What Makes A Bank Ethical? Mondo's Beta Ethical Thoughts

True but it was the ONLY high street bank trying to bring to light a problem that almost every other company was turning a blind eye too.

What about Sterling and Universal Credit? I am a bit behind the times…

They’ve taken on a contract to verify claimants ID/bank accounts for the DWP. By putting small amounts into their accounts (think PayPal verification). I saw this as them now being involved in Universal Credit and part of it, basically saying they’re fine with it. So I closed my account.

@nickbw Co-op Bank? Yes, their MD turned out to be a coke head. But the bank as a whole didn’t break it’s ethical policy at any time (investments, lending, community involvement, etc) - while it kind of dented them a bit it’s unfair to say they’re no longer ethical.

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Fact is for those of us who are not particularly politically minded but, because of our age, if nothing else, we benefit from a long-term perspective when we consider a ‘given issue’ Banks being Ethical is a Red Herring. It merely serves to illustrate how hamstrung contemporary thinking is. I have several children (they are not children actually, they are factually adult: but in terms of their experience and their perspective and attitude - from my point of view - and also because, when one is a parent (and I found myself, unexpectedly, in a position (at least practically and emotionally) where I was a single parent caring for two and worrying about their emotional and psychological development, The issue of banking is simply an ‘excuse’ for making a protest. Contemporary society in the Uk is in a new place. Nothing can be discussed in a reasonable or moderate atmosphere any more. That is why, even though I have a Monzo and a Starling account, I most of the time view the respective discussions via TOR without logging in. The one huge downside to contemporary society is the (seemingly overwhelming need to conform to whatever the contemporary social values are perceived to be) that is not me, never has been me and I reject it just as I reject both logging in via social networks or allowing the (usually USA) Global companies access to my metadata and treating it as their own. At the end of the day, not withstanding how much Monzo is a (disparate) community it is only a bank; not a religion (one might be forgiven for believing it is) and, in common with all Fintech is has yet to demonstrate it is the future, just as it has yet to prove both reliabitly, dependability and probity. If you are still reading this, please bear with me for a few moments more, I am opposed to Uber. Many of you will, no doubt be instantly anti-me. My reasoning is as follows, ‘they’ are making hailing rides cheaper (why women in general think this renders them physically safer, God knows -I don’t) but the business plan is clearly to achieve monopoly in a given territory. What happens next? What all monopolistic models predict, they destroy competition and distort the market. In the same way a bank is just a bank, that it what it should be; not a means to change or save the world. I like and applaude intelligent innovation, the moment I feel my personal data/metadata is being mistreated (to hell with ethical banking) I am out of here.

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I don’t think of it as making a protest - I genuinely don’t want my money going to companies that support or use it for unethical aims (unethical is kind of subjective - but generally, arms, tobacco, gambling, oil, stuff that’s bad for the environment, tax evasion/avoidance, human rights, damaging government policies).

This isn’t a protest, it’s not something I go on about or declare to people - unless it comes up in general discussion, it’s a specific discussion about ethics or I’m asking the question.

I’m not perfect and don’t claim to be (just bought a charger off Amazon Prime Now because it was 2 hour delivery on a Sunday and I’m lazy - and they’re massive bastards in a lot of ways), but I try.

There is a direct link to what I do, how much I work, and how much I earn. I feel very very strongly about where my money goes/is kept.

I hate seeing people being called out as hypocrites on this or the ‘nothing I do will make a difference so sod it’ attitude. Sometimes it’s just low hanging easy ethical fruit people take.

But everyone who takes the various bits, of even low hanging fruit, does add up and does make a difference. If everyone thought it was pointles then nothing would have ever changed and not very many big corporations would give even the tiniest of lip-service to any ethical matter.

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It’s good to see that other customers have the same questions as me about Monzo’s ethics. Like others on this thread, I’m only willing to consider using Monzo as my primary bank account if I have ongoing reassurance about this aspect of the service.

Unlike traditional/established banks, Monzo is highly likely to be currently operating at a substantial loss (perhaps losing as much as £50 per customer per year) and so ongoing development is investor-funded.

Along with customers who have participated in crowdfunding, there are major venture capital shareholders, especially following the recent huge investment round.

I have faith that customer shareholders will continue steering Monzo in the right ethical direction, but what the VC investors want is likely to have a large impact on ethics (VCs hardly have the greatest reputation for putting ethics first).

This thread and this thread talk about Monzo’s likely revenue streams, with the most viable route to profitability being overdraft fees, depending on how well the (so far unproven) plans for affiliate partnerships develop (earning a share of “interchange” merchant card fees may also be a viable route to profitability at high volumes, though it’s unclear whether this is a current revenue stream or not).

