By Kerim Derhalli, CEO and Founder of invstr
Seven years after the onset of the financial crisis not much has changed structurally in the financial system. Regulators, central banks, politicians, shareholders and the public at large remain dissatisfied with the performance of the banks. Heavy fines and attempts to regulate compensation have done little to assuage the resentment felt against the sector. This is a cause for concern. Historically, the efficient recycling of savings into investment has been fundamental to economic growth. More than ever, we need to encourage people to invest rather than spend to reduce record levels of debt. And for that to happen, we need to reinvent the financial system in a way that is both fair and sustainable.
What should a new system look like? I believe that we are entering a ‘post-capitalist’ era, in which society’s expectations of the private sector will differ materially from the past. In my opinion, every enterprise will need a demonstrable social purpose at its core. Not the after-thought of a corporate social responsibility program, but a defining purpose that generates profit as a by-product of the social utility provided. Society’s expectations of the banking system are clear: banks should be efficient deposit takers and lenders, serving savers and helping companies to grow and create employment. Banks need to rediscover their true social purpose as financial intermediaries if they are ever to regain the trust of the public. The adventure into risk taking and securities trading, which almost destroyed modern capitalism, must be consigned to the history books.
Secondly, we need to re-connect society with finance. Developments in financial markets affect all of us in our daily lives. And yet, few people have any understanding of the markets. For too long the banking system has created barriers to entry: jargon, mathematics, elitism and high information costs have prevented people from accessing the financial world. Going forward, everyone must have a stake in the financial system. Only by re-connecting society with finance, can we unleash our economic potential in a sustainable way.
Thirdly, we need to embrace technology to unleash a revolution in retail financial services. In many other industries, technology has been used to create a better consumer experience. We all now expect to be able to access information, to read peer reviews before we buy a product or a service, to compare different offerings, to compare prices for the same product and to do all of these things on our portable devices. This social media revolution has largely passed the financial world by.
We need to deliver the same social experience for the financial consumer. We need to democratise access to financial information and give everyone a stake in the markets. Wherever possible, financial information should be freely available. Moreover, people need to have easy access to analysis that can help them to make informed decisions. It is an irony that the financial regulation which was designed to protect individuals from receiving bad advice, has resulted in banks being unwilling to provide that advice at all to the consumer for fear of recrimination when markets turn sour and investors lose money. We need to enable people to share ideas and learn from each other, and to collaborate through peer-to- peer mechanisms. Taking finance out of the exclusive domain of the banks and bringing it closer to the consumer will help to raise financial awareness and reduce systemic risk. We call this making finance social. It is past time we got the financial markets working for all of us again.
About invstr:
invstr is democratising access to financial information with a new social network for finance, where people can play, learn and share – making finance fun, fair and collaborative. invstr uses gamification to generate forward looking community predictions for financial instruments. Members gain access to crowd-sourced predictions when they play the game. invstr also aggregates high quality financial content and real-time data to improve access to information on the markets for both consumers and experienced investors. The business was founded by Kerim Derhalli in late 2012. Kerim spent thirty years in the City, most recently as Global Head of Equity Trading at Deutsche Bank. The company is based in London and Istanbul.
