The FCA’s paper on Access to Financial Services has been a long time coming. Some of us there have been working on the issues blocking vulnerable people from a bank account, appropriate credit and insurance for years. In the not-for-profit sector we may not have the power to change things but we have a lot of the ideas but it felt like many of the suits in the room couldn’t see us there.
‘Where do we start?’, they asked.
‘Here. Here. Here,’ we said.
‘No-one? Oh, okay, back to the drawing board.’
Martin Lewis rightly described financial exclusion as a ‘civil rights issue’. He described the injustice of expecting someone to do something when they are barred from the means to do it. He picked out Universal Credit and said it could be the next Bedroom Tax, forcing vulnerable people into destitution when they are simply not able to do what is asked of them. Instead of not having a smaller property available to move into, UC claimants may find they cannot access an account or even the IT to enable them to make the system work for them.
All this remains pretty alien to City men and women, outside the Social responsibility department. There was a three-way exchange of looks between them and the FCA and anyone remotely representing government: ‘Who me?’, they all asked.
To be fair, the banks did not actually say there was no responsibility for them to take customers who couldn’t generate them profit but, cynically perhaps, I guessed there was that undertone. For that to change, regulators will need to step up. For them to do so, political will is required to give them the green light. All three parties are inherently conservative, (small c), and it will take more than an Occasional Paper to light a fire underneath them to get cracking.
Immediately standing before them are current rules on fraud and money-laundering, demanding strict ID rules are enforced. It’s a good example of how things need to go: It turns out branches are kind of over-enforcing the rules and barring innocent (and often vulnerable) consumers. At the same time, regulation could be relaxed or re-defined to ensure it doesn’t create exclusion. But then there’s the consumer… Maybe that’s where the rest of us come in.
Quids in! research found 63% had a bank account and just 60% used one. That’s up on 2014 when 48% used one and down on 2012 when 85% had one. It’s the same picture with home contents insurance where 41% have it now, compared to 39% in 2014 and 51% in 2012. Trust remains a major issue for hard-pressed consumers and willingness to make use of facilities to help them manage their money better is a key element of financial capability. According to our research, 64% of social tenants are working age but not in full-time employment and these are the likely claimants of UC.
How do we engender trust and nurture good habits if banks only act with a profit motive? How will consumers develop good habits when they’re forced into positions where they’re damned if they do, (taking responsibility for juggling budgets for rent, debt, bills and the kids at Christmas), and damned if they don’t, (failing to access an account where they keep different budgets safe and payments automated)? With UC in mind, the government may well have gone off half-cocked, if claimants will be paid like employees but cannot bank like them.
There’s a real opportunity for financial services to create meaningful partnerships with the not-for-profit sector around financial inclusion. It seems unlikely they’ll jump at this. My guess is they’re going to wait until they’re pushed. It’s just who will do the pushing?
