Just when you thought that we might have moved on from the financial crisis with a modicum of self awareness, along comes this ad to interrupt my eBay auction watching. It is from the sub prime lender Provident Financial (via their Vanquis Bank) and aside from the irony of naming a credit card after the off balance sheet and offshore mortgage vehicle of Northern Rock, it reflects what I think a lot of financial services companies are thinking and feeling at the moment.
The response to the loss of trust and confidence in the institutions which produce and stand guard over our money (easy come easy go) is to explicitly claim qualities of solidity and resilience. The irony of the name aside, there is something deeper here about what role a credit card with a 34.9% APR is playing in 'building your credit rating'. I am waiting to see how they deliver their promise of starting slowly and building up my credit usage as a reward for good behaviour - the APR doesn't exactly shout confidence about the effectiveness of the bonds produced by that particular social exchange. Am I really being asked to (re)build my financial future on the rock solid foundations of my credit limit?
This approach contains some of the contradictions of other attempts to get people to conform to accepted norms of the consumer-driven economic system (such as workfare). My worth is calculated based on my ability to build up and pay off my debts on a regular basis (something which is fundamentally good for the consumer economy) and I am free to choose what those debts are used for. It is interesting to note that in the application process I am asked if I would like an upfront 'cash advance' which would seem a rather big "baby step" for someone who is supposed to be feeling their way into (or back into) the credit market.
This comes back to examining the meaning of the 'age of austerity' in which we now live and the difference between "austerity" as a temporary phase of temperance of our natural desire to consume versus perhaps the "age of sustainability" which requires a complete change not only of the strategies and tactics of consumption but also a fundamental redrawing of the mechanisms by which we engage in social, economic and cultural production.
I don't believe that Mr Smith would have been quite so impressed if he had examined the processes of a modern industrial financial institution as opposed to the pin makers of Scotland. True one man on his own cannot make 10,000 pins, but it seems that financial institutions for all their claims of efficiency of allocating resources/capital are remarkably inefficient in the way that they build and sustain relationships with their customers. The individual decision makers on Zopa have arguably been more successful at lending in a recessionary climate than their mass market institutional peers. Financial institutions have been slow to react to the realities of the liquid modern life, seeing it more of a threat than an opportunity (hence why Zopa was launched by some refugees from a bank rather than coming out of some corporate innovation process).
As I have blogged ad infinitum, when you talk to people "inside", you are struck by how their cognitive and linguistic framework for understanding money has become increasingly inward looking and specialised. This creates a distance between themselves and their customers who appear to do and say things which don't make "common sense". I don't believe this is all a function of their current defensiveness about bonuses and bailouts, it is also a function of their desire to make money and the users of money behave in more 'rational' ways. It may well be 'rational' to conform to a system of credit rating which rewards you with more 'credit' based purely on your ability to pay it back not what you want to use it for (or who you really are) but that doesn't mean that it makes sense for me to do it.
Of course, according to everything 'rational' about money, Zopa really shouldn't work as well as it does, but as Chris Skinner recently tweeted, Zopa lenders have now lent out more than £100m so far and no-one had lost their capital. You could go further, I doubt there are many who have lost out to inflation, the stock market or many other places you could have put your money in the last 5 years and made a return of 7-8%+ ....