I have been humbled by the offers of input and support on my journey of writing a book that I have received from financial services professionals across the industry. The topic: “A New Ethos in Banking – Embracing Values and Ethics for a Meaningful Transformation”, is sparking a lot of interest and stimulating many interesting conversations that are helping me to shape my thoughts. Stefaan Roegiers, Head of Distribution at Banque Internationale à Luxembourg (BIL), provided me with additional perspectives on customer centricity in this interview.

The views you read here are his own.

Let me start with the first question: when you read that I'll be writing a book on ethos in banking, you enthusiastically came to me to suggest your involvement as well. I'm very keen to hear what the reason was and what triggered you to share your opinion on the new ethos in banking with us before we dig into the topic itself.

I think that the time is right for a book about ethos in banking. Everywhere around us, everything is evolving faster and faster. Even when people are much more at ease with the digital component of reality it is still difficult to follow for a lot of our customers. They are really looking for a partner in whom they can put their trust, both in the digital and physical world. Banks still have a high trust factor in today’s society, even though the last decade, it was a bit more complicated because of past events and the sometimes coloured press reports. But I do believe that trust is a bank’s strong point and essential in the relation with our customers. We need to ensure that we keep our customers’ trust in the real world and in the digital world. As such banks should aim at being a customers’ trusted partner in the Phygital world. Phygital? Yes, our customers want to be serviced in both the digital and physical reality in a balanced, efficient manner. Banks need to ensure to keep this trust in both realities.

Terminology like digital identity, artificial intelligence, digital channels, remote working, phishing, ChatGPT and more are popping up all around us. Technologies for which a lot of our customers do not always know the full impact on their lives. It's important that we, banks, ensure that they can trust us when we apply all of this new content, ways of working and technologies while we interact with them. But more importantly we need to use the data that we obtain from customers in an ethical manner and harvest this new electricity for a better service in a secured and efficient way.

Ethos in banking is not going to hold back banks, but it's actually going to be a facilitator for banks. As long as we can prove to our customers that we are ethical, that we have the right intent, we will be able to earn their trust, and we will be able to do our jobs. But once we lose that trust, customers will turn to other solutions outside banks and finding these solutions is easy these days.

So being ethical will become a differentiation factor for banks and a key element in the relationship between banks and customers.

The reason why that is so incredibly important today is probably also partly because we lost some of that ethos in the past. Would you agree with that? Do you see banks grab that opportunity to make sure that they can rewrite the ethos, to ensure that they are the trusted partner in the future and that people can also probably understand that they can trust their banks?

Yes, I do believe that trust in banks and the overall financial industry just emerged from a less glorious period in the past couple of decades. Events like the subprime crisis, anti Wall Street movements, etc resulted in a negative vibe around banking and in a loss of trust. The larger public banks became greedy institutions that were only interested in profit. All bankers were being crucified which in hindsight was unfair. Most bankers did not forget the main social role of banking: putting oil in the engine called the real economy. But we cannot dismiss that some bankers got greedy and abused customers by taking advantage of the ignorance of these customers. Therefore, regulators needed to step in to separate the wheat from the chaff resulting in the financial industry becoming one of the most regulated industries in the world. Was this necessary? I believe so as it was the only way to guard the customers’ trust in banks and the financial world.

The public also needs to understand that banks need to make money if they want to stay healthy and continue being the oil in the economy’s engine. Banks balance savings and loans in a safe manner. They enable members of the public to buy a house and to keep the economy running through consumption. Without that, the economy wouldn’t work, and what we call our capitalistic system would be difficult to sustain.

I like to compare the current situation of banks with professional cycling. In the 90s, records were broken on doping. At the start of 2000 the Festina affair erupted, Lance Armstrong or Jan Ullrich finally acknowledged the use of doping and cycling as a sport lost a lot of its supporters. The cycling regulator (UCI) stepped in and bombarded the sport with rules like the "blood passport". This allowed a reborn cycling sport to emerge with new champions. But there is still suspicion. Everyone is cautious when cyclists perform well, afraid that their performance is based on lies. Luckily the rules now allow to remove the cheaters quickly. But most importantly, the beating of records is now based on new scientific research and incorporates new techniques from other disciplines.

The banking peloton went through the same process. Thanks to the regulation the “cheaters” or unethical bankers are being identified much quicker and their impact on the financial system is better contained.

Banks are now in the stage of using new research and techniques from other disciplines such as Artificial Intelligence, NLP and psychology, to better serve the customer. But luckily the regulators, at least in the EU, are following up much closer to avoid fall out and loss of trust from customers.

A bank is not only a product factory. Today a bank is a platform that brings people together. Products will remain important, but they are not the only differentiator. I am a strong believer in everything that has to do with "beyond banking" and the “open finance regulation”. It will help us to become the place to go for customers where they will be able to navigate in the digital environment, share their identity and buy things in a trusted manner.

It reminds me of one of the conversations at The Banking Scene Art Night this year on empathy, where Ghela Boskovich shared that banks may be selling a mortgage, but actually, they are also selling safety, they're selling family, they're selling the house and everything that comes with it. And that's a consumer point of view, but also for governments that are selling a healthy environment. Because if you have mortgages, people may care more about the house; they will ensure that it's a safer environment because they want to stay there for the rest of their lives, etc. And that showed me that banks, of course, their basics are selling products, but that's not the end goal. They are the engine, the oil in the economy, but also the engine in a thriving society, perhaps. And that is something that banks have forgotten somewhere.

