What Do Catalytic Converters Have to Do With Transparent Banks?

Innovations are funny things. Often the greater their capacity for doing good, the more suspicions they arouse.

Certainly, there are wonderful innovations we embrace as soon as they appear—marvels like the iPod, for example. But these are generally improvements on existing technology, not radical steps forward.

If you're old enough to remember the innovation of the personal computer, do you remember your initial reaction to it? More likely than not, it was fear coupled with dismissal. It took many intrepid souls many years to show us, bit by bit, how these devices could actually help us in our day to day. Today, we can't live without them.

The fresh air of successful innovation

EPALisa Jackson of the U.S. Environmental Protection Agency (EPA) gave a speech to the National Press Club this year in which she described the fear and trepidation that often accompanied mandates for environmental innovation.

For example, 30 years ago, the EPA used the Clean Air Act to phase in unleaded gas and catalytic converters. Many major automakers opposed the measures. The Chamber of Commerce claimed "entire industries might collapse." The mandate was positioned as a choice between economic well-being or environment.

In fact, the auto industry did everything but suffer. Innovation thrived, as an entire industry was created around pollution control. The Engelhard Corporation, which led the commercial production of the catalytic converter, was purchased in 2006 for $5 billion.

What's more, the initial cost of the mandate has paid itself back 10 to 13 times to society. By 1985, the reductions of lead in our environment had estimated health benefits of $17 billion per year.

So what does this have to do banking transparency?

Transparency—the new catalytic converter?

Today, we are witnessing the results of a massive bank, mortgage, real estate and credit meltdown. Much of the blame has been leveled at an industry that is virtually inscrutable.

At the same time, we are seeing the rise of transparency as a new reality in doing business. Social media and social / environmental consciousness has created a new generation of consumer—one that demands to be involved in the decision-making process of companies they support.

Confidence in banks is low. Employee morale is low. And, as we see from JPMorgan's halting 56,000 foreclosures, tragic mistakes continue to be made with little outside oversight.

Yet, roadblocks continue to be thrown up in the way of greater banking transparency. Regulations and 'status quo' thinking seem to be conspiring against improvement.

Creating safer, sounder banks through greater transparency seems to parallel the mandate to create a safer environment through catalytic converters. If history repeats, transparency could bring new vitality and confidence to our financial system.

Innovation takeaways

The current resistance to transparency is an opportunity for innovators. Lowering the fear factor around this sort of revolutionary innovation can be offset by developing an innovation portfolio, comprised of:

* Evolutionary innovations—modifications to existing products to keep current brands fresh and profitable.

* Fast-fail innovations—ongoing moves to transparency that are put to the market to test. If they fail, they are improved and retested. Market learning, and better innovations, result.

* Visionary innovations—visions of transparency for the future. Technically impossible at present, they will nonetheless provide a north star to steer by.

HOW CAN WE BUILD SAFER, SOUNDER, MORE SUSTAINABLE FINANCIAL INSTITUTIONS?
Join Bruce Cahan, Ashoka Fellow, founder of the GoodBank model, Sheila Oviedo, Analyst with Jantzi Sustainalytics and Marc Stoiber, VP of Green Innovation at Maddock Douglas to explore the answer to this question and more. CLICK HERE to register for the Webinar.

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