Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Banking Must Take A Stand On Tough Social Issues
The Financial Brand | Jim Marous | Jun 8, 2020
The COVID-19 crisis, combined with the recent incidents involving racial injustice, result in a dual pandemic for minority neighborhoods across the country. Financial institutions must increase their resolve to support racial and gender equality, diversity and inclusion within their organizations and in their communities.
While many financial firms have taken a rather passive position in the past around crises, the COVID-19 pandemic forced banks and credit unions to think more broadly about how they could positively impact the community and their employees. From allocating funds for small businesses, to changing loan terms for consumers, to helping employees cope in a remote working environment, many financial institutions moved to the forefront to reassess their corporate social responsibility (CSR) programs.
See: Women In Fintech Will Play A Crucial Part In The Covid-19 Recovery Plan
Beyond banking-related initiatives, some firms also made donations to health facilities and local governments, while others purchased products such as gowns, masks, sanitizers and ventilators to fight the virus. While there were exceptions, the banking community has done well responding to COVID-19.
Then a second crisis hit.
With the financial community beginning to look at “back to work” scenarios in a post-COVID-19 world, a “social pandemic” took over the public consciousness prompted by the death of George Floyd. Banks and credit unions across the U.S. and beyond were confronted with how to respond to the racial injustice faced by the Black community and whether to align with the Black Lives Matter movement.
Without any rule book or standards to follow, financial institutions were called on again to respond in a way that would support the community outside traditional profit-making norms. For an industry wary of conflict, and with a rather spotty record regarding employee and management diversity, a well-crafted press release or a modest donation was not enough.
Corporate Social Responsibility (CSR) Takes Center Stage
There is no debate that banks and credit unions have an important role in the community. Beyond being a place to safely store funds or to get access to credit, financial institutions have a corporate social responsibility to voluntarily contribute to a better society as a whole. This responsibility goes beyond regulated ethics to include moral obligations.
In the past, most organizations positioned their corporate social responsibility in the form of donations to organizations considered beneficial to the communities served. More recently, CSR has also taken the form of internal policies that impact employees and the workplace.
See: Tech has an ageism problem: 3 things to do if you’re over 40 and want to stay relevant
It is during times of crisis that financial institutions are required to not only join the discussion, but be part of the solution. The importance of financial institutions during these times cannot be overstated. Unfortunately, when it comes to sensitive social issues, many banks and credit unions have often relied on rhetoric or fancy press releases instead of concrete commitment or investment.
In an exclusive interview for the Banking Transformed podcast, Mike Jarvis, legendary college basketball coach stated,
“Institutions should set the tone as it relates to opportunities for minorities and people of color and especially women. In the black community, and in most lower socioeconomic communities, the women are the key because they hold the families together.”
Banking Can’t Remain Silent on Social Issues
Over the past couple weeks, people across the globe have taken to the streets once again to protest against racial injustice after the murder of George Floyd. This has occurred against the backdrop of a global health pandemic that is impacting minority neighborhoods more than other areas.
The question becomes, can the banking industry continue to avoid taking a public stance on sensitive issues like Black Lives Matter despite the potential of polarizing key stakeholders? More importantly, is it time for financial institutions to invest in initiatives that can bring about change?
See:
Now may be the best time to rethink previous CSR strategies. For one thing, consumer values are changing. According to Resonate, two major consumer values are shifting … rapidly:
- Tolerance (acceptance of those who are different): Increase of 12.7% in the U.S. adult population in the past year.
- Equality (the belief that everyone should be treated equally): Increase of 10.1% in the past year.
As of June 2, 52.3% of the U.S. population says that tolerance is an important value in their lives and 53.7% believe that equality is an important value. While females were more likely to favor both equality and tolerance by a slight margin, there was virtually no difference across age categories.
In other words, consumers want change and they prefer organizations that support equality, diversity and inclusion. But remember, people are sensitive to tone-deaf or empty statements, and there’s no shortage of blunt criticisms online.
Bank of America was early to commit significant funds for communities most impacted by COVID-19 and racial inequality. They announced a commitment of $1 billion over the next four years to assist in the areas of healthcare, job training, small business growth and housing.
“Organizations need to build relationships with the people within the community and not wait for a crisis to occur. Ask, ‘What can we do?’, ‘Where can we invest?’, ‘How can leverage our people?’ before crazy things happen,” stated Mike Jarvis.
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