That’s a good remark. I really like what is happening now. I see a shift from a focus only on product, to a focus more on customers and customer-centricity. And I think the remark at the Art Night is true. Imagine that there are no banks. People wouldn’t have money to buy a house. They would live in horrible conditions: lack of toilets, running water, electricity, a roof over their heads, and a bed. The system would be under pressure, people would be striking because there wouldn’t be work. The bank really plays an important role in making sure that society is stable. Banks can ensure that there are investment possibilities and investing means allowing people to build a future for them and their families.

In that respect, another very valuable remark I got from another friend a few months back was her idea that banks shape today what society will look like in 10 years. So banks invest in things and those investments define how society, how companies and people grow in the coming years. They also determine through their investments what kind of companies rise and what kind of investments are being supported with financing in that respect. Perhaps sustainability is also the biggest opportunity for the bank industry to show that they're actually doing good for society. How important do you think that the sustainable shift is for banks to prove that they are at the right end of society?

I don't fully agree with this. Banks have an influence on the future, but they do not determine it. Due to their role in society banks cannot afford to take too much risk. They will hardly ever invest/grant loans in/to start-ups, and will always balance the risk of investing or granting loans with the viability of the company/industry. I use the example of OpenAI to illustrate the whole concept. I think we can agree it was not banks who stepped in and enabled that growth. It was the venture capitalists and private equity who stepped in. But I don't think that was the role of banks.

Putting oil in the economic engine of society also means using the assets of our customers in an ethical way and avoiding taking too much risk.

However, I do agree that a bank can play a role in organising an ecosystem where private equity players and companies can easily find money. Banks can operate initiatives like crowdfunding platforms and lending platforms. This gives banks the possibility to offer alternatives to their customers, respecting the required transparency, also indicating to its customers that there is no such thing as a free lunch and that with high return also come higher risks. As long as it is correctly regulated it can work but if there are no rules then I hold my breath. I wonder what the impact of private credit in the coming year on the financial system will be.

Of course, if you look at society in 10 years, that will partly be shaped by start-ups. But the majority of the investments are infrastructural. So, if you look at really shaping society as a whole, of course, the start-ups will heavily influence it. However, the existing companies and guiding these existing companies in a certain direction also happens through financing. That's what we see today with sustainability, for example.

Absolutely true. Sustainability is driving banks to think twice while deciding in what to invest. So it will have an impact on the speed of the transition. But I would not exaggerate the impact of banks on this shift. Regulation and fiscal stimuli are going to play a much bigger impact. Look how fast the electrification of company cars is being rolled out in Belgium.

You have a technological background, of course. So let's proceed with that. To what extent do you think that banks should play a leading role in guiding the way we should deal with and govern new technological developments? Think about quantum computing or AI, responsible AI, that kind of thing? Should banks be the leader and lead other industries in the right direction? Or should we rather be followers, given the risk aversion they have?

I prefer to call myself a business tech person: I'm interested in tech, but I'm not a developer. It's a question that I'm struggling with as well. At this moment, I see a lot of technology around me that is increasingly becoming impactful on society. So, as a bank, we can start proactively pushing the new technologies, but that is not always in the interest of a customer. A big example is AI, which is popping up everywhere. Are we driving it? Are we offering it to our customers without thinking? Or do we also reflect on the risks, and do we look, follow, and then implement when we take all the elements, good and bad, into account?

The Gartner hype cycle that defines the maturity of a technology can be a benchmark. In my opinion, a bank always needs to step in when the maturity slope has passed the hype wave. That is the sweet spot where risks and advantages for customers are moving to an acceptable balance. So, banks should not be the digital or the tech leaders. That's not our role, but we should make sure that when we use new technology, we give our customers access to it in a secure manner.

When starting to write the book, I concluded that perhaps the biggest part biggest chunk of my book should be about the rhetorical triangle and adding pathos and logos as well, because in all these areas, somehow, something went wrong in the banking industry. With logos, we probably got too far, rationalising everything, and we somehow get lost in our own complexity. Again, throughout the 90s and the 00s. There's a pathos, as we can imagine that we may have lost that emotional connection with the client somewhere as well. So there's also quite some work to be done, which is one of the reasons why I set up The Banking Scene Art Night with the theme of augmented empathy.

What would be the key area for you to restore that narrative in banking? Would it still be ethos, making sure that as a bank, you are being trusted if you share something with the whole wide world? Or is it rather making sure that you can get that connection with the client again so they will trust you in the end? Or make sure that you can explain in a simple way what bank is actually about.

I think ethos, pathos and logos are the Holy Trinity of customer centricity in any industry.

So, it is not 1-1-1, no, it is finding the right combination between all three of them. You have to make sure that you offer a product that is correct, and you need to ensure that you are able to use data models that you can explain understandably to your customers. If we cannot clarify matters, then we will lose their trust.

We will never be 100% digital, but customers may only come to us when they consider that we bring added value to them. That means finding the right balance between human, digital or phygital interaction.

So for me the essence is that we need to find the right balance between ethos, pathos and logos.

Stefaan shared more insights at The Banking Scene Conference 2024 Luxembourg, in the panel session “The Building Blocks for a Modern, Customer-Centric Bank Model” - read Andrew's key takeaways from the session here.