Money. It’s a symbolic token of exchange, and one with which we’re all familiar. The classical orthodoxy of economics states that money is neutral, and this belief has been a traditional cornerstone of the finance industry. But just how valid is it today?
Not very, according to Bruce Davis: “A view of money based solely on economics is a somewhat limited one,” he says. “We’re trying to bridge what people do in the real world i.e. how they perceive money and how they use it." Bruce continues:
Money only has a value when it does something, and that’s the very essence of why people want to do things with their money like putting it into different individual pots.
In our practical lives, of course, money appears to be ‘doing’ all the time. We spend it, we talk about it, we earn it, we save it and we think about it every day. It carries a significant amount of meaning in society, and understandably so.
As a commercial anthropologist, Bruce has spent a considerable amount of time experiencing first-hand how people perceive and value money by immersing himself in household environments in a process called ‘deep hanging-out’. “People usually relate to money as something social,” he explains. “It reflects the relationships that they have in their lives; it reflects the way that they see the world.”
By way of example, Bruce references a classic contradiction: “We tend to treat money earned from different sources differently. If we earn money through work we spend it on necessities. If we win money on a lottery then we’re much more likely not to save it but to spend it.” There’s no economic reason for that, Bruce explains; it simply comes down to money having different ‘meanings’.
What money means
The world of money is permeated by such meanings. Sixty years ago, Bruce suggests, money was mainly ‘experienced’ through cash. Because of the fact that very few people had bank accounts, it existed as a transient object; it came and it went. “The dominant moral in the 1950s was therefore about saving up for things,” he says. “That’s where the idea of the ‘piggy bank’ came from.”
Move forward in time to the 1970s and discontinuities appear, in particular the establishment of the mortgage market. “Previous to that decade, if you were working class you probably never owed anyone money unless you were in dire straits,” says Bruce.
“The idea of buying something as an investment through a mortgage was unheard of.” Yet mortgages rapidly became the mainstay, introducing a new demographic to debt.
In the 1990s, though, credit became cheap and easy to acquire, and debt was no longer seen as debt, but rather as cash. “As such, people completely changed their behavior in the way they both borrowed and spent such money,” says Bruce.
At different points in our development as society, then, Bruce believes that money has taken on different meanings as people have used it differently. “The ‘Universal Bank’ – the dominant model of the last few decades – has been largely unable to differentiate according to those meanings,” he says. “It tends to treat money the same no matter where it comes from, and the reality is that customers don’t.”
So where are we now in 2016? Bruce suggests a point of hybrid. The financial crisis, he believes, shook our perception of money to a point that we went in one of two directions: “Either we decided that, a bit like climate change, the concept of money was too intimidating, and so we kept it within banks but were obsessed with safety.
Or we said, ‘I’m going to do my own DIY investing – I’m going to go direct into investing.
That's really what's driving the growth of the peer-to-peer market, this sense of wanting control over where you money goes and how it’s used, and a transparency on the other side.
The democratisation of finance
The trend highlighted here is known as the ‘democratisation’ of finance, and it’s seeing major developments at the hands of alternative finance champions such as Bruce. Last year Zopa lent its billionth dollar, demonstrating the attraction of peer-to-peer lending in its perceived transparency. Abundance Investment meanwhile – a renewable energy crowdfunding platform – offers customers the chance to make investment decisions on ethical grounds.
From extending trust to likeminded others as a peer-to-peer lender, then, to embarking upon investment in solar energy or wind farms such as in the case of Abundance Investment, Bruce says we have the power to meaningfully affect ourselves – and the people around us – and to make the markets we deserve.
But as worthy as these possibilities are, the democratisation of finance doesn’t just mean being able to change society by disrupting the loans market or championing green investment; it means, more broadly, affording everyone access to choice, control and flexibility when it comes to their money.
From first-time investors looking to test entirely new waters through to seasoned crowdfunders who are constantly active in the market, the democratisation of finance is allowing more and more people to make their money really ‘do something’.
“Customers are becoming increasingly more demanding as to how they can interact with their money, and rightly so; they are protecting and building for their future,” says Mark Taylor of Equiniti Financial Services. “Being a registrar, pension administrator and provider of share plans and investment services, as well as looking after customers’ assets, we are in a unique position at Equiniti. We have a broad view of how customers want to use their money. And we are acutely aware that customers are driving the need for ongoing innovation.”
The role of fintech
Technology has been massively instrumental in developing the entire trend of democratisation. The UK alone is currently home to hundreds of platforms and products that are serving people in the fold. Many more exist in Europe, and each one is different. “I don’t think we’ve seen such diversity since the 19th century when institutions and services grew out of local communities,” says Bruce. “We’re seeing it all over again, but this time it’s happening on the Internet.”
The main driver of fintech, Bruce believes, is control. “If it ticks the right boxes and lets people feel more in control then they will use it. People can be sceptical about some technologies, but when they can actually see direct benefits in terms of control that can be very powerful.”
And at Equiniti, this is being fully realised. “Technology is playing an increasingly important part in driving the democratisation of finance,” says Mark. “We recognise that we have a very wide range of customers to consider, from those completely new to owning shares or a pension right through to investment hobbyists, and we are continually building our understanding of these customers so that we can serve them with information and products that are appropriate.”
Equiniti’s core technology services millions of customers on a daily basis. Mark continues, “We see our role providing customers with technology-led solutions that provide them with choice and control. Our multimedia solutions include web portals, award-winning apps and customer service centres, as well as on- and offline communications, and are there to ensure customers can choose the method by which they want to engage, whenever they wish to do so.”
For example, the Shareview portal is Equiniti’s shop window for its self-directed investment services. Retail customers using it are largely new to investing. “The key for us,” says Mark, “is to take those customers and turn them into active investors.
By that I mean getting them connected with more information, starting to look at ways to diversify their risk, taking more note of what’s going on around them, and most importantly feeling that they are connected and that their money is actually working for them." He adds:
We continually want to ensure that all of our customers have the ability to access new ways of investing and different forms of asset classes. That’s very important to us; customers being connected and having control over their finance is what it’s all about.
Complex lives, complex money
On the one hand, the rise in the democratisation of finance can be attributed to a desire to return to a simpler economic past, a past in which people had more immediate control over their money and what happened to it. Yet on the other hand, the whole concept of money itself is more complex than ever before, specifically as a result of our increasingly complex lives and the fluidity of our contexts. “The diversity of financial models and systems we’re now seeing is a function of the financial system beginning to reflect the complexity of money in people’s everyday lives,” says Bruce.
And they’re not getting any less complex. Mark says there’ll be greater commoditisation in the marketplace in the future as customers start to take more accountability for their own financial futures. Money may be driven, as Bruce believes, by social and moral beliefs in some contexts, but it’s important to remember that many people’s usage of it still depends on rational, economic considerations such as future wellbeing or personal saving.
Mark says: "At Equiniti, we’re working in the background around the automation of wealth modes and services. Many financial institutions are struggling to sustain the traditional one-stop shop model of providing wealth products with customers’ changing expectations, so we have an important role to play in terms of making everything we can available to our customers for their futures. We’re not aiming to reinvent money, but we can encourage and support people wishing to take their own money into their own hands."