In June of this year a non-profit organization based in Chicago, the Center for Financial Services Innovation, published a list of four principles for banks to consider, in order to operate both competitively and ethically. Last Thursday, they opened the principles for public feedback.
The CFSI, whose stated mission is to help transform the banking industry so that it better serves the underbanked, felt that there was a “lack of aspirational guidelines for what constitutes quality in innovation [in financial services].” So in 2010 they began working out what they call Compass Principles: a framework to guide the financial services industry back into Americans’ good graces, by doing business better.
Principles Aim for More Equitable Banking
The four Compass Principles, as worded by CFSI, are:
- Embrace Inclusion: Responsibly Expand Access
- Build Trust: Deliver Clear and Consistent Value
- Promote Success: Link Smart Design with Actionable Guidance
- Create Opportunity: Provide Options for Upward Mobility
Ultimately, the CFSI wants to encourage those with power in the financial services industry to “do their part to create a financial services marketplace that actively contributes to improving peoples’ lives, and delivers sustainable value to all consumers and providers.” By expanding access to the underbanked and never hiding any fees, banks would certainly be taking steps in the right direction towards improving their relationship with Americans, and rebuilding the trust that has been lost.
Innovation Defined Narrowly by Banks
In the last few decades most of the innovations in finance have involved the creation of complex instruments to offset risk and technological innovations that help make things easier for the consumer. From automated stock trading programs that cause market scares to mobile banking apps that allow customers to deposit checks with their iPhone cameras, innovation in banking has been incredible in recent years, but banks have adopted a narrow definition of what innovation means.
While Washington has been creating new laws that force banks into being honest and fair with consumers, and keeping rates down to get them lending again, the CFSI is making the case that banks would be better off doing these things on their own. And now they want you to say your part. Do you have any thoughts on the Compass Principles?
Learn more about them here.