Beneficial State Foundation Perspectives

Our thoughts on changing the banking system for good and building the new economy

How value-based banks are driving good

Elizabeth Cameron is VP of Client Engagement at Free Range, a purpose-driven innovation and storytelling consultancy.

Investment in the financial technology (fintech) industry has been booming in recent years, increasing tenfold between 2010 and 2015. Encouragingly, many investors — including Accion Venture LabOmidyar Networks, and CFSI and JP Morgan’s Financial Solutions Lab — have focused these efforts on fintech solutions that provide increased access to financial services for underserved populations. From Artoo’s online micro and small business lending platform to Digit’s convenient approach to encouraging increased saving, exciting progress is being made.

It’s important to recognize, however, that increased access to financial services is only one part of the financial sector’s ability to do good. As we expand our focus on improving economic opportunity, we’re seeing a number of our partners push beyond access towards a deeper commitment to values based banking. For these organizations, and others in the values-based banking movement, access is just the beginning.

So how do value-based banks take steps beyond providing increased access to have an even greater impact on those they serve? We’ve outlined four key methods below.

1. Building for the Long-Term

First, value-based banks look beyond short-term gains to ensure long-term economic resiliency for their institution and for the customers and communities they serve. This viewpoint shapes not only their strategic decision-making, but also how they work with their customers to support their long-term financial goals. A prime example is Beneficial State Bank’s focus on providing loans for renewable energy projects. While traditional investors might shy away from renewable energy projects given the large up front expenditure and the uncertainty that goes with new technologies, Beneficial State Bank’s long-term view of both the potential profit and impact of such projects has led them to invest significantly in the industry. By building for the long-term, value-based banks are able to reduce the negative impact of outside disruption, capitalize on opportunities a short-term outlook would likely overlook, and empower customers to take full advantage of the services available to them in order to meet their individual goals.

2. Working Locally

Value-based banks are also committed to supporting the unique needs of the communities in which they work. For example, Missoula Federal Credit Union, a member of the values-based banking movement and Montana’s largest CDFI, has pioneered a Buzz Points program that encourages local spending by rewarding customers who shop at local businesses. By focusing locally, value-based banks are able to craft unique solutions to meet local needs — like student loans for those attending a local, non-traditional technical school — and to deliberately work to strengthen the communities in which they work.

3. Focusing on the Real Economy

In addition, value-based banks focus on supporting the real economy, meaning that they prioritize providing loans to businesses producing goods and services over trading in financial markets. In fact, the Global Alliance for Banking on Values estimates that in 2015, value-based banks had over 75% of their balance sheets dedicated to lending, nearly double that of Global Systemically Important Financial Institutions like Bank of America and Wells Fargo. This focus on lending is evidence of value-based banks’ prioritization of people and communities over short-term profit.

4. Aligning Lending Portfolio with Values

Lastly, and perhaps most importantly, value-based banks align their lending portfolio with their triple bottom line values of people, planet and prosperity. They do so not only by avoiding investments at odds with these values, but also by actively seeking out opportunities to support those doing the most good. As Beneficial State Bank puts it: “we look for ways to help non-profit organizations and businesses that typically find conventional financing out-of-reach, such as specialty agriculture, renewable energy, green building and low-income housing.” Their decision to support the Mass brothers as they sought to increase revenues for local dairy farmers while simultaneously providing renewable energy to the area is a prime example.

With the expansion of the values-based banking movement, fintech’s continued focus on reaching underserved populations, and the increased cooperation between banks and fintech, the ability for financial institutions to shape the world for the better is growing. But it will take individuals supporting these organizations to realize this potential. Consider joining a value-based bank near you or advocating for your existing financial institution to take a values-based approach. By meeting the growing supply of value-based financial services with the unexpected demand of consumers who want more, we can accelerate the transition to better banking.

*Originally published on This blog post reflects the author’s personal views and opinions, and does not represent the views and opinions of Beneficial State Bank and/or Beneficial State Foundation.