There is so much excitement in the challenger banking space in the UK, that sometimes its hard to stay on top of the activity. At Daily Fintech, our mission is to ensure we bring the latest and the greatest Fintech analysis across the globe. A few weeks ago, we did a post on clearbank that showcased how challenger banks were focusing on niches in banking that are still unexplored. In the last few days, we have had a new entrant in the challenger bank space. Triodos, who have been into sustainable banking in Europe for over three decades now, have launched their digital current account for consumers, and that comes with some interesting features.
Banking in its ancient form was based on trust and social values. Some of the first organisations that provided banking services existed in temples (as early as 2000 BC), and followed strict principles to do business. Charging interest to customers were banned by Christianity, Judaism and Islam. But somehow over generations, greed took over , the social purpose of the industry was forgotten and as a result the industry lost the credibility. The recession in 2008 was probably the lowest point for the industry’s trust bank with consumers.
I find it unacceptable when a bank that got greedy, went down during the 2008 crisis and had to be bailed out by tax payer’s money, has its sustainability initiative showing up on the first page of google search for “Sustainable banking”. Thats just how rigged the system we have today is. However, we have Triodos who have been around for 37 years, quietly focusing on sustainable banking. Triodos was founded in Netherlands in 1980 and launched their UK operations in 1996. In 2016 they financed about 70 deals totalling $567 Million in clean energy projects and topped the table against some really strong competitors.
Triodos have sustainability at the heart of how they operate as a financial services institution. Their bonuses are not based on targets and they follow a simple remuneration system. All the Bank’s shares are held in a special Trust, which is responsible for ensuring that decisions about financial profits are not made at the expense of social and environmental goals. This gives them the independence to execute their strategy without pressure from shareholders.
They are still a small bank with only about €13 Billion under management. However their lending volumes in the UK went up by 43.5% last year to £90 Million. They have seen increased interest from customers on new products and hence are set to launch their digital current account product.
Customers will be able to access their Triodos current account using an app or online. There wouldn’t be a high street branch. The current account costs £3 a month and would offer a pre-arranged overdraft of upto £2000. Customers will receive a debit card which is made out of PLA, which is natural plastic and is recyclable. This highly innovative card material has been put through a rigorous testing process to confirm its suitability for use in a regularly handled debit card, with the result that the card itself is now believed to have the strongest environmental credentials of any debit card in the UK market.
Triodos don’t offer unarranged overdraft to their customers. According to the Competition and Markets Authority (CMA), this is a key problem area, where banks exploit customers. Banks make £1.2 Billion a year through unarranged overdraft charges, and CMA are trying to clamp down on this.
As per surveys conducted, 63% of savers in the UK would like their savings to have a positive social impact, and 75% of consumers like to know what their monies are being used for. Triodos differentiate themselves big time from high street banks in the way they use customer deposits. They use deposits only to finance socially impactful and responsible projects. Typically the social responsibility of banks end in NOT lending to arms, mining, gambling or tobacco industries. But Triodos have strict guidelines to not lend to any business that have more than 5% of their balance sheet coming from initiatives without social impact.
Triodos Track Record
To bring transparency to their banking operations, they even publish where customers’ monies are going.
“In designing this new current account, from the plastic used to the fees and charges structure, we have consistently adhered to Triodos’ principles of transparency, sustainability and fairness.”
– Huw Davies, Head of Retail Banking at Triodos bank.
Agreed, this is not the coolest current account we have seen from challenger banks. However, as per a survey conducted by Morgan Stanley’s Institute for Sustainable Investing, 84% of Millenials were interested in Sustainable Financial Services. This is seen as a huge opportunity for smart long term investments. Perhaps, Sustainability is the new Sexy.