How anthropology can heal the anxiety

of our broken relationship with money

Eshe NelsonMarch 7, 2018

Copenhagen, Denmark

In a 200-year-old building in the center of Copenhagen, overlooking the Rosenberg

Castle, a group of anthropologists, sociologists, and experts in other human sciences
stand around a large, white table to discuss the deepest anxieties of the world’s best-
known companies.

The young, distinctly Scandinavian group—dressed head to toe in patternless grays,

blues, and blacks—work at the headquarters of ReD Associates. The Danish firm is, on
the surface, a consultancy, but at its core it believes it’s much more than that: a group
of creative problem solvers who use anthropology and the social sciences to help
companies truly understand their customers on a human level. (And, ultimately, design
more relevant products for them.)

Since ReD’s founding in 2005, companies have turned to it for guidance on their most
fundamental, existential issues. In its early days, this was Lego trying to understand why
kids play; Adidas looking to expand its brand beyond athletics; and Samsung wanting to
become known for high-quality design instead of commoditized, mass-market
electronics.

ReD’s results speak for themselves. Lego has gone from the brink of bankruptcy to
the world’s largest toy company, Adidas is now one of the top-selling sneaker brands in
the US, and Samsung has become the world’s most profitable technology
company (paywall). Now, ReD Associates is taking on one of its biggest challenges
ever, and without a specific client in mind. It wants to figure out how to get people to
trust banks again.

Legacy of crisis
Ten years after the global financial crisis began, the public still finds it hard to forgive the
banking industry for its role in the mess. In the UK, for example, only one in four adults
has confidence in the financial services industry, according to a major study by the UK’s
Financial Conduct Authority published in October. The irresponsible, misguided, and
malicious behavior by some in the industry caused irrevocable harm to many people’s
lives. That’s hard to come back from.

It’s even more complicated than that, according to the consultants. The very existence
of big banks is threatened by a combination of withering customer loyalty, regulation,
and new technology. Few are properly prepared for it.
Dissatisfied with hundreds of outside reports on the future of finance and banking, ReD’s
staff, as they do, went back to first principles: seeking a “deeper truth” in the “underlying
phenomenon of money.” The language they use is deliberately philosophical and even
a little whimsical. This is ReD’s ethos, which shuns big data in favor of tried-and-tested
anthropological methods.

Using the low-tech tools of anthropology—documenting every detail of people’s daily

lives, listening, taking photographs, making endless notes—ReD’s consultants
approach the cold and calculating world of finance, characterized by algorithms and
complex mathematics, from a completely different angle. In fact, their first step wasn’t to
study the banks at all. Instead, the project grandly purports to divine “the future of
money.”

People power
ReD Associates was founded in Denmark by Christian Madsbjerg, a political scientist,
Mikkel Rasmussen, an economist, and Filip Lau, a sociologist. They thought there was
a gap in the market for the social sciences to be used more prominently to solve practical
business problems. Today, many big companies employ anthropologists and
sociologists in search of competitive edge, although the American Anthropological
Association estimates that 75% of its members work in academia.

Ethnography is at the center of ReD’s research. This is the study of people in their own
societies, in which a researcher attempts to observe the facts of life from the subjects’
point of view. The theory is that people don’t always know or accurately assess why they
behave as they do, but professional observation can reveal these answers more clearly.
Other methods include discourse analysis (the study of language), semiotic analysis (the
study of signs and symbols), and the study of social networks. Needless to say, the
jargon, codes, and cliques in finance provide a rich seam of material for anthropologists
to mine.

By immersing themselves in the lives of consumers, ReD aims to uncover hidden

patterns and truths. To call it simply “market research” is to dismiss its depth and intent.
And these services also don’t come cheap—the typical project runs close to $1 million.

An ethnographer’s essential tool : Post-it notes.

The meaning of money

Martin Gronemann, who leads ReD’s research on the future of money (pdf), describes
the project as a “massive opportunity to make people feel more confident.” Most people
shy away from discussing money and finances because they find it too difficult or dull.
Gronemann believes banks can have a positive impact on their customers’ lives, which
is why it’s worth a speculative five-month study.

The research began in typically academic fashion, with a small team reading relevant
books and hundreds of studies on money and banking. Then came the ethnographic
study. ReD spent time with 32 people in the US, UK, and Germany, who were found by
a professional recruiting service and paid for their time. They followed the participants
around for two days, diligently taking notes while meeting their friends, family, and
financial advisors (personal or professional). The goal wasn’t to produce statistically
significant findings or conclusions, but instead to come up with a few hypotheses that
could be tested after in a larger survey.

The results of the ethnographic study were dispiriting. Watching people piece together
their finances, ReD witnessed ad-hoc, fragmented financial systems. Most people have
different checking accounts, several credit cards, multiple retirement plans, and a variety
of insurers. It means most of them feel out of control and lack financial agency.

Money is deeply personal and the most pervasive “product” ReD has ever encountered.
There is “a persistent sense of anxiety caused by being overwhelmed by their finances,”
ReD said in a written report on the study. Fixing people’s broken relationship with their
money is the opportunity that ReD wants banks to seize.

The relationship between banks and their customers is in a strange sort of flux. British
regulators found that even though less than a third of adults feel financial firms treat
them honestly and transparently, almost two-thirds still prefer to stick with a financial
brand they know. Officials found this troubling, warning that customers’ lack of
knowledge and engagement makes them vulnerable to harm.

This isn’t particularly good for banks, either. Banks that focus purely on transactions lose
sight of the crucial but unquantifiable role they can play to help people address their
biggest worries or offer personal support, says Mikkel Rasmussen, one of ReD’s co-
founders. These days, customers feel about as much affinity for their banks as their
water or electricity providers.

