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The urgency of digital ethics for banks

  • Posted on March 4, 2021
  • Estimated reading time 3 minutes

Remember the Apple credit card launched by Goldman Sachs? The one with algorithms that offered lower credit limits for women than men, even among married couples with shared accounts? Apple co-founder Steve Wozniak complained that it happened to his wife, and the New York Department of Financial Services launched an investigation. And have you read more recent perspectives on bias, showing that if designed and implemented the right way, algorithms actually have the potential to reduce bias in banking?

 

Technology is rapidly changing every aspect of how companies serve customers and engage employees, but often without consideration for important ethical consequences. We regularly rely on software to perform sensitive and even life-altering tasks. But does it deserve our trust?

 

Avanade defines digital ethics as the systematic application of values to digital technology throughout its lifecycle to make sure it’s respectful of individuals, socially responsible, environmentally conscious, and well-governed. This is much broader than just eliminating bias in algorithms. In fact, even managing risk and compliance – something banks understand well – is only part of the story. Digital ethics is about going a step further to do the right thing, which in turn works to build customer and employee trust.

 

The world’s most ethical companies have outperformed the large-cap sector over five years by 14.4% and over three years by 10.5%. But more importantly, ethical behavior is increasingly important for building a brand that people want to engage, which is crucial for attracting and retaining both customers and employees.

 

How are banks doing?

Late last year we fielded a global survey on digital ethics across 12 sectors, including banking, as part of our ongoing work in this emerging area. Here are some of the highlights for banks:

  • Among all industries, banks were the most likely (70%) to say they are increasing their digital ethics budget over the next 12 months.
  • The IT organization is the most likely to own digital ethics (31% in banks, 34% across all sectors). After that, banks assign responsibility to the board of directors (21%)
  • Banks are most likely to say that risk mitigation goals (77%) and customer pressures (75%) are a significant factor or key driver for investing in digital ethics.
  • How are banks addressing digital ethics?
    • Banks were the most likely sector to say ‘We assign individuals specific responsibility related to digital ethics.’ (45%)
    • They were also most likely to say ‘We have people whose primary job is digital ethics’ (37%)
    • They were second only to health care to say ‘We hire ethical people and expect them to make good decisions’ (48%)
  • Banks are most likely to measure the value of digital ethics based on increased customer satisfaction (47%), followed by increased customer loyalty (45%).

 

Of course, there is still plenty of room for improvement:

  • Bank respondents were most likely to say their firms ‘could be doing better’ or ‘are seeing negative consequences’ in the following areas: How inclusive their technology is, how their tech affects people’s physical and mental health, pollution and other environmental impacts of their tech, how their firm sets the tone for digital ethics, and the explainability of technology outcomes.
  • When asked what barriers are keeping their firms from making improvements in digital ethics, bank respondents were most likely to mention: Lack of expertise among employees (31%); lack of interest from management/execs (28%); lack of legal/regulatory mandates (28%); lack of interest from employees (27%); and lack of interest from customers (27%).

 

What next?

The good news is that there are specific ways to overcome these barriers and improve your approach to digital ethics, and organizations that do are achieving tangible business benefits. Here are four ways you can get started today:

 

Digital ethics are only going to get more complicated and more important as we continue to innovate, so it’s essential to frame your efforts as soon as possible for future success. And if you’re looking for a more in-depth discussion or help on any of these topics, you can contact us directly or post a comment below.

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