GoodBank™(IO) - Launching a High-Transparency Banking Movement
GoodBank jumpstarts a high-transparency banking movement, first in the U.S., then globally. SMEs are agile at creating stories about their environmental and social impacts. SMEs need a bank that seeks, underwrites and finances their valued societal impacts. Through semantic web, GIS and impact modeling, GoodBank can improve its and its customers' impacts, thus creating a safe and sound bank.
About You
About You
First Name
Bruce
Last Name
Cahan
Website
Your Organization
Urban Logic, Inc.
Country
United States, CA, Santa Clara County
About Your Organization
Organization Name
Urban Logic, Inc.
Organization Website
Organization Phone
(212) 399-9700
Organization Address
P.O. Box 1281, Palo Alto CA 94302-1281
Organization Country
United States, CA, Santa Clara County
Organization Type
Non-profit/NGO/Citizen-sector Organization
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Your solution
Name Your solution
GoodBank™(IO) - Launching a High-Transparency Banking Movement
Describe Your Solution
GoodBank jumpstarts a high-transparency banking movement, first in the U.S., then globally. SMEs are agile at creating stories about their environmental and social impacts. SMEs need a bank that seeks, underwrites and finances their valued societal impacts. Through semantic web, GIS and impact modeling, GoodBank can improve its and its customers' impacts, thus creating a safe and sound bank.
Country your work focuses on
United States, CA, San Francisco County
If multiple countries, please list them here. If your solution targets an entire region, please select it below
San Francisco Bay Area/Silicon Valley Region
Region(s) your solution focuses on:
Latin America and the Caribbean, North America.
Range of turnover in your target firms, in USD
Less than $1 Million, $1-5 Million, $6-10 Million, $11-20 Million, $21-50 Million.
Average turnover in USD of your target firm
5,000,000
Number of employees in your target firms
5-24, 25-49, 50-74, 75-99.
Average number of employees of your target firm
75
Specify the size, average and range of expected loans or investments in each target firm
GoodBank will make loans of a traditional commercial bank size to qualified SMEs whose business model and performance results in measurable improvements to regional sustainability and resiliency using our underwriting model for sustainable resiliency®.
What stage is your solution in?
Idea phase
Innovation
What makes your innovative solution unique?
Banks today are stuck in the Industrial Age, replicating in branch, online and in mobile apps the same one-way mirror user experience of Charles Dickens' era. For all they know about our homes, offices, income, spending, saving and gifting, banks share little of that knowledge with their customers.
What if, instead, a bank were to focus on being the most transparent it could be? The transparency would attract loyalty. The bank would be safer because when it makes a mistake, transparency would find and fix it faster, at less cost. As a high-transparency bank, GoodBank would be unique in a field of banks that specialize in low-transparency, camouflage and non-disclosure disclosures.
To provide its high-transparency, GoodBank would incubate social financial literacy tools. Some tools already designed include:
1. The Means Meter® as a mobile phone app to provide instant feedback and incentives for applying the customers' ethical norms into practice while they shop,
2. Sustainable Resiliency(® as an "all risk" mitigation measure of the Bank's and its customers' impacts on regional quality of life
3. A Three-Layered Map where the world is displayed as needs, the capacities to fill those needs and the money available from government, foundation and corporate sources to fund the need or deliver the capacity to meet it
4. Procurement Visualization so that public bids/tenders for goods and services can be readily identified and sent to pre-qualified SMEs customers of GoodBank.
The tools provide marketing, brand, impacts and other services so when SMEs tell their stories well, GoodBank can improve their banking experience, their relationship pricing and community user experience.
As an incubator, GoodBank will license to other community banks, credit unions and financial intermediaries the social financial literacy tools that our customers and the Bank find of greatest value. The license royalties will grow GoodBank as a bank born of the Information Age.
How does your proposed innovation leverage public intervention in catalyzing private SME finance?
Commercial banks in the United States are licensed, literally, to print money, through the fractional reserve banking system. Peer-to-peer lenders, mobile payment services and other micro-finance services cannot replicate the leverage of commercial banks.
Design and development work for GoodBank has centered on how to benefit SMEs through a transparent and accountable monitoring system that achieves the safety and soundness that bank regulators and the public expect of a trustworthy bank.
