How do we change the financial system - Part 2: Transition Theory
Systems can be changed through actions focused on three dimensions – the landscape, the regime and the niches
For the landscape to be changed, there is a need for the innovations to be protected and integrated by the regime
Once integrated, the innovations become the new reality that changes the whole landscape and, furthermore, the system
*This is the second part of our article about system change. If you have not read already the first part you can find it here, if you have read it then you can jump directly to Part 2: Transition Theory.*
Nowadays many feels the financial system is eroded. People become more aware of the value their actions create as well as their own value as a client and expect the banks to be fair with them when it comes to this value. On the other side, banks have never found a way to quantify this value at scale and therefore don’t do much effort to maintain and improve their relationship with their clients. They rather put their energy into streamlining this relation to reduce the cost of serving it.
These silent frictions between banks and their clients not only produce an erosion in the trust that has to be the main pillar in the bank-customer relationship, but also generates financial losses for banks, for customers and for society.
Changing the banking system can create a series of chain reactions that will transform today’s enclosed system into a more democratic, inclusive, accessible, fair, responsible, and sustainable one. Here, we talk about extended access to financial solutions for population, including the individuals that now are not bankable, better financial choices made by customers, increased financial resilience and, overall, a better financial life. You can read about the benefits of an inclusive financial system here.
But how can such a strong and pervasive system can be changed? We present in this article in two parts the theories of living system change.
PURPOSE AND LIFECYCLE OF A SYSTEM
Living systems differ from machine driven systems because unlike machines, humans can either be rendered blind by the purpose of the system or lose faith in the purpose. Consequently, living systems are not causal, linear, or predictable. Driven by each participant’s interest, living systems thrive due to what we name nowadays a network effect. Then they peak when interests consolidate too importantly, and systems become insufficiently inclusive. They finally decline when participants lose faith and alternatives become available.
Therefore, changing a living system is not about retooling or adding lines of code to the program, it is about bringing perspectives through innovative alternatives, connecting, and protecting these alternatives for them to emerge and be adopted.
Changing a system is not an easy task, no matter how brave, determined, and hardworking an entity or a group of people is. Nevertheless, some theories can enlighten us on how this change can take place
PART 2: GEELS AND KEMP TRANSITION THEORY
The Transition Theory describes the different interconnected strategies to be applied at different layer of the society to catalyze a system change.
A nested hierarchy of 3 levels is considered by the theory:
People at the Finance Innovation Lab have summed up these levels better than we could:
The landscape:
The landscape is an external structure or context for interactions of actors. This is about the terrain the game is played on, rather than the dynamics of the game itself. It covers demographics, technological innovation, environmental factors and other broad trends, and also the social and cultural norms that make up and perpetuate what we believe is normal.
Our current form of neoliberal economy is an example of part of our current landscape. Statements such as ‘growth is good’ are framed and endorsed by powerful institutions in media, government and business. As such it seems like common sense to pursue policies and practices that will shore up more growth, even when this growth causes many of the problems we are grappling with, such as climate change and inequality.”
The regime:
At the regime level, the focus is more on the dynamics of power. Who gets to shape the rules of the game? Who has access to the most valuable information? Who is included and who is excluded? Who decides where money flows? Who gets to shape the narrative of success in the system? It comprises the entire infrastructure that perpetuates the ‘way things are’: the institutions, the market arrangements, the culture, the policies and regulations that enforce and protect the status-quo. This becomes what Transition Theory calls a ‘regime’.
The niches:
The niches are those places within the system that provide a safe place for the innovation to emerge.
HOW TO CHANGE THE SYSTEM
The stability of system results from the linkages between heterogeneous elements. The elements and the linkages are the result of activities of social groups which (re)produce them. This stability or evolution around a status-quo has several consequences. The regime can only evolve along trajectories that are compatible with the regime itself and acceptable in the current landscape. Secondly, these accepted trajectories are implying the system will only evolve incrementally. Thirdly, other researches have shown that incrementally evolving systems are prone to decline overtime or to disruption by other challenging systems.
In the Transition Theory, Niches are places in the system insulted from normal market selection as defined by the regime. They allow for radical innovation to emerge. They produce low-performing solutions but approaching problems from dimension rejected by the regime or according to values dismissed in the current landscape. They also allow to solve problems ignored entirely by the regime. Fostering these niches creates the disruptive opportunities, the regime cannot produce. If sufficiently protected, radical novelties can stabilize into a dominant design that is taken up by the regime, changing the regime in the process. Yet the Regime will only be taking up on this new design in periods of where tensions exist within the Regime or when shifts in the Landscape occurs, pressuring the Regime. Geels names these period ‘windows of opportunity’. Finally, when the new dominant designed is adopted by the Regime, then the Landscape of normality will be as well modified, and the system is changed.
We have the means to be that voice. We provide the platform that brings you the opportunity to be part of the revolution. Together, we can step up and convince the big players that better financial policies mean safer business.
22TRUST VENTURE IS CHANGING THE SYSTEM
22Trust Venture is leading a real-world experiment – named the Early Access Program – to prove the benefits for all, of a new inclusive and mutually beneficial way of doing banking. In Romania 72% of all the personal banking savings are in the saving accounts of only 5% of such account holders. 22Trust Venture is changing that by driving positive financial behaviors in our everyday life.
If you demand a 21st Century financial system that is fair, inclusive, sustainable. A system which enables every citizen to benefit from their actions and want to help us to convince the financial system Regime to do better, then join us in the Early Access Program!
SOURCES
