What does it mean to be included? It’s a word we use a lot, but perhaps don’t often stop to break down to consider the real meaning behind it. And there it is – consider. To include someone is to consider them, to involve them, to allow them to share in an activity or privilege, without restriction or limitation. To be included is to feel that you belong, that you are connected, and that you are listened to.
These definitions are powerful reminders when we come to talk about inclusion in the context of financial services. Access to basic banking services is a crucial building block of participation and integration in society, yet the Financial Inclusion Commission estimates that 1.5 million adults remain unbanked in Britain today. The impacts of exclusion are not just financial, they also affect education, employment, health, housing and overall well-being.
This is clearly an area that warrants deep and serious thought. The recent House of Lords Financial Exclusion Committee report puts some structure around potential future solutions, including the recommendation that the Government appoints a designated Minister for Financial Inclusion to lead and coordinate work in this field.
This sort of overt commitment to ‘lead from the top’ would be a welcome initiative, though there are a number of complex structural factors that must be addressed within the traditional banking system, if we are to make substantial progress towards wider financial inclusion.
Stamp out ‘free banking’
This is not a new debate, but a myth which continues to poison the way banks approach monetisation of their customer base. Banking is not free. It costs money to provide a service. The sooner banks are obliged to be up front about this, providing clear and transparent statements to their customers on the fees they are charging and why, the sooner we can redefine the rules of engagement between established incumbents and some of the most vulnerable in society.
The problem is that banks have no economic incentive to encourage financial inclusion. All too often, we hear that people are declined access to a basic bank account because they have a poor credit rating. This credit rating has no relevant bearing on reality, if all the customer wants is to store and withdraw money. However, this is a loss making exercise for a bank, without the option to charge for overseas money transfer, cash withdrawal or credit requirement. These fees become even more noxious when they are unexpected, or hidden – incurred by going unknowingly into an overdraft, for example.
Change the credit conversation
Linked to this, is rising consumer debt. Recent figures from the FCA suggest that more than 17 million people do not pay off the monthly balance on their credit cards, allowing banks to pocket billions of pounds in interest. This unearths some wider problems, including continued bank reliance on credit history to verify customers.
There are many reasons why someone may need to take credit – but building a credit history should not be one of them. Newcomers to the UK often find themselves forced to take credit, to win them access to financial freedom in the UK. Anything that actively contributes to financial anxiety, unease and stress is unacceptable.
Put a stop to problem profiteering
If financial inclusion initiatives are to pack any real punch, the parties and organisations involved – from banks, to consumer advice and support groups – must be ready to understand that helping to solve this problem may not result in a new revenue stream for them.
All too often, we see groups and businesses looking to monetise the problem, by charging a referral fee to pass ‘leads’ to alternative options beyond the banks. This is a mercenary and unwelcome approach, and will achieve nothing but stall wider progress, as well as leaving a sour taste in the mouths of those trying to forge real change. With this attitude, the poor and financially vulnerable will be forced to rely on high-cost and sub-optimal products, which are ineffective in the short term, and damaging to long term financial health.
As Europe’s only global-scale financial centre, the UK must be ready to lead the way in tackling this difficult – and at times uncomfortable – issue. But we live in a global society, and we cannot address this at a country level alone. Financial exclusion affects not only the most vulnerable within their home society, but newcomers from other countries, whether they are economic migrants or expats. Access to financial services should not be a burden to allowing an increasingly mobile population to live, work, and travel freely.
To include is to understand, to listen, to compromise and to value. Outdated thinking and legacy infrastructure cannot be allowed to let us down here.