Nothing above seems incompatible with a broadly ethical banking proposition (charging overdraft fees to individuals is way better than profiting from investment banking in the arms trade).

I hope that the ethics and values page can be updated soon because it is currently very short and lacking in detail. I would love it if it could cover the following:

  • No oil and gas investments (including fracking) because of climate change and the need to keep fossil fuels in the ground
  • No arms trade investment (because war is bad)
  • Something about payday lending given the potential for a Wonga-style scandal

Given how much of a voice the customer community has at Monzo, and how refreshing this is compared to other banks, I’m quite close to switching to Monzo as my primary account. But I do need some reassurance about the above points, especially because I am suspicious of the motives of the VCs and the potential for their desire for a financial return to trump ethical commitments.

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The prepaid scheme loses around £50 per active customer per year. Simply by moving to current accounts powered by our own technology, we plan to significantly reduce this amount.

Monzo – Annual report 2017

Correct, we were losing around that much late last year. There is a lot of focus internally this year on making Monzo sustainable in a responsible way. Upgrading to current accounts gets us a lot of the way there along with foreign ATM usage fees. The next major step is reducing costs of top ups by debit card by implementing some of the most commonly requested features and encouraging people to either switch to us or use bank transfers to move money in to Monzo (these cost us effectively nothing compared with debit card top ups). :slightly_smiling_face:

As for the ethics and values page, I think that’s one for @tristan!

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It’s unlikely in the short term we’ll have the capacity to set in place rules like this — it takes quite a bit of work on our end. However, the whole point of that page is that you can see exactly what we are doing and so you can see we aren’t and aren’t planning to invest in any of those things you mention. Obviously medium/long term it’d be great to have a very detailed policy!

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Thanks for the quick reply!

Correct, we were losing around that much late last year. There is a lot of focus internally this year on making Monzo sustainable in a responsible way.

How transparent is Monzo willing to be in terms of its own finances in this respect? Can you tell us what your target is for this number this year? For a potential crowdfunding investor it would be interesting to know so that we can work out how reliant you are likely to be on VCs in future.

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Do you have an idea of when you’ll be able to set the policy? Are we talking 6 months or more than that? Also, is the reason purely timing or one of internal governance? If the intention is to simply clarify that you aren’t intending to invest in oil and gas (for example) then it doesn’t seem like it would be big amount of work to get such a statement approved internally and then update the page (particularly if you can see clear demand from customers for such a statement).

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Good. Concentrate on running the bank rather than getting side tracked wasting time on playing politics. Surely a concise statement of principles is sufficient and we don’t need Monzo to start listing individual industries, countries, companies, etc one by one!

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It does say they do not invest at the moment. All the money sits at the Bank of England except what they’re lending out as overdrafts.
If and when Monzo get into investments i expect an update on how they go about this

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Agree with much of the sentiment here. I am frankly very surprised that Monzo is still claiming to put social objectives first (from website: “We want to make the world a better place and change people’s lives”), when they don’t have an ethical policy in place. In my opinion, a bank that claims this should be guided by their ethical policy, not retro-fit it. I am not questioning Monzo’s ethical priorities, however I don’t believe they are being guided by this. It appears they are being guided by growth and the drive for sustainability - not by the overarching mission to improve people’s lives

In my opinion, if Monzo is serious about their social and environmental objectives (in addition to their financial objectives) then they should formalise a triple bottom-line into their governance documents. And, they 100% need a water-tight ethical policy asap. I signed up to Monzo because of its social mission, and I am questioning this constantly because I am yet to see any evidence of it.

Also, in the spirit of transparency, I think Monzo should reveal it’s pay structure and details of its investors and their options schemes. Without this, they cannot claim to be fully transparent. Companies which are certified B-Corporations, for example, cannot have a pay structure where the CEO earns more than 20x the lowest paid employee. I believe in this company structure, yet I have no idea if this is the case at Monzo.

Furthermore, if Monzo wants to ‘improve people’s lives’, why not do some community finance programmes? Coaching, workshops, budgeting sessions for people struggling with universal tax credits etc. That’s improving lives.

Happy to provide more input if needed.

Thanks for being so open to feedback!

Jack

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I think if you were to spend just a couple of hours at Monzo HQ, you would change your mind on this pretty fast. I don’t think I’ve ever met a bunch of people who care so much about their customers and making a material positive impact on people’s lives. It really shows.

