Changing the Culture of Consumption with Bank Brand Differentiation by the Social Benefits of Lending Practices

Banks could measure their impact on the community and use that data to differentiate them from the competition in relation to depositors. Banks get an increasing amount of their revenue from fees depositors pay. This factor could increase the potential benefit of this sort of brand differentiation.

Perhaps the most significant social impact banks have is through their lending practices. The events of financial crisis of 2008/09 shows the harm that can come from poor loan practices but it is also clear the substantial economic gain that can come from good behavior. Business expansion can be funded, homes can be made more energy efficient or accommodated for occupant disabilities, and educations can be funded.

Loaning behavior could be rated on how well they match the financial ability of borrowers to repay. Loans could also be evaluated by whether they are spent in ways that meet needs and contribute to the common good or are spent on luxury and entertainment that fits more with worldly hedonism.

A successful implementation could change borrower behavior and motivate them to consider the overall benefit of their borrowing and change their approach to obtaining loans from any bank. Perhaps they would seek to expand their business instead of their homes or they would realize they don't need a shiny new car just because the neighbors bought one.

While this type of promotion seems to offer banks that implement it a competitive advantage a third party rating system could also achieve the social benefits. One roadblock to third party ratings would be access to loan data. Information on general categories of loans might be available but these categories likely don't differentiate a home equity loan used for a 3 month around the world trip versus one used to widen doorways and put in a first story bathroom for someone confined to a wheelchair.

Banks with the best records in these measures and the means to obtain and share in aggregate this sort of data could benefit from participation in this sort of third party rating system. With the proper branding of the rating system it could offer prestige and bolster the bank brand all while achieving the social benefits.