Thus, "high-transparency banking" at GoodBank describes three levels of knowing how the bank operates:
1. Is my money serving my ethical goals for environmental and social impacts on the region's quality of life [sustainable resiliency®]?
2. What are GoodBank's own institutional impacts on sustainable resiliency?
3. As a bank, how is GoodBank operating in a safe and sound manner that I can compare with how other banks operate?
SMEs are the target of SBIC, CDFI and other government loan and investment programs. However, what GoodBank is doing is returning to the ultimate public intervention for private SME finance: a federally-insured depository institution as SME lender and ally.
SMEs' success and growth often relies on the social capital it develops with its banker(s). Over the past several years, banks have merged, failed and consolidated to the point where SME entrepreneurs have great risk in the continuity of their bank working capital, inventory and acquisition lines of credit and other services. The banker who understood their business model on Friday, may be gone on Monday, and the larger bank acquiring their local bank may jettison existing credit criteria and policies. By creating a bank that uses transparency to achieve safety and soundness, and that underwrites its portfolio to improve sustainable resiliency, GoodBank's continuity and customer loyalty will stand out.
SMEs want to build boutique "story" brands, so as to create compelling customer linkages. Tom's Shoes is a great example of such strategy. Since GoodBank has underwriting that quantifies such stories as far as their environmental and social impactfulness, the same underwriting will serve SME marketing and branding to garner a higher margin average sale per SME customer, thus making the SME a stronger credit risk for GoodBank.
A last dimension of GoodBank's high transparency impacts deals with the potential for using the public non-intervention policy towards faith-based groups and indigenous peoples in a novel informative way. The sacred texts, oral traditions and teachings of the world's major religions and indigenous cultures have a wealth of wisdom, encoded in spiritual characters and stories, that relate to money, credit, collateral, fair trade, caring for the poor, restoring the ill and other civil society values. Agnostically, GoodBank offers these religions and cultures the opportunity to objectify whether they are using their own money and their members are using their own funds, in ways that are congruent with their self-defined values. To the extent that a church, synagogue or mosque represents a local living economy and wealth management setting, GoodBank could innovate information feedback services that compare preaching with sustainable investment in SMEs and other facets of local sustainability. This aspect of GoodBank's services would create a dispassionate and healthy interfaith and inter-cultural dashboard for comparing and contrasting the actual and ideal roles of such traditional beliefs in modern daily financial life.
What barriers does your proposed solution address?
Asymmetry of information, Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, Lack of competition / incentives for financial intermediaries to serve SMEs, Specific barriers to fragile and weak states.
If you checked any of these barriers, describe how your solution addresses them
GoodBank's sustainable resiliency® underwriting is designed to elicit and reward information that makes SMEs unique, human stories, and quantifies their impacts as a form of collateral and creditworthiness that is of special interest to the depositor base and consumer borrowers for the Bank.
By providing banking incentives for quantifying their social impacts, GoodBank raises the skill level and capacity of SMEs to cross-sell impactful products and services to their customers, making the SMEs stronger commercial competitors, and focusing their management on delivering higher-impact products, services and employee satisfaction.
GoodBank's services will generate cash-back rewards for its customers that can only be spent/invested in hybrid, social and nonprofit enterprises. This investment capital will supplement the Bank's own lending capacity to recipient entrepreneurs.
GoodBank's Three Layered Map of the World and procurement visualization tools will highlight SMEs' capacities to meet regional quality of life needs, and will point them to financing, grants and government procurement activities (RFPs and tenders) that would be ripe for bidding and winning new contracts and earning higher revenues.
GoodBank needs SMEs as an essential part of its own portfolio strategy. Assume an SME agrees to provide health or nutrition services and agrees to provide an hour a week counseling/coaching to another member of the GoodBank community so they stay fit and healthy. That SME's gift of an hour (using Ashoka Fellow Edgar Cahn's Time Banking) (1) insulates GoodBank's customer from illness, (2) reduces the risk of wages lost that would impact the beneficiary customer's ability to repay GoodBank's loans and (3) grows savings and wealth that GoodBank can play a role in managing. GoodBank can be a true community partner with the counselor/coach donor of time through cash-back rewards and other incentives as part of their relationship as a member of community living better through the Bank.
