About the Banking Hub
What is the Banking Hub?
Why worry about bank accounts?
The history of bank accounts within financial inclusion discussions
Initiatives
What is the Banking Hub?
The Banking Hub is a centre for information and communication around the issue of bank accounts within financial inclusion discussions. It’s a place for sharing experiences and developing learning and understanding around the access to and usage of bank accounts. It is for everyone who may have an interest the issues, including:
- those who work with individuals who may lack access to bank services (such as a bank account) or who may have one but lack the relevant skills, confidence, knowledge or motivation to make effective use of them
- those within the banking industry who work on the front-line with individuals seeking to access and use their services or whose job may be to help facilitate inclusion across banking services
- those who have an interest from local or central Government
- anyone else looking to find out more and how banking fits into the wider financial inclusion discussions
The Hub:
- offers the latest news on financial inclusion and bank accounts
- brings together the latest training resources, research and policy documents in our extensive library
- produces a quarterly e-bulletin with a full round-up of news and updates on the work of different projects across the UK
- offers people a forum to offer feedback on their experiences of banking inclusion, ask questions and share knowledge in this area
Why worry about bank accounts?
In December 2007, as part of its financial inclusion action plan for 2008-11, the Government presented three aims for its work:
- To enable individuals to manage their money on a day-to-day basis, effectively, securely and confidently.
- To ensure people are able to plan for the future and cope with financial pressure
- To ensure people are able to deal effectively with financial distress
Having access to a bank account and the ability to make effective use of it is of key importance in the attainment of these aims.
The lack of a bank account, or not having the appropriate skills, knowledge or confidence to make best use of one, can have many negative effects on an individual and anyone reliant on that individual for support. These effects can be both financial and social:
Financial effects
• Additional costs - financial: Lack of a bank account often means that a person has to pay more for some goods and services. For example, paying utility bills by means other than direct debit can often has an additional charge. In 2007 Save the Children calculated that families who were excluded and didn’t have a bank account or the ability to make best use of one were paying a ‘poverty premium’ of around £1,000 per year.
• Vulnerability: A bank account can offer a secure place to keep money. People who operate solely in cash are more vulnerable to theft or loss and have no recourse to getting this money back.
• Exclusion from additional financial products: A bank account can often act as an entry product to other financial products and services. For example, without a bank account it can often be harder to get certain types of insurance.
Social effects
• Additional costs – time and effort: In addition to things often costing more financially, there are also additional time and effort costs involved in conducting transactions without a bank account. For example travel to and from somewhere to cash a cheque or pay a bill takes time from your day that could be used to do something out.
• Exclusion from other goods or services: Without a bank account people are excluded from buying goods and services that require non-cash payment, for example purchasing shopping or a cheap plane ticket online.
• Limited employment opportunities: Many employers now require their workers to have a bank account to receive wages into. No account can often mean no work, or an individual having to rely on someone else to receive their wages for them, placing them in a vulnerable position. In addition to this, some form of account is required to receive most benefit payments (although a Post Office Card account can be used for this).
Finally, not having a bank account or being able to make best use of one can lead to a person feeling excluded from society more generally. Being excluded from activities dependent on a bank account or lacking the security one brings can lead to feelings of frustration and isolation from wider society. From our work we’ve seen first hand the positive impact opening and using a bank account can have on a life, often giving that individual the impetus and encouragement to move on towards greater inclusion.
The history of bank accounts within financial inclusion discussions
There has been considerable collaborative effort since the late 1990s between the UK government, banking industry and the voluntary sector to tackle the issue of those without access to basic transactional banking facilities. Activities and innovation include the Universal Banking project, the development of Basic Bank Accounts (BBAs), the development of the Post Office Card Account (POca), specific provision within the Banking Code around BBAs.
In 2004 the Government and banks announced a shared goal of halving the number of unbanked adults – those lacking access to any form of bank account – living in the UK. Through a combination of partnerships, investment, prioritisation and monitoring, huge steps have been taken towards meeting this goal.
The number of people without a bank account is measured using the annual Family Resources Survey. The latest figures for 2006/07 show that there are 2.09 million people without a bank account. When adjusted for those without a transactional account (for example a basic or current account) that number increases to 3 million (click here to view a Treasury press release with this information). This represents around 60% of progress towards the shared goal.
While progress is continuing to be made towards the shared goal there is a growing recognition that the road to inclusion does not end with access. In 2008 Toynbee Hall produced a research report ‘From Access to Inclusion’. This work revisited the 2005 report ‘Banking the Unbanked’ in which individuals in London’s East end were assisted to open basic bank accounts. Three years on from account opening it was found that, while 25% of those who opened accounts in 2005 had subsequently gone on to take out other products and move towards greater inclusion, a separate 25% had the account closed and returned to being unbanked. The remaining 50% still had the account and were displaying varying degrees of knowledge, skills and confidence in making best use of it.
The Financial Inclusion Taskforce, the body established to monitor progress made on the Government’s financial inclusion action plan, produced its third annual report on banking at the end of 2008. In this it seeks to move the discussion away from a focus on across the board access by calling for:
- more work to be done to identify and cater for the needs of groups who, perhaps due to a specific vulnerability, remain unbanked;
- an increased focus on the use of transactional banking by newly banked people and whether basic bank accounts are acting as a gateway to additional financial products and services.
More work needs to be done to ensure that those on the margins of banking are:
• properly identified along with any specific needs they may have;
• aware of the banking options available to them;
• able to overcome any barriers (perceived or real) to open an account;
• able to make best use of a bank account once opened;
• moving towards greater inclusion through the take-up of other products and services where appropriate.
Initiatives around bank accounts
Current initiatives working in this area include the Department for Work and Pensions ‘now let’s talk money’ website and Financial Inclusion Champions Initiative and the Financial Services Authority’s strategy for financial capability. The banking industry also funds a number of local projects across the UK and various work is done by charities, housing associations and local government bodies up and down the country.
The Banking Hub seeks to bring work in this area together in order to share knowledge, promote communication and help develop a better understanding of the challenges that exist to inclusion through bank accounts and the ways in which these can be met.