That being said, Monzo has to be a profitable and sustainable business in order to be able to fulfil their ambitions. They can’t make the world a better place or change people’s lives if the business is being liquidated. So, I’m hoping Monzo’s ethics and values can shine through a bit more when the company is more established. This could include a more explicit statement of ethics as alluded to above.

If you haven’t seen them already, you may be interested to read some company filings.

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Thanks Kieran, I don’t disagree that Monzo’s team are fully behind their social mission, and that’s great to see transparent records of their filings, I hadn’t seen those.

I also agree with you that sustainability is paramount in order to further the social mission, but my general concern is around Monzo’s marketing as an ethical bank, when it doesn’t have an ethical policy in place. When I think of an ethical bank, I think Unity Trust Bank, Charity Bank, Tridos Bank etc, which invest directly in projects that benefit people and the planet. These players are very much driven by their ethical investment strategy. Check out this sector report by Ethical Consumer for some more info on the ethical banking sector: http://www.ethicalconsumer.org/researchhub/ukethicalmarket.aspx

Jack

Hello all,

First post on the forum, so I hope what I have to say is relevant to this discussion.

As someone mentioned previously, ethicalconsumer.org publish rankings for financial services, and in their recent update just a few weeks ago they included “App-based banks”.

http://www.ethicalconsumer.org/buyersguides/money/app-basedbanks.aspx

You can’t see their rankings unless you subscribe, but interestingly they rated all the app-based banks they reviewed as relatively ethical choices because they don’t have the legacy lending issues of the older banks.

They also rated Monzo slightly higher than The Co-operative Bank and slightly lower than Nationwide, and Monzo is their “Best Buy May/June 2018” amongst the app-based banks. They cite Monzo’s “less risky” investors and “allowing customers to help shape its future” as factors making it their best buy.

This is a good starting point for Monzo, and I hope they can maintain this as they develop. I know there are different ideas of what “ethical” means, but all the same its interesting to see these comparisons so that we can make informed decisions about our choice of financial provider.

Dave

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Thanks for sharing this - very interesting!

It looks like an initial comparison between four app only “banks” (my inverted commas as some aren’t actually banks): Monzo, Starling, Revolut and Atom.

I’m interested in your comments about comparison to other financial institutions (The Co-operative Bank / Nationwide). Can you share anything more about this (not copy/paste though cos copyright n stuff :neutral_face:) - particularly are these three the top of chart? Where do the other digital challengers figure?

Also, do you know if the Co-operative Bank has tumbled in the ratings since they stopped being, well, a cooperative, being now owned by hedge funds?

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What most people don’t know is that The Co-operative Bank was NEVER a Co-op in the normal accepted use of the word. However it’s then parent company the Co op group was and still is.

To answer your questions you have to understand how ethicalconsumer.org do their rankings. Recognising that different people have different priorities for ethics, they provide an interactive way of weighting your interests (Environment, People, Animals, Politics and Product Sustainability) and therefore adjusting the overall scores. The default option is with all these weighted equally.

Assuming that scores across categories can be compared fairly (I think they can); Triodos is a the top of the list. Of the ones I previously mentioned Nationwide is next, then Monzo/Revolut/Tandem/Starling (equal score) and The Co-operative Bank is lower down. To be clear, there are other banks and building societies between and equal to the scores of Nationwide and The Co-operative Bank, but I don’t want to upset ethicalconsumer.org by quoting their table more fully as their service is subscription based (free trial available though). All of these fall in the top fifth of the table.

As already mentioned The Co-operative Bank was never a co-operative/mutual really, and was often marked down due to activities of The Co-operative Group. It was felt that political campaigning was a negative feature (regardless of political persuasion), and the animal farming of the Co-op was previously cited too. So it is clear activities of a parent group do figure in the scores.

However, since the Bank has been owned by hedge funds, the score has gone up somewhat (even though it is marked down because of their use of tax havens). The Bank’s ethical policy has been strengthened under their ownership. There is a comment in the best buys that The Co-operative Bank is the best of the group after Triodos (which is the recommended best buy), and a further comment that app banks are worth looking at.

I would say that Monzo is in a special position at the moment given its relationship with its customers and investors and it will be interesting to see how the business develops. I’m not pushing Monzo here particularly, I am a fan of mutuals and particularly credit unions (my local one is about to introduce a “proper” debit card linked to accounts) and I’ve only had my Monzo account 8 days. However, it does strike me that Monzo could do a lot of social good, and I hope it will.

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Thanks so much for this. Absolutely fascinating - especially the bit about the Co-operative Bank’s scores going up after the ownership changed!

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