Impact
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact
The core underwriting and social financial literacy tools for GoodBank aim to quantify, track and reward environmental and social impacts. This will occur at three levels: individual, institutional and affinity group.
- Individuals who declare and stick to a spending and saving pattern consistent with their self-determined ethical goals will receive information/feedback rewards, as well as cash-back rewards and bank loyalty pricing concessions.
- Institutionally, GoodBank will routinely publish the volume of transactions handled that relate to specific categories of environmental and social concerns, and will report the Bank's own impacts
- For affinity groups, GoodBank will provide sustainable resiliency® daily transaction impact statistics, incentives, public forums and social media tools to gather customers' attention and cash-back rewards to focus on ethical goals, and to raise competing voices and literacy about such concerns.
Once operating successfully as a commercial bank, GoodBank will organize an investment bank to accelerate pre-disaster mitigation investments and post-disaster sustainable response and rebuilding. Sustainable resiliency® grew out of Urban Logic's experience as an emergency responder after September 11, 2001, in New York City. As fully implemented, sustainable resiliency will be more than an underwriting platform for consumer and business loans. It will create the path to underwrite bonds and investments measured for their impacts to reduce the vulnerability pre- and post-disaster of fragile regional and neighborhood areas. As the proceeds of such a bond issue are spent on projects and programs that measurably strengthen the sustainability and resiliency of the vulnerable people or place, the bonds will have a feature that reduces interest or other fees, or even forgives a portion of the principal amount of the bond. These are corporate and municipal finance incentives that provide a powerful, sustaining logic to fund and actively manage the success of projects and programs that grow sustainable resiliency pre-disaster, and take out-of-the-box thinking for rebuilding post-disaster. The depositors and wealth management customers of GoodBank and its affiliates will provide capital for that ultimate implementation of GoodBank as disaster mitigation and response capital source.
How many firms do you expect to reach?
Thousands, directly and indirectly.
Directly, GoodBank will serve business, NGO, foundation and faith-based SMEs who want and need a bank partner to see, reward and amplify their environmental and social impacts.
Indirectly, licensing our social financial literacy tools to other banks, and our competitors' imitations of GoodBank's high-transparency user experience will grow SMEs globally.
What is the volume of private SME finance you aim to catalyze?
Tens of millions of dollars, directly and indirectly.
Directly, GoodBank, as a commercial bank, will leverage its capital base many times to make loans to SMEs. We will offer customers a program to invest cash-back rewards into SMEs that improve regional quality of life.
Indirectly, with GoodBank's procurement and impacts visualization tools, SMEs will attract more revenue and investor capital.
What time frame will be required to reach these targets?
GoodBank plans to start quickly by acquiring and repurposing an existing commercial bank, licensed in the U.S. The strategy accelerates market positioning and depositor base development. Using a combination of physical branch and online services, we would expect to achieve these impacts within 5 years.
Does your solution seek to have an impact on public policy?
Yes
What would prevent your solution from being a success?
GoodBank needs to raise capital, attract and retain experienced, passionate management and staff, and assemble the social financial literacy technologies that will make its customers' user experience unique.
The competitive landscape for banks is becoming simpler: Small banks are disappearing, consolidating and merging into bigger banks. With the loss of small banks, much of the human touch of banks is disappearing, and customers are feeling treated anonymously as herded cattle, instead of as individuals, with families and SME businesses. Bankers who once worked in small to medium sized banks want to work at a bank that cherishes community impacts and values. GoodBank has identified a number of highly-qualified bankers, bank technologists and staff who could be hired once funding is secured.
Bank technology for enhancing the user's experience is at a rudimentary level of evolution, and offers little of the high-transparency experience designed into GoodBank. Technology engineers and co-developers have been attracted to GoodBank as a sandbox within which to create advanced social financial literacy tools, put them into safely limited use, and optimize them for wide-scale deployment and licensure.
Equity funding for GoodBank remains the biggest hurdle, and that will ease as angel investors, foundations, governments and SMEs themselves seek a more enlightened, safer and accountable banking experience than the consolidating banking industry and its megabanks offer.
