If you want to live ethically, start with your bank account
Moving your money is an opportunity to make the banking system as a whole better, writes Co-operatives UK's Ed Mayo.
Do you have a bank account? If so, congratulations. You have a vote in what kind of economy the UK has moving forward.
This week is National Ethical Investment Week, an event which over recent years has become a great way to celebrate the mix of green and ethical funds open to those with the money to invest.
A bank account isn't usually considered as a classic investment product. But if we are going to improve the ethics of the world of finance, it is a good place to start.
To begin with, any money you have in your account is invested by your bank. It is not an investment that you see, but for every pound on deposit, your bank can lend a multiple of this in the wider economy. Taken together, as UK consumers, our bank accounts have money in credit at the end of a typical day of around £100bn.
A number of current accounts do now pay direct interest for the money you hold, even if it is still only a small proportion of conventional accounts that pay more than 0.5 per cent interest.
But there is another reason to consider where you hold your bank account, because it is the building block for the wider financial services sector. We can't complain that banks are less than fully ethical if we don't ourselves consider ethics when we choose who to bank with.
Current accounts are a cash cow for the big banks. One way or another, they make £152 out of every bank account they have. This is more than they earn from savings and credit cards put together.
Current accounts are also something that most people have a choice over. There are 64 million bank accounts in the UK. So, where only around 15% of people are investors in the sense of putting money into stocks, shares and pooled funds, 90 per cent of us have a bank account and can have a say through our money.
The Move Your Money campaign has emerged this year as a cause célèbre. Launched in February 2012, the campaign calls on people to switch their account, current or savings, away from shareholder banks that helped to cause the economic crisis, and towards co-operative and mutual banks, such as credit unions and building societies.
Because they are not owned by external shareholders, they can put the interests of their customers first. Worldwide, customer-owned banks have been far safer than shareholder and state-owned banks over the last five years. No less importantly, your money is reinvested locally rather than going into the global carousel of bonuses and high finance. If you switch banks to an ethical bank, your money is being used for good – so it is not just fair to you but fair to others.
Since the campaign launched, around half a million people have switched accounts. The UK had long been the country with the lowest switching rate in Europe. More than the actions of any regulator, the Move Your Money campaign, in tune with the times, has changed that. And it is still early days.
Madeleine is one I know of many that have switched to the Co-operative Bank in recent months. "The online banking is different, but it all meets my needs and the switching was pretty simple." The switching process is far smoother than people may fear. You ask your new bank to set it in train and within 10 days of the application being approved, all your standing orders and arrangements should be transferred and up and running.
Sandra has switched to Nationwide, one of fifty building societies still operating in the UK. She found that "banks are only interested if you have a lot of money and, as pensioners we don’t have a lot. But Nationwide was different. I know they want your money, I’m not saying they don’t, but they have more time for you, to explain the ins and outs."
Credit unions, which are financial co-operatives for savings and loans, are also among the providers that have benefited from switching as the larger credit unions now offer current accounts or debit cards that give access to ATM networks.
Ethical Investment should not just be about feeling good or having something to talk about at a dinner party but changing the way the financial system works. The call to move your money is a genuine and positive opportunity to make the banking system as a whole better.
Make it the one thing that you do this week.
Ed Mayo is Secretary General of Co-operatives UK