I watched from the other side of the globe as women and men all over the United States and major cities around the world marched on Saturday, 21 January, 2017. And although there was no organized rally in Hong Kong, I was rallying in spirit with them all.
It was the first official protest following the inauguration of DJT as the 45th president of the US. It won’t be the last.
It struck me that beyond the preservation of equal rights under the law, it is a warning sign for our own industry to do everything in its power to preserve the momentum towards open banking. The reasons are myriad, lest you ask why. And if you have asked why, let me draw a few parallels that are reason enough for concern.
1) Privacy rights & Cyber Security
The DJT/Putin relationship alone is enough to imply more frequent cyber attacks, something the banking industry can ill afford when privacy, security, and trustworthiness are pillars on which financial services are built. But more worrying is DJT’s promise to reduce regulation of the SEC, FTC, CFPB, and FCC – the regulatory agencies that spearhead defining and enforcing cyber security standards.
Relaxed regulation also means that our data can be bought and sold on the open market. The US, unlike Europe, has no formalized privacy and data rights encoded for the banking industry. At least PSD2 is bound by the General Data Protection Regulation clause. The GDPR codifies that the individual owns their data, not the bank, not the third party API providers.
But DJT wrote in his 2011 book Time to Get Tough: Making America #1 Again that “all freedoms flow from national security,” suggesting he’s willing to put national security ahead of people’s privacy. Not cyber security, mind you, national security. Equality under the law is trumped (pun totally intended) by national security (hello Patriot Act), and that extends to banking transactions, compromised AML and KYC standards, and no regulation around cyber security. I won’t even go into Net Neutrality – but needless to say universal access to information/transactions is heading to pay-to-play territory, and they’ll be monitoring who can pay.
Take it a step further and API banking, data portability, secure access to transactions and privacy are in jeopardy if we’re not all equal under the (regulated) law.
2) Repeal of Ombamacare & Financial Inclusion
Universal health care coverage is in jeopardy in the US, with both the President and the Republican Congress vowing to repeal Obamacare. You already knew that. But extrapolate its repeal to a retraction of financial inclusion efforts. Contracting inclusion, shutting millions (nay, billions) out of the financial system and we all lose. From higher insurance premiums across the board, due to subsidization, to lost fee revenue from diminishing transaction volume, our industry suffers at both the individual and market levels. Sure, it’s costly to offer basic “free” current account services, but the opportunity to help customers build wealth and purchase additional services shrinks when no new customers are onboarded. Fewer ‘included’ customers also means banks have to up their game to keep them. Fewer people moving money around the system means diminishing returns for new fintech solutions trying to fill the gap in costly bank transfers. Fewer customers means fewer solutions rise to the top. It becomes a natural oligopoly of few providers holding customers captive. Less competition, less innovation, more costly transactions (dare I say it, even price collusion) are the norm in an oligopoly. Who suffers? Fintech, innovation, the end customer, and even banks as they are effected by the law of diminishing returns. This is exacerbated by a stagnant, shrinking market of those who can afford to be in the financial system. There are only so many fish in the (banked) small pond.
Take it one step further to correlate actual financial health and access to health care, and you can see how being sick and uninsured is equivalent to being outside the financial system.
Look at Obamacare and its support of SMEs. Those who couldn’t afford costly group rate insurance can still help their employees get insured via the marketplace. Those SMEs who’d be forced to ante up for group policies once again mean that the most profitable (albeit underserved) market for banks also retracts their consumption of financial services. That growing market shrinks, so does the revenue it generates for financial services.
It’s a vicious cycle. Universal health care is akin to universal financial inclusion: every one benefits and the market grows. Repeal the universal aspect, and you’ve got a smaller, finite, captive market operating under the law of diminishing returns. No one profits.
3) Equality & Innovation
You want innovation? At its core it demands a new perspective on how to solve a problem. You want to stymie innovation? Encourage groupthink and status quo. You want to stifle it completely? Ignore the end customer and design in a vacuum, dismiss the diversity of the market, and promote homogenous teams who have limited empathy for the actual needs of those diverse customers.
So what does innovation have to do with equality under the law? Everything. The moment governments dismiss huge swaths of the population as active participants in the political/economic system with equal rights is the moment diverse thinking (read: innovation) is snuffed into oblivion.
Hinting at a Muslim registry, calling Mexicans rapists, retracting LGTBQ marriage, health, and protection rights, condemning Black Lives Matter (let alone referring to an entire people as “the Blacks”) – implying that they are less than the ruling elite – and going so far as to actually lessen their equal protection under the law is appalling from a moral perspective. Now overlay the absence of their contribution to designing services and solutions that address their needs from a banking perspective, and again, we’ve retracted the viable market. From an economic perspective, it’s akin to suicide.
People all over the world wore pussyhats in protest of DJT’s treatment of women and in support of gender equality. How utterly stupid would the banking industry be to perpetuate the current state of inequality of gender? Utterly. Stupid. Aside from the numerous business cases supporting greater gender equality in banking, women will control 75% of discretionary spending globally in the next decade. We have money, and we have money to spend on managing our money. We constitute the biggest growing market for banking outside of the unbanked. To dismiss us – as does DJT – as just being women, who are good only for Tic Tac kissing, pussy groping, and being beautiful ornaments of objectification is to alienate future revenues and wave goodbye to profits and ROI.
It also means bidding farewell to diverse perspectives for better solutions. If we eradicate equality, we kiss innovation goodbye.
No doubt protesters yesterday weren’t thinking about banking, but what they were protesting directly impacts our industry. Equality matters to this industry, it is an externality that can be positive when equality objectively exists, and disastrously negative if it becomes subjective. Privacy, trust, and security are compromised when equal protection isn’t guaranteed. Financial health, and the continued growth of the market, is diseased if we don’t have universal access to the financial system (and health care, don’t forget health care). Gender, racial, and ethnic equality is at the root of our ability to innovate and adapt. This industry is already accused of being a dinosaur, and to exclude equal representation of diverse groups in financial services is analogous to signing our death warrant.
This won’t be the last protest for equality, and the financial services industry ought to be counted as first among those standing up for equality. Our survival demands it.