Banking isn’t exactly short of negative press – with the 2008 recession, news of shady investments and excessive pay, people are seeming more and more disillusioned with mainstream banking. But are there alternatives? Are they safe? That’s what I set out to answer.
I had never considered how banks use money until recently, when I found out about an ‘ethical bank’. My first question was ‘if there are ethical banks, what are the rest doing that is so unethical’?
Here’s a little insight into my research, which will hopefully help you make more informed choices about what you want your money to be doing in the future!
All of this information is from talking to people and doing research online. I’m not a professional but have put in references and links for you in case you want to do further reading.
What makes most banks unethical?
Banks are a business like any other. Their primary goal is to make money while providing a service to users. In general, the unethical part of most banks becomes visible when you look at where they invest their money, and there have been a few court cases in the past with banks that have been caught being complicit in illegal activities, such as funding drug cartels (and more recently too). Most of the business they carry out however is totally legal, it just might not be in line with your personal values.
Ethical Consumer magazine released a report in 2018, stating that the UK’s biggest 5 banks ( Barclays, HSBC, Lloyds, RBS and Santander) are hindering our efforts to tackle climate change by profiting from some of the world’s most harmful industries, such as fossil fuels.
As if that weren’t bad enough, most mainstream banks also use money from consumers to fund various other industries, such as nuclear weapons, tobacco (full report on why this does harmful than good) and fracking.
Worryingly, there is little incentive for banks to disclose where their money is going, and as such it has been incredibly hard for the average consumer to even begin to figure out which banks might be morally bankrupt, and which might actually be able to benefit the world we live in. Thankfully, Ethical Consumer has done the reports, and these are the banks that came out on top:
Triodos is one of the most transparent banks out there, meaning that every investment decision they make can be seen by everyone. It publishes details of every organisation it lends to, and is known for specialising in sustainable energy, organic farming and culture, helping local communities.
“We want people to really think about what their bank is doing with their money. Money doesn’t have to be invested in the arms trade, fossil fuels and tobacco – it can be used to do good things that help build the society we want to live in,” says the bank.
Triodos has 715,000 customers across Europe, lending £6.5bn to projects making a positive impact on the world. The only downside is that it costs £3 per month for a current account. Huw Davies, head of retail banking says that there is ‘no such thing as free banking’, and that someone always pays, e.g. via hidden penalty charges and hidden fees. Triodos is about as transparent as it gets.
In 2011 the bank suffered huge losses and was sold off to private shareholders, leaving its ethical policies in doubt. However, as of 2018, the bank proved that it was able to continue running with ethical investments only, and is watched closely by a customer union, to ensure no dodgy investments get made. It seems to be making a comeback, so could still be a good option.
If you’re a millennial, there’s a chance you might recognise Monzo’s eye catching ‘hot coral’ banking cards. Launched in 2015, Monzo has been breaking crowdfunding records since, and is a ‘fintech unicorn‘ – one of the rare British startups to be already valued at over £1bn.
Similar to Triodos and Co-op, Monzo is all about transparency. Anyone can read minutes from Monzo meetings, and they have just hired a diversity inclusion leader – 26% of Monzo’s staff identify as non-straight, and 45% of the staff are female.
Whilst no doubt better than the majority of banks, Monzo appears to focus less of sustainability and ethics than the above two options. However, if you’re looking for an intuitive, user-friendly option that has all the functionality to help you save, use money abroad and soon even pay off your mortgage (once you’ve saved enough to get one), Monzo could be for you.
This Swedish bank has been operating in the UK since 1982, with over 200 independent branches. As each branch is decentralised, customers belong to a local branch rather than an umbrella bank, meaning that each customer is known by the local bank, leading to better and more ethical lending decisions. Unlike many banks, staff at Handelsbanken are not pushed to sell dubious packages to customers that they don’t want or need – this has led to the highest rating among personal and business bank customers for satisfaction and loyalty.
Charity Bank is an ethical bank that ‘uses savers money to lend to charities and social enterprises’. They have lent over £278m to these causes since 2002, funding community projects, the arts, education and training, the environment and more.
Similar to Triodos, they are incredibly transparent about their lending, and you can read up about how each penny is spent here. Not only this, but they also provide practical support and free seminars for those working in the charity sector, helping them achieve their goals and help others. If you’re interested in helping out local communities, this could be the bank for you.
Many people don’t want to change banks because of the faff of having to change account number, sort code and PIN, and for good reason. When we get a phone we get to keep the number for life – why is it not the same for banks? Unfortunately, despite the increasing number of ethical options out there, bank switching appears to have remained relatively stable, perhaps because of the complications involved in switching.
I cannot recommend more choosing to switch banks, even if only for some of your money, especially if you are with one of the main banks, e.g. HSBC, Barclays, Nationwide etc.
We choose to spend our money the best we can day to day, and yet fail to realise that the rest of our money, no matter how small, is still being spent on investments that likely don’t align with our values.
Is it not more important that the bulk of our money goes towards projects that have positive impacts? Perhaps this is over simplifying, but I cannot help but think that it is really the least we can do, if we are able.
Mainstream banking is pretty bad for the world. I’ve switched to Triodos Bank and you should too.
Read more here.
I would love to hear your thoughts on this! I know it’s a huuuuuge topic and I’ve tried to cover what I can in here. Essentially I wanted to share that there are options, so we don’t have to all be stuck in the abusive relationship that is mainstream banking. Please do comment and share, and come and find me on Instagram to let me know what you think!