One thing ReD observed is that banks and finance startups have fetishized “fast money.”
You can now send your friends money, pay your bills, and complete international
transfers on your phone in minutes. That’s useful, but these innovations have taken
attention away from “slow money” products, such as pensions, mortgages, savings,
investments, and insurance, which often require personalized advice. These are what
reflect the money issues that keep people awake at night. Advances in the “slow” areas
are lacking, suggesting that financial industry has lost sight of what really matters to
people.

Indeed, ReD ran a survey of more than 3,000 people in the US and UK, and found that
37% of respondents said that financial or money challenges were their biggest source
of stress, more than health concerns, family responsibilities, and their job. More than
50% of people said they found online banking, savings accounts, and credit cards easy
to use; less than a third said the same for their retirement savings, life insurance, and
investments. Some 90% of the respondents said their relationship with their bank was
defined by simple transactions.

ReD Associates co-founder Mikkel Rasmussen.

Notes from the field
There is a disconnect between the way people live their lives and the way banks think
people live their lives, ReD observed. For example, Rasmussen says that what struck
researchers is how many people in the UK had either freelance jobs or relied on
bonuses, as opposed to a consistent, steady income. One of the people they followed
was an actor in London who had been with the same bank for decades.

As Rasmussen tells it, when they visited his bank, the first questions were all about his
name, address, and annual income—basic, impersonal questions. Because the actor’s
yearly income varied so much, his bank couldn’t offer him a mortgage, life insurance, or
pension despite his long history as a customer. And that’s after an appeal in person,
which is increasingly rare as banks close branches and invest in digital services.

Digital doesn’t have to be totally impersonal: a flurry of app-based banking services like
Monzo and Starling Bank in the UK and N26 in Germany try to help their customers
mange their finances smarter with user-friendly interfaces, automatic budgeting, and the
availability of other financial products on their phone.

That’s still not enough. Customers demand responsive, personalized services in every
aspect of their lives, including from their banks. “If you think all it takes is mobile banking
then you’re in trouble because everyone is doing that,” says Rasmussen. Instead, banks
should focus on using the vast data they collect about clients to target services and
advice at the moment they are most needed, such as buying a house, raising a child, a
sudden change in income, marriage or divorce. Digital and mobile pension and
insurance offerings should be available and tailored to individuals.

Fundamentally, banks need to deliver services that make people financially better off,
which means reconsidering how they measure success, says Rasmussen. One way to
do that is abandon Net Promoter Scores, a metric based on how likely a customer is to
recommend your company to others. Given that banking services are so similar and
people rarely switch, these metrics can be misleadingly high.

Banking will go the way of “the mobile phone business, which turned infrastructure into
services,” Rasmussen says. “I don’t think we will see a return to branches and bankers
in pinstripe suits and arrogance. It will become a real service. I hope.”

The invisible hand

This view is shared by Huy Nguyen Trieu, co-founder of the Centre for Finance,
Technology and Entrepreneurship, which runs online courses in fintech, and a former
managing director at Citigroup. He expects the biggest innovation in the financial
industry over the next few years to be in what he calls “invisible finance.” Customer
service has degraded in the process of digital transformation, as banks and startups
have replaced people with machines. But AI, blockchain, and other new technologies
will allow banks to create better, personalized financial customer services.
Is this really such a revolutionary proposition? At Dutch bank ING, the global head of
retail is also the firm’s chief innovation officer. The holder of these positions, Ignacio
Vilar, says the combination of the two roles is designed to “accelerate disruption” of
digital applications into the business. These innovations must be close to the customer,
so often that means mobile-first, Vilar says.

Even though insurance, pensions, and mortgages haven’t been given a comprehensive
digital makeover, ING is keen to stress there has been innovation in these areas. For
example, it now only takes about a week for a mortgage approval, compared with four
or five weeks before. ING also recently invested in Fintonic, a Spanish app for personal
financial management that, among other things, acts like a broker with a marketplace
offering loans and insurance from a variety of third-party providers.

This isn’t what ReD is proposing. A faster mortgage approval isn’t the same as personal
assistance in choosing the best mortgage for you. Neither does a list of insurance
products on an app identify which is the right one for you. Banks tend to overwhelm
customers with information, outsourcing the decision-making to them with little help to
guide them.

The human factor

ReD estimates that banks can increase their revenue by 14% if they sufficiently digitalize
“slow money” products. The bulk of the boost comes from higher revenues and the rest
from cost-cutting via consolidated IT processes and lower loan-loss provisions from
better customer profiling. For the top five US consumer banks, this implies an annual
increase of $4.5 billion. This project has attracted new clients to ReD, but it declined to
name them. (The writer also signed an agreement not to disclose the names of other
current clients from different, unrelated projects.)

Banks haven’t yet suffered the same kind of disruption that Netflix and Amazon brought
to TV and Spotify brought to music. But they have still been slow to change without a
push. The financial services industry has a “cultural problem,” says Michele Chang-
McGrath, one of ReD’s early hires who now runs its London office. Banks work in slow
business cycles and value conservatism. New regulation in Europe could speed up this
process. Open banking and the Second Payment Services Directive are designed to
break the hold banks have on customer account data to encourage innovation and
competition in the industry.

As the world hurtles into a digital, algorithmic future, ReD is betting on the fact that
people still matter, and that more than anything, all of us have a deep desire to be
understood and appreciated. As ReD co-founder Christian Madsbjerg writes in his
recent book, Sensemaking, “we must remind ourselves—and the culture at large—why
the human factor is the most important factor when it comes to making sense of the
world.”