Banking services are central to the challenge of financial inclusion. Financial exclusion can impose significant costs on individuals, families and society as a whole. Lack of access to a bank account can be a significant barrier to employment and enterprise. The unbanked can also face higher charges for cheque cashing and utility bills. Providing access to a bank account needs to be the foundation of the Government's strategy for promoting financial inclusion. In this Report, we make a series of recommendations designed to ensure that opportunities for access to banking services are maximised.
Basic bank accounts
Many financially excluded people are still facing problems in opening basic bank accountsincluding problems of identification, administrative delays and lack of access to appropriate literatureand in operating them so as to maximise their value as a tool of personal benefit. Some banks are not meeting their obligations under the Banking Code. In this Report we have outlined an agenda for action for the Government, the BCSB and the banks collectively and individually if these problems are to be overcome and if the current voluntary partnership approach is to prove its enduring value. We expect to monitor closely both the swiftness and effectiveness of the response to our recommendations.
Other banking issues
We also highlight a range of other banking issues where further action is urgently required to reduce the hardships of financial exclusion. The banks and the utility companies need to give greater priority to low cost payment options beyond the current direct debit arrangements and the DWP should conduct a review of the third party deduction scheme. The Government needs to ensure that problems with accessing basic bank accounts are resolved before extending the system of direct payment of housing benefit. A lack of coordination in the regulatory regime for remittances is hindering the ability of small money transfer companies to obtain business banking services. The Treasury, in conjunction with the FSA, needs to address this issue.
The Post Office Card Account and the role of the Post Office
Arrangements for the future of the Post Office Card Account have not been well-handled. The Government must improve consultation with those affected and bear in mind that for any migration away from POCAs to basic bank accounts to be successful there needs to be significant progress in tackling the barriers to opening basic bank accounts identified in this Report. There will clearly need to be a successor to the Post Office Card Account. We recommend that the Government work with the Post Office to introduce a successor to the Post Office Card Account with greater functionality that can maximise opportunities for financial inclusion. There needs to be a cross-departmental approach within Government to enhancing the role of the Post Office in promoting financial inclusion, and, in view of its overall responsibilities for public spending and financial inclusion, the Treasury must take the lead in ensuring a coherent Government approach to Post Office issues.