Digital innovation has allowed financial institutions to cater more transparently to clients. However, improper use of capital from the financial sector can lead to an unsustainable economic system.

The world has yet to fully recover from last decade’s global financial crisis. The collapse of Lehman Brothers in 2008, and the subsequent worldwide economic turmoil, fractured what little trust society had left in the financial industry as people began questioning everything that capitalism stood for.

Over a decade later, with the onset of the COVID-19 pandemic and its ripple effects on the global economy, financial institutions – new and old – have been working non-stop to ensure that consumers, businesses, bank accounts and investment portfolios stay afloat. Now, the big question has surfaced again, with more at stake than ever before: Can the world really trust financial institutions to empower and protect us?

“Creating new services and solutions for clients is where we have to go next,” Lisa Schröder, a fintech leader and head of APAC operations at Singapore-based portfolio investment company Vestr told panelists at the St. Gallen Symposium’s “Trust in Financial Services” session, moderated by Ravi Velloor of The Straits Times.

Schröder described “financial services” as a conservative, closed-box practice that lacked a clear definition, mainly because such services depend heavily on the needs of a client. Having worked in fintech incubators, she emphasized that for a financial institution attracting customers means making sure people have a transparent understanding of what services an institution offers.

“Financial services don’t just come from banks nowadays,” she said, citing digital London-based fintech company Revolut which offers an online interactive brokerage account for its customers.

This collection of diversified financial services, moving digitally in a “brick to click” manner, can help strengthen broad trust in financial institutions because the use of precise customer data can help make the financial markets more transparent and foolproof, said Edmund Koh, president of UBS’s APAC group to the panel.

Mathias Imbach, founder of Sygnum, the world’s first digital asset bank, told the Symposium’s magazine team in an interview that modern technologies in the banking space allow services like Sygnum to best service their clients and partners with investing in digital assets with full trust.

“Blockchain technology allows us to work towards ‘Future Finance,’ where everybody has more direct access to ownership and value – and thus can take back some of the control lost in today’s world,” he said.

Imbach is convinced that institutions like Sygnum are needed “to change the status quo” and that, ultimately, trust in financial institutions is linked to whether or not people are meaningfully working on behalf of stakeholders or just chasing short-term economic goals.

Swiss climate activist Stephanie Wyss agreed, saying in a separate session, “Capital for Purpose,” that such investments are only as good as the direction capital is flowing.

“Profit-maximizing thinking is short-term thinking, and sustainable thinking is longer-term,” she said to fellow panelists in a conversation moderated by London School of Economics professor Stephen Chambers.

“It seems we are in a boat that is sinking, and instead of looking at why is it sinking or rebuilding the boat, we are plugging some holes or repainting it green and calling it sustainable,” she said. Such “greenwashing” is a particular problem in Environmental, Social, and Governance (ESG) investment practices, where ESG is regarded as a way to generate active returns and not as a way to usher in a more environmentally friendly future.

“If I invest in sustainable funds, it’s because I want to make money, and I think that’s the wrong approach,” she said.

Wyss pointed out the insincerity of many ESG approaches by describing Credit Suisse’s decision to list a major food and drink conglomerate as a top ESG investment choice, despite the latter being involved in scandals including the use of child labor and price fixing.

“Capitalism” has now become “growth capitalism,” said Czech macroeconomic historian Tomáš Sedláček, who was on the panel with Wyss. To him, utilizing purposeful capital is a matter of being able to put profits aside for the greater good while building and sustaining a strong society.

Despite what many say about a future with prevailing inequality and unsustainable business practices, Sedláček is optimistic. “We are capable as mankind of putting the economy in second place,” he said.

As an example, he cited the global COVID-19 vaccination rollout, in which governments and institutions committed to making vaccines free and accessible for everyone. “Nobody came up with a market solution that said, ‘Okay, let people buy their vaccines; let the strong and the healthy and the productive buy them first,’” he said.

All told, trusting in the future of financial services means not focusing on prices, but instead examining the inner intrinsic motivation of investment decisions, be it an ESG portfolio or retail banking. Says Wyss: “Rebuild the boat, don’t just paint it green.”