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Economic Justice

Fairbanking Foundation report describes a better kind of banking

The Fairbanking Foundation’s latest report looks at how well British banks serve their customers, and argues that the people leading Britain’s banks have the potential to change their industry for the better.

 

A Better Kind of Banking, supported by the Barrow Cadbury Trust, proposes that the main banks’ business model based on ‘free banking’, alongside a banking culture that has encouraged managers to pursue profits at the expense of their customers’ needs, is greatly flawed. The report highlights alternatives to this approach that illustrate how banks can work with customers to enable them to manage their money more carefully and intelligently.

 

Authors Charles Leadbeater and Antony Elliott look at four banking innovators that could transform the banking industry if they were taken into the mainstream. thinkmoney has a customer base of 100,000 who pay a monthly fee for a service which guarantees that they will not go overdrawn, ensuring that they do not pay charges for unauthorised overdrafts. Secure Trust Bank help customers set up a current account which is used to pay direct debits and standing orders for regular bills, but no debit card is provided. Customers are instead given a prepaid Mastercard which they can upload their spending money onto. Saffron Building Society encourages people on modest incomes to save by allowing them to track progress toward a goal and get regular encouragement to do so. And the Capital One Progress Card rewards people with lower interest rates on their debt as they pay more money off.

 

The report points out that these innovations come out of the margins as opposed to the mainstream. It argues that banks need to alter their business models and adopt higher standards to create a better banking system.

 

Read the full report here.