Setting the Scene of Ethos in Banking
On my journey of writing a book on “A New Ethos in Banking”, I’m here with a second blog, which follows the first on “New Ethos in Banking – How it Started”.
Before I expand on that, I wanted to share an anecdote from this weekend's family reunion. Of the many remarks on me working in the banking industry, there was one that struck me, and it is the perfect example of why this book needs to be written. Banks need to rethink their narrative to avoid examples like what I heard at that reunion.
A family member, an entrepreneur, backed by a father with a good understanding of finance, confessed that it is keeping its savings at home. That member has a couple of investments at a bank, but the savings stay at home. It knows that, rationally speaking, it doesn’t make any sense, and that even a bit of interest is better than inflation eating the money at home, but that is where the savings stay for now. That is not because the bank doesn’t want to serve that person, not because it doesn’t understand the system. No, it is because it is fed up, this person's words, not mine, fed up contributing to the banks’ profits given the little earnings it gets on the savings account.
The previous post ended with: “Transformation today starts with the hope for a better world, and we are just at the start of this evolution. An evolution that requires a new ethos in banking. An ethos that favours transparency and customer centricity, society, and the planet.”
This is, in essence, what this book will be about. From what I understand from the many discussions on the topic and my desk research, the industry seems to be reaching the biggest opportunity since the start of the Industrial Revolution for a New Ethos, an ethos in favour of people, the planet and society. More on that later.
The above summary opened many doors with C-level people from the industry and other relevant voices to help me better understand what is going on and how we should reformulate the ethos.
Some of those people preferred to keep the conversation private, which is a great source for more information and relevant insights that is not available for public sharing. Some of those conversations will be shared on the road to publishing a book as part of taking you on my journey.
Before we do that, I should explain what the word ethos means to me, so we have a common understanding of what I am talking about and what you and I are trying to correct going forward.
What do I mean by Ethos in Banking?
I’ll keep it brief.
Given the complexity of banking services, trust and confidence in a bank are vital. In the case of a bank, trust means, for example, that as a customer, you can rely on the care of your bank for financial wellness, which requires a bank’s good behaviour above what is required by law and regulation.
That is one explanation and a justification that ethos doesn’t equal ethics. In my opinion: ethics is the set of moral principles or a system of moral values for a particular society or an institution.
Ethos, on the other hand, is much more personal.
Ethics lays the foundation for a society of what is right and wrong. Ethos is the colour people and organisations like to give to that right and wrong in their behaviour.
In some of the talks with executives, I also heard ‘character’ and ‘culture’ as an explanation for ethos, and rightfully so. Ethos is how you and I, and organisations behave within the ethical framework that we are given.
From another angle, and only one speaker actually referred to it at any of our three conferences this year with the theme “New Ethos in Banking”, is that ethos is one element in a set of three - which will be the core of my story.
That set of three is called the rhetoric triangle.
Ethos is part of this concept conceived in ancient Greek times. The School of Liberal Arts defined the rhetoric triangle in “The Rhetoric Triangle – Understanding and Using Logos, Ethos, and Pathos” as follows: “Logos, ethos, and pathos are important components of all writing, whether we are aware of them or not. By learning to recognise logos, ethos, and pathos in the writing of others and in our own, we can create texts that appeal to readers on many different levels.”
Isn’t that what the industry is currently missing? A story that appeals to people not working in the industry. Isn’t that why discussions on trust are so high on the agenda?
My thesis is that the industry may need a new ethos to ensure they can rewrite a narrative that makes banking appeal again to their customers and society at large.
The relationship between Ethos, Pathos and Logos
And that means that we need to understand ethos in relation to the other 2 elements. In this context, the definition should be interpreted a bit broader than what I explained earlier:
Ethos: is about establishing credibility, in rhetoric, ethos is said to belong to the audience. In that sense, a bank’s ethos is how it is being perceived by its audience. It remains highly personal, and it is defined by culture and character. Although that character and culture can be defined by an organisation, it is the outside world that will evaluate and value it. That valuation is outside its control.
Like trust is. A common misconception is that we can build trust, but that is not true. We can build a trustworthy context, but others will determine if that makes us trusted or not.
A bank can say it invests in society, but if it is missing the trust factor, which is again something external, it is meaningless for the bank because it cannot fall back on a solid foundation of listeners and so the story gets lost.
Pathos: is an equally important element and refers to the heart: a bank’s pathos is its understanding of and empathy with its audience. We come from an age where people had their own advisor, sometimes for their entire life. Consumers didn’t trust the institution per se, but they trusted the representative in their community. That logic changed with digital banking, but how does that affect a bank’s empathy with the customers?
Logos: is the reasoning on scientific numbers and rational thinking. This should be a bank’s biggest strength. After all, banks are risk managers and accountants, right? However, what happens when banks get lost in their own complexity, making this industry so complicated that it gets close to impossible to properly explain how banking, its services and products work?
As Andrew Vorster asks regularly in data-discussions: "when will I ever have my personal advisor in my pocket?". Perhaps more important: once we have that: will it make us trust a financial institution more?
Will it create more personal bonding?
So… where did it go wrong? And is it possible to reconnect those dots, making sure the industry can find a New Ethos? Is it possible for banks to reconnect with their stakeholders to bring them a story that is both appealing, convincing and the right thing?
Banks got lost in their own complexity, in their own rationalisation, in their own reality.
But can banks get out of their ivory tower and show more empathy based on a true understanding of their clients instead of a rational analysis of the data they own?
Can they rewrite their narrative?