Learning From The UK "De-Banking" Furore – A Modern Bank's Perspective

Tom Burroughes Group Editor 15 September 2023

Learning From The UK

A new financial services firm that calls itself a "Coutts-Revolut" hybrid reflects on the recent "de-banking" saga in the UK and why some of the attitudes and behaviours on display should be avoided if UK banking and the wider economy is to flourish.

At a time when the banking and wider financial sector, particularly in the UK, has been rocked by the â€śde-banking” saga and the plight of politically exposed persons, it begs questions of what new entrants to the financial sector think about it. 

A relatively new kid on the block in financial services is Greengage, a UK-based digital merchant banking shop founded in 2018, now with 35 staff. Its chief executive, Sean Kiernan, says his firm has even been referred to as a “Coutts-Revolut” hybrid. Greengage provides a platform of relationship-based e-money account services to small- and medium-sized enterprises, high net worth individuals, and digital asset firms – with every client having the personal service of a dedicated relationship manager. Alongside account services, Greengage provides clients access to a B2B lending platform offering traditional and digital sources of money. 

When this publication cogitated about the Coutts/Nigel Farage case, and other incidents, it also noted the phenomenon of “challenger banks” and “neo-banks” to wonder how they fit into this picture, and what changes they might bring. 

Kiernan takes the view that it matters that banking doesn’t get ever more influenced into only catering to clients who lead supposedly unblemished lives according to certain political, cultural, social, or sexual agendas. 

“Short of those who have broken laws of the land, banks that choose to refuse business with people on various non-financial grounds is not good for the wider economy,” he told WealthBriefing. “Banking clients are wondering if they might lose access to banking altogether, even when acting lawfully, responsibly, and while creditworthy. It makes poor financial sense, damages shareholders, etc.”

With the UK also now outside the European Union’s Single Market, the “City” cannot afford to get a bad reputation for treating clients poorly. After all, the new Consumer Duty regime introduced by the Financial Conduct Authority is supposed to tighten up standards. 

Kiernan thinks London could be affected unless matters are addressed carefully. 

“De-banking, `de-lending’ and other practices also, unless done in ways that are strictly explained and controlled, are going to fuel more controversy that could damage London’s standing internationally as a financial centre, and hurt the wider economy,” he said. “Other than difficulties in finding bank accounts for certain sectors (e.g. gambling, cannabis, and crypto to name a few) which seems to be a broader issue for firms in these sectors across advanced Western economies, it seems de-banking for a client’s views is a relatively recent phenomenon in the UK.”

Understandably, with a new model of financial services firm such as Greengage, Kiernan hopes, is able to show a way forward – but this is not automatic.

How new business models might help
“Traditional and even challenger banks alike are not only de-banking clients, and in some cases limiting client access to their own money, but they’ve largely taken out personal contact: with several firms clients are now a number and a function in an algorithm,” he said. “Technology is revolutionising banking, and has much further to go, but is not a silver bullet on its own to addressing issues around de-banking as it is by definition a tick box (the infamous `computer says no’). This mechanisation of client services is also being pursued by larger traditional firms which results in a tick-box approach to their client relationships as well,” he said. 

As Kiernan argues that it is easier for new banking/financial services institutions to deal with some onboarding issues than established firms with layers of management and incumbent costs. This is to a certain extent driven by the “higher touch” approach that smaller firms can apply when evaluating new clients on their own merits.

Nothing can replace personal service and empowering staff with agency to deliver solutions to meet client needs.

Kiernan agreed with the contention that if the industry wants to attract smart, enterprising young adults, and those from other walks of life, into banking and finance, the culture must be genuinely inclusive and interesting. An innovative workplace tends not to sit well in an atmosphere of fear of offending often-shifting definitions of what is the correct way to speak and act.

Finally, Kiernan argues that the kind of de-banking that has happened creates concerns about the loss of banking in a world where people’s use of cash is falling and where being cut off from the “plumbing” of a financial system can hit their ability to earn a living. This is also a question of basic justice and fairness. For banks to repair reputations still affected by the 2008 crash and bailouts, de-banking hinders this process.

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