This Entry is about (Issues)
Describe the social impact of your innovation. Please include both numbers and stories as evidence of this impact
GoodBank has yet to launch, thus its impacts are mostly in the future.
As a high-transparency bank, portions of GoodBank's business plan and approach are available for public review and comment, appearing in the San Francisco Federal Reserve Bank's Community Development Investment Review http://www.frbsf.org/publications/community/review/vol5_issue2/cahan.pdf and at our project wiki website (http://www.goodbank.info/w).
Already, based on such materials, invitations to speak to SME entrepreneurs and business students at Bainbridge Graduate Institute in Seattle, Bioneers in Marin County, California Interfaith Power & Light, Future of Money & Tech Summit in San Francisco, the CleanTech Summit in San Jose, South American Business Forum in Buenos Aires, Stanford Entrepreneurs in Latin America 2009 and 2010 intensive training workshops at Stanford University and Wharton School of Management in Philadelphia. These public forums have opened many minds to contribute to GoodBank's design and to the broad definition of high-transparency. GoodBank's project wiki goodbank.info has over 500 registered users and contributors. GoodBank founder's Tech Talk on conscious consumerism at Google has over 6,500 views on YouTube http://www.youtube.com/watch?v=niGJCNN1FbA. Such groundswell of support is early indication of GoodBank's ultimate impacts and widespread adoption.
Aspects of GoodBank's high-transparency banking draw on longstanding interfaith and indigenous beliefs about scoailly-responsible commerce, community finance and sustainable economics. Through GoodBank's Means Meter® , Three Layered Map and other social financial literacy tools, the heritage values of immigrants to the United States and the cultural roots for American residents can be preserved, explored and deepened, by reattaching the meaning of faith-based and indigenous ethical precepts and teachings to how GoodBank's customer aims the impacts of choosing, living and using their spending, saving, investing and giving (i.e., their financial life). By respecting and sharing what we learn about faith-based and indigenous traditions, GoodBank agnostically will promote interfaith and intercultural authenticity, understanding, curiosity and mutual respect across its customer base, within its business community and globally.
Sustainability
List all the funding sources that are required for the sustainability of this solution
Series A Funding - $2.5 million is needed to bring the management and design teams together, to bid on a target bank for acquisition and to build prototypes of the Means Meter® and sustainable resiliency® from existing designs
Series B Funding - $25 million is needed to acquire the existing bank and rebrand/repurpose it as GoodBank
Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?
GoodBank is not dependent on public/government finance. As a bank, GoodBank would participate in suitable public finance programs for SMEs and other customer segments that add to the Bank's capacity to grow regional quality of life (sustainable resiliency®).
GoodBank will grow from earning three types of revenues. First, the normal spread between lending and borrowing rates of interest. Second, fees for special services, but not the "gotcha" fees that mega-banks seem to specialize in assessing. Third, the royalties earned from licensing our social financial literacy technologies to other community banks, credit unions and financial intermediaries.
Additional equity for GoodBank will come from sale of its or its subsidiaries' stock.
A sizable portion of GoodBank's net profits, after reasonable reserves and additions to regulatory capital, will fund its Foundation, so as to advance the social equity and financial literacy mission of the Bank across its cultural and regional diversity.
Demonstrate how your proposed solution will survive a potential loss of its largest private funding source
The context for losing a private funding source for GoodBank needs to deal with the real world news that investors face today in considering investing in banks or other companies. This context is full of bad news and good news cycles, each favoring GoodBank as an attractive investment.
First the Bad News Cycles: The National Venture Capital Association reports that average investor returns for the past 5 years have been less than 5% per annum. The U.S. equity markets have been highly volatile and their returns have been negative, with the S&P U.S. 500 showing a negative 1.8% 10 year return as of August 31, 2010. While these market returns have fallen, the value of regional banks has fallen more, such that faith in the durability of traditional (Industrial Age) regional banks has eroded, opportunistically growing a bank only to make it acquirable. Simultaneously, icons of community banking in the U.S. have been hit with cease and desist orders and been shuttered by bank regulators, as speculation on residential and commercial real estate loans proved fatal when the real estate bubble burst, causing the current global recession.
