment, noting that it is easier to lose trust than to rebuild it.
When Sir David led Barclays’ board, then-chief executive Antony Jenkins ran a campaign to improve behaviour and the bank’s culture, but acknowledged it may take a decade to restore trust to the industry.
That long time lag leaves banks open to challenges from new rivals, said Sir David, arguing that “the scale of change in prospect is massive even over the relatively short-term”.
“While this disintermediation pressure is set to intensify, it is not irresistible and the smart bank will adapt and anticipate it,” he said.
“An important part of that adaptation should be cultural, and should enable the bank to retain the confidence of its customers, however technology changes the form of customer engagement.”
Sir David added that the challenge is even greater than it might first appear because bankers are not simply trying to revert to perceived good behaviour of a previous era.
Instead, he argued that bankers have always been badly behaved.
“There is a tendency to look back to the culture of banks and banking several decades ago through rose-tinted spectacles,” he said.
“We should have in mind that activities such as insider trading, front-running, concealment of high front-end commissions on in-house products and other charges alongside the persistence of wide net interest margins for banks, not wholly attributable to the configuration of interest rates, were an at least tacitly accepted part of the financial landscape. Much of this would today be barred by regulation if not, like insider trading, be treated as a criminal offence.”
The perception of worse behaviour now is in part fuelled by the fact that it is far easier to complain to and about banks, either directly or publicly online.
Trust in the sector has also been undermined by the financial crisis and the series of scandals which followed, increasing awareness of poor behaviour and encouraging customers to report mistreatment.