JS: What exactly is the role banks play - what are they for? How do they compete? What does it say about 'us' that they all seem to have the same business model yet all make mega-profits?

AW: The banks are completely and utterly entrenched as owners of financial infrastructure. In their minds nothing moves except via them. They think of themselves as intermediaries bringing everything together in a safe and secure way. Their business model given their self-styled indispensability is to extract the maximum revenue from each of their customers, and given their power and control, all the banks extract more and more with less and less resistance from customers. Competition only works to accelerate this process.

JS: You used the word entrenched. Given that ‘it’s the economy, stupid’ no government could allow entrenched banks a totally free rein so is it fair to characterise them as playing a surrogate, quasi-governmental role and their profits as an extension of the tax system? And if so isn’t denying them profits tantamount to tax dodging?

AW: The banks certainly play an auxiliary role in the tax and benefits systems, and democracy would benefit if this collusion was broken. My suspicion is that the government worry about bank profits undermining their legitimacy in this quasi-governmental role but do not have the courage to tackle the issues.

JS: In another part of the forest where there are giants - I'm thinking of supermarkets - despite all the collusion and fixing that goes on, the cosy arrangements and the similarity in business models, the role of the consumer seems to me to be closer to the forefront of the giants' minds than with banks. Is this the case in your view? What is the role of the consumer as far as banks are concerned? What might a consumer-centred banking service look like and what would be the basis of its profitability?

AW: The saving grace of the supermarkets is that they have to invest their own money in facilities that the customers actually want to visit. They can see stores getting tired and customers voting with their feet on a daily and monthly basis. The banks do not know what a consumer is in this respect, because in the mind of the banks no-one can ever leave the system and they can always buy customers back if they need them. The banks help themselves to their customers’ money and have no incentive to do otherwise.

AW: There is another way. Fair Money are looking at people’s behaviour in trying to manage the money implications of their lives. There are of course tools and services that would make getting on with life easier and worrying about money less draining. In as much as financial marketing people see this, they design honey traps for consumers, but there is a clear basis for charging for services that would actually leave customers better off. Of course the purely financial solution to a life issue is always a mistake and a trap: money needs keeping in its proper place and services should do just that.

JS: Abraham Maslow reckoned that when your only tool is a hammer you tend to treat every problem as if it were a nail. So, in those terms, if money is the banks’ hammer what does it say about the problems they think they’re setting out to solve and the solutions they provide?

AW: Money is a control mechanism that works via dependency, so the answer to every problem is more money and more expert advice from the centre. The real problem with the mis-selling scandals is that it becomes clear that the expert advice is hollow and self-serving. There is a rash of financial literacy projects being invested in by the banks, and they all amount to ways of being prudent with money the banks regard as their own. From a money-centric view of the world there are no measures of success or failure that rest in things that people care about or value.

JS: Given what PK has said about the nature of money, can you explain the part banks play? Likewise, what is the consumers’ role in money?
For trust to exist in any useful way people have to accept that the institutions they are dealing with have their best interests at heart. How is this possible at the moment and what might an alternative, more trust-based, model look like?

AW: Government and large corporates largely think of money as a control mechanism of last resort: they make sure people are dependent on them and if people do not do as they should they can then be denied access to money. The banks take the side of government and the corporates: if you have money in a bank account it will be paid to these people despite your explicit instructions to the contrary. Consumers know this is unfair but so far have bought into the notion that money (for them) is a limited resource largely controlled by others. The proof of this really lies in the size of the black economy that is willing to take the risks of rejecting that mindset.

AW: If consumers are to trust services, the services have to meet their real, stated and developing needs and need to be run by someone who has a service orientation towards them. Fair Money think in the first instance this means people doing most of the work for themselves so that they understand what it is like to control their own assets. For an up and running example, look at Zopa which matches borrowers and lenders with increasingly rich criteria for the match. Actually, because the trend within the banks has been towards automation and the removal of real service, almost all of the basic needs of consumers can be met with a simple software platform. When we ask what it is the banks do, the answer is increasingly empty.

AW: A trust based model of service provision would start with questions about who needs to trust whom about what for the basic mechanisms that allow people to use their assets effectively to be implemented. The answers are surprising.

JS: Can you give me some examples?

AW: For instance it is commonplace to say that people on low incomes face higher costs and increased exposure to penalties for late payments. If this is true then it follows that a cash float that avoids these poverty traps will show a substantial return in cost avoidance. Fair Money’s proposal would be for a group of people to share such a float: they and the lender need to trust each other to keep it available for just that purpose so that the cost avoidance keeps working.

AW: Or, focussing more directly on assets, the services that people already provide to each other may require investment such as a van or a sewing machine. People need to understand the balance between services provided, the wealth generated in the process and how to repay the investment. Trust is needed to commit to the capitalisation of the services.

JS: What of the relationships necessary to support mechanisms offering these degrees of freedom in finding solutions? They must be quite radical. What do they look like, how are they developed? In short, how do you build the trust on which they’re based?

AW: This is the work of the current project. We know that solutions will be generated by the relevant economic units so long as we deal with the barriers to action and so long as people are focused on assets and value and not on money per se. Since we are used to money as a medium of control, part of exercising trust is in recognising where this control is redundant and counter-productive in finding solutions. We are used to micro-economic experiments that work in isolation and we are used to attempts to train people to use existing services that are really not suitable for them. Now we want to see is people can use mainstream mechanisms like electronic money but under their own control, not under the control of the banks.