For many years, banks have contributed to established charities, sponsored artistic events and institutions and, in many cases, created their own foundations or charities. However, Millennial and Generation Z consumers are less likely than previous generations to view these efforts as being authentic, and they may have a point. These contributions, many of which come with tax benefits and marketing opportunities, are the baseline of what is expected of banks.
But given all the power and money banks have, critics see these efforts as afterthoughts, at best. At worst, they can come off as nothing more than tax savings and feel-good marketing. This perspective is exacerbated by the general view of banks as corrupt and greedy – a view that banks have done shockingly little to address after years of continuous scandals.
But we’re doing good things! Bank executives may feel this perspective is unfair. After all, many banks donate sizeable sums to these causes. What banks need to understand is that consumers have plenty of reasons to be cynical about banks’ supposed interest in social causes. Aside from the issue of corruption and scandal, (which is a pretty big deal), Millennials and Generation Z are also concerned about oil investments, fair lending practices, and disaster capitalism.
The truth is that banks have not given customers many reasons to believe that they are motivated to do more than earn a profit, and this gap is being filled by ethical banks and niche investment companies. As Millennials and Generation Z begin to earn more money and make larger investments, banks will start to see growth flatten and eventually drop as ethical banks like Amalgamated Bank, Triodos, and First Green Bank address consumers’ emotional need to feel like their money is going to good causes.
So what can banks do?
Banks need to think more creatively about how they can impact the communities they serve. While it’s still important for wealthy organizations to support large charities with cash donations, banks have expertise and capabilities that can spur economic stability.
Consider, for example, JP Chase Morgan’s view that rebuilding communities is critical to the growth of the US economy. Instead of donating a lump sum to one cause, the bank invests $250 million dollars a year in initiatives such as “Invested In Detroit“, a program that supports the revitalization of local real estate, the growth of small businesses, and job retraining in the struggling city. According to Peter Scher, the bank’s Head of Corporate Responsibility, the program has created or preserved 1,700 jobs, financed 100 new businesses, and supported about 15,000 people in job training programs so far. Rather than just handing over money, this program addresses economic issues by lending people capital and providing free, top-level advice on how to put that capital to work.
These are the factors that make this kind of social contribution far more impressive than cash donations:
The degree of commitment is significantly higher than a dollar donation.
JPMorgan Chase has invested considerable resources to the project, which is complex and has a timeline that stretches to 2026 and beyond. The bank managed to work around regulations that restrict big banks from lending on “unbankable” investments and leveraged their own data-science team to determine the ideal districts of the city to ignite economic growth. Banks, especially large ones, have resources that can be extraordinarily helpful to charities, foundations, and community projects. Lending time and expertise is just as valuable as donating money, especially if the commitment is one that lasts.
The bank has found a way to do good, doing what they do best.
It feels authentic because it addresses issues that banks are well-positioned to help change. Rather than showing up and serving soup to the homeless, the “Invest in Detroit” project makes perfect sense for a bank to lead. Banks have a lot to offer, so they should be looking at how their core capabilities might naturally fit with a cause.
Bank leaders are becoming community leaders.
JPMorgan Chase CEO Jamie Dimon and Peter Scher are stepping into a role some bankers may find unfamiliar: the role of community leaders. Community leaders don’t just show up and cut a ribbon. They have a deep understanding of the issue they aim to address and are passionately committed to seeing their mission through. This direction and passion is also reflected in the culture of the bank itself. JPMorgan is able to attract and retain the best talent because staff want to be involved in programs like this one.
Bankers have become advocates for social change.
While it might seem bizarre to consider bankers in a role usually reserved for activists, global economics rely on top economic minds to provide guidance. This is especially important when politicians may be pressed to offer short-term, feel-good solutions to capture votes even though these solutions may not be the best choices for economic stability.
Banks are in a strong position to address all kinds of issues – from global warming to poverty, education, food security, and even regulating the sale of arms or other contentious goods. What banks need to understand is that Millennials and Generation Z are not going to be impressed by half-hearted efforts that feel slapped on. They will, however, find deep investments that feel authentically connected to the bank much more interesting.
If banks can be innovative leaders like JPMorgan in Detroit, customers will find more reasons to believe that banks can do good in their communities. In the long run, this will be a big win-win, with banks earning deeper, more meaningful relationships with younger generations, and communities reaping the benefits from the expertise and vision of bankers like Jamie Dimon and Peter Scher.