Banking on Fairer Finance

Banking on Fairer Finance

Mulenga Agley

VP Growth at Monese

Views 1414

Banking on Fairer Finance

15.06.2017 09:15 am

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.

Latest blogs

Simon Black Awaken Intelligence

Boom or Bust: How the Financial Services Sector is Coping

Covid-19 has had an impact across all industries and businesses are feeling the sting. However, is it equally devastating within every sector? As industry and individual concerns grow during the inevitable economic crisis, financial services are Read more »

n/a n/a

Tips on How to Successfully Trade CFDs

A CFD or contract for difference is a financial product that allows a trader to speculate on asset classed without owning a portion of the underlying asset. A CFD trade is not an investment but high-risk speculation that carries the risk of losing Read more »

Patrick McKinney and Joe Fuchs Wolters Kluwer Finance, Risk & Regulatory Reporting

Building an Integrated Data Management System: A Guide for Digital Banks

Digital banks and other FinTechs are emerging as more nimble competitors to established legacy banks. The digital banks that are on their way to becoming fully chartered have the opportunity to setup fully automated processes and systems without Read more »

n/a n/a

How COVID-19 Is Ushering In a New Era of Cashless Technology

  Image source: https://www.pexels.com/photo/person-shopping-online-3944405/   Cashless technology isn't a completely fresh concept. People have been using credit cards for decades, and the market for fintech services has been Read more »

Jean Shin tyntec

Using WhatsApp for 2FA is the Future of Banking

From user authentication and password resets to transaction verification, two-factor authentication (2FA) offers basic but useful protection for consumers. The 2FA process typically sends an SMS sent to the customer with a one-time password (OTP). Read more »

Related Blogs

Jean Shin tyntec

Using WhatsApp for 2FA is the Future of Banking

From user authentication and password resets to transaction verification, two-factor authentication (2FA) offers basic but useful protection for consumers. The 2FA process typically sends an SMS sent to the customer with a one-time password (OTP). Read more »

Ryan Stewart Cloud Technology Solutions

Lockdown: Has It Paved the Way for a New Banking Industry?

Lockdown has presented a huge opportunity for the banking industry. The sector has been forced to modernise its IT infrastructure to cope with the ‘new normal’ and in doing so, has made more progress in its digital transformation journey in the last Read more »

Sudeepto Mukherjee Publicis Sapient

Platform Banking: Why Getting Cozy With Big Tech is Good News for Incumbent Banks

They’re not the most natural of bedfellows, but tech titans like Google, Microsoft, Apple, Facebook and Amazon have exactly what global banking behemoths need to reach new customers and stay relevant. Read more »

Elina Mattila Mobey Forum

How Can the Banking Industry Emerge Stronger from the Covid-19 Pandemic?

Around the world, many countries now face a new period of uncertainty caused by the Covid-19 pandemic. While regional lockdowns had temporarily started to ease, the prospect of a second wave has caused some countries to reintroduce restrictions – a Read more »

Simon Wilson Icon Solutions

Strange New World: What Next for Banks?

What’s next for banks in this strange new world we find ourselves in? Forget the forecasts and predictions, we are in unchartered territory and the only honest answer is that no one truly knows exactly what is coming down the line. But what we do Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel