As Greece and its creditors reached a deal earlier today, we now need to look at the underlying challenges ahead for Greece in managing the public’s trust in financial services, innovation and regulation. Over the past weeks, against a backdrop of serious questions about the ability of the European Union (EU), European Central Bank’s (ECB), and the Greek government’s ability to manage a path forward, we saw Greek leadership returning to bailout terms that were met by a “No” vote from its people only the week before. In an environment of extreme distrust, the need for regulation, innovation and trust building behaviours are at an all time high.
A Cry for Greater Regulation — But No One to Trust
We know from the 2015 Edelman Trust Barometer for Financial Services that 54 percent of global respondents believe that there is not enough regulation in the financial services sector. In Europe, the outcry for greater regulation is an average of 16 percent above the global demand – ranging from 77 percent (UK) to 68 percent (Spain). In this current European situation, we do not need to look far to find explanations for the toxic environment for trust: EU capital controls that dampened business growth in Greece leading to the total bank shut down; the Greek misrepresentation of the gravity of their debt crisis; and even the U.S. bank that helped to mask Greece’s capital crisis by hiding fiscal positions through derivatives.
The call for more regulation belies a deep desire for trusted regulation and regulatory bodies that can lead the way. Eurozone leaders will now have to clearly demonstrate their ability to not only chart the course, but to act upon triggers as the governing regulatory authority to ensure that terms are met and peaceful transitions occur in the new regulatory regime.
Millennials: Feeling Trapped and Confused
On July 4, Greek millennials shared their fears and frustrations relating on whether or not to accept the bailout terms offered by the ECB. Seventy-one percent of those polled between ages 18-to-24 supported “No,” along with 59 percent of those aged 25-to-34, according to polling firm Public Issue, as reported in the Huffington Post. Now they must accept these terms and look to be part of the solution.
This is a generation hit most hard by the crisis. The younger among these Greek millennials have experienced no other fiscal environment than the dire one in which they are graduating and looking to start careers. The older group see their fledgling businesses put in jeopardy with limited access to capital that would allow their businesses to survive and difficulties attracting talent in the current pension scheme. In many ways, they will be looked to as part of the solution with new thinking and approaches that can be part of trust building. This search for new solutions – perhaps even coming from outside of the institutional financial system – is accelerated by the millennial generation’s faith in innovation to provide alternatives and disrupt the non-functioning status quo.
Looking for Answers in Innovation: Bitcoin
The Trust Barometer tells us that while only 54 percent of respondents trust the financial services sector, 62 percent trust the sector to protect electronic banking information. There is a clear appetite for innovation that creates greater access to capital and the ability to manage it directly.
According to CNN Money, 10 times as many Greeks are registering to trade Bitcoins on the German marketplace Bitcoin.de than usual. Bitcoin trades from Greece have shot up 79 percent from their 10-week average on Bitstamp, the world’s third-largest exchange. When the Edelman Trust Barometer was fielded in October and November of 2014, only 47 percent of respondents said they viewed Bitcoin or other cyber currency as a trusted innovation – and yet today, Greeks are open to new approaches.
People will embrace alternative, disruptive solutions when the alternatives are few and the situation is extreme. But it may be through this very type of experimentation that the viability of Bitcoin and the general ledger find greater credibility and applicability, even beyond Greece. Most global financial services institutions now have their own innovation labs testing the future of the general ledger to create a platform for transactions beyond what the Internet was ever conceived to support. Still, real viability and broad acceptance will come only with time and regulation. Greece may prove an interesting test bed.
Time for Trust Building
The economic situation in Greece bears out what we know about trust in financial services. When distrusted, institutional authorities are questioned, innovative solutions are embraced – even when ill-defined or inadequately prepared to solve the problem, and a lack of thoughtful regulation creates confusion and chaos.
Hopefully, the deal reached will help ensure economic and social stability for Greece – and the Eurozone as a whole. Once trust has vanished, it will take time and demonstrable advances in trust building behaviors to earn it back. No time like the present to get started.
Image by fdecomite.