Now the Good News Cycles: Every recession weakens and weeds out weak banks. So what banks will be left standing after the current recession? While the mega-banks will survive, and benefit from taxpayer-funding mergers, will banks that serve the needs of investors and owners of SMEs be available to lend for their growth? By every measure, today is a fantastic time to start or acquire an existing bank: Valuations are low, collateral valuations are likewise low, making underwriting safer. GoodBank's focus on "safety and soundness" has strengthened our commitment to use high-transparency banking will create portfolios of loans that have environmental and social impacts delivered through SMEs that themselves are stronger by attracting and retaining their customers' loyalty. For mission consistency, foundations, socially-responsible corporations, NGOs and faith-based organizations will need to bank at GoodBank, where high-transparency authenticates and rewards their mission focus, which assures stakeholder, media relations and blogger endorsement and continued support.
Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation
Socially-responsible corporations with venture capital arms and employee-consensus directed investment groups would be wonderful partners to extend GoodBank's mission of high-transparency banking and social financial literacy. Likewise, social venture investors, foundations and pension funds pursuing mission-related and program-related investments would be great partners, since their experiments with impacts-accountable grant-making and venture philanthropy have synergies in the parallel context of GoodBank's model for high-transparency bank operations.
GoodBank's design draws on a wide range of talent who drive its innovations, including user experience designers, social MBAs and social entrepreneurs. Bankers and technologists who have worked in mega- and community banks have been drawn to GoodBank as a sandbox for describing and implementing their ideas for renewing the bank industry and banking experience.
Are there non-financial issues that could threaten the sustainability of your proposed solution?
The loss of the chief organizer and visionary of GoodBank, Bruce Cahan, is a risk, that Bruce has deliberately reduced by cultivating a team that sees, shares and enlarges his vision.
The technology risk for GoodBank is reducing daily as new APIs (Application Programming Interfaces) and interoperable data streams make gauging impact of SMEs and others more readily sharable and scored.
The risk of management misfeasance for GoodBank is reduced by operating as a high-transparency bank where anyone - an employee, customer, community member - encouraged to see clearly and comment on how the Bank operates. Recruiting for GoodBank will emphasize finding and cultivating ethical bankers, whereby diversity of perspective and insights for serving customer needs is prized.
Corporate governance will include pattern review of bank transactions in the context of industrywide public data from bank regulators and variables that determine safety and soundness (CAMELS) ratings. This financial management tool will be a dashboard that every GoodBank employee can access to proactively sustain GoodBank as a durable safe and sound bank, able to withstand macroeconomic shocks better than peer banks and megabanks.
Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically
GoodBank will start in the San Francisco Bay Area/Silicon Valley, and will scale conservatively, once bank operations and technology can support expansion. Keeping a high-touch personal banker relationship and user experience will be key. Thus, some online technologies will be used to assure in person access to the customer's relationship manager at the GoodBank branch. The Bank's technology subsidiary will incubate and license social financial literacy tools to other banks, credit unions and financial intermediaries, so as to widen the scale of GoodBank's efforts to grow SME participation and funding, that in turn grows measurable sustainable resiliency®. Once its commercial bank operations operate consistently, GoodBank will organize an investment bank affiliate to apply sustainable resiliency® underwriting and impacts transparency methodology to originate and manage funds of investments for institutional and private wealth clients. This investment banking affiliate will permit GoodBank to create and monitor impacts incentives for corporate and government clients that actively manage their portfolios of sustainable resiliency® projects and investments. GoodBank will organize a GoodBank Foundation to lay the groundwork for research, development and accessibility of social financial literacy across diverse cultures and regional settings. The Foundation will be funded through founders' stock and funds donated by the Bank (5% of net profits) and Bank customers (through their cash-back rewards). The Foundation will work with SMEs and NGOs to innovate solutions to lifecycle issues confronting Bank customers and their families and communities, including death, illness, divorce, job loss, career counseling and disaster mitigation and response.
 | 89 weeks agoBruce Cahan updated this Competition Entry. |
| 90 weeks agoBruce Cahan submitted this idea. |
