The importance of banking services
1. Banking services are central to the challenge
of financial inclusion. In an earlier Report which also arose
from our inquiry into financial inclusion, we examined the importance
of issues relating to credit, savings, advice and insurance.
In a subsequent Report arising from the same inquiry we will examine
the challenge of enhancing financial capability and the roles
to be played by Government, the FSA and other partners in promoting
financial inclusion. The current Report concentrates on banking
services, examining their crucial role in financial inclusion
and the steps taken by the banks, the Post Office, the Government
and others to improve access to banking services, and setting
out the further steps which should be taken to ensure that services
which most take for granted are available to all.
2. People who do not have access to banking services
are limited in undertaking a wide range of everyday financial
transactions, and those limitations are arguably increasing as
such transactions become more sophisticated. For example, without
a bank account a person may not be able to obtain competitive
loans or insurance policies or enter into a mobile telephone contract.
Those without bank accounts often lack security in storing money,
leaving them vulnerable to theft or loss. Employers very often
require that wages are paid into a bank account, limiting employment
opportunities for the unbanked. It can also be difficult to start
a business or engage in entrepreneurial activity without a bank
account. In recent years, the Government's welfare strategy has
placed greater emphasis on direct payment of benefits into bank
or Post Office accounts, enhancing the importance of success in
endeavours to "bank the unbanked" and in the development
of the Post Office Card Account and any successor to it.
3. Appropriate access to banking services serves
as a crucial stepping stone to full financial inclusion. Those
with bank accounts find it easier to use other financial services
and grow more used to handling their own personal finances. A
reduction in the proportion of individuals and households without
access to bank accounts is not only an important goal in itself;
such a reduction also makes a crucial contribution to wider success
in tackling financial exclusion.
Our inquiry into financial inclusion
4. This Report is the second of three Reports arising
from our broad inquiry into financial inclusion. The earlier Report
gave more detailed information about the conduct of our inquiry,
including evidence received and visits undertaken, and all of
the published evidence is also included with that Report.
In the context of the current Report, we were particularly assisted
by our visit to Services Against Financial Exclusion (SAFE) at
Toynbee Hall in Tower Hamlets, by discussions during our visit
to New York and Washington DC about the operation of the US Community
Reinvestment Act and by evidence from the Post Office, the Banking
Code Standards Board (BCSB) and senior representatives of the
major high street banks. We are grateful to all those who contributed
to the development of this Report.
Structure of this Report
5. The next chapter of this Report examines the background
to our work, including an analysis of the scale of the problem
of the unbanked and developments in recent years designed to tackle
the problem. We then outline different approaches that have been
advocated for tackling the problem in future and set out the approach
which underpins the analysis and recommendations in this Report.
In subsequent chapters, we focus in more detail on issues relating
to the opening and operation of basic bank accounts, before turning
to other banking issues and then to the Post Office Card Account.
1 Treasury Committee, Twelfth Report of Session 2005-06,
Financial inclusion: credit, savings, advice and insurance,
HC 848-I and -II Back
HC (2005-06) 848-II: all references to written evidence ("Ev")
and to oral evidence (Q or Qq) in this Report are to evidence
published in that Report unless otherwise stated. Back