Memorandum submitted by HSBC
ACCESS TO
BANKING SERVICES
HSBC recognises that access to banking services
forms an important part of social inclusion in a wider sense.
For many the Basic Bank Account is the first step in accessing
mainstream financial services. HSBC Basic Bank Account customers:
— enjoy free banking and can access
their money at HSBC branches, through the LINK network of over
56,000 ATMs and at Post Office counters;
— are able to withdraw cash of up to
£200 per day;
— benefit from a free £10 buffer
zone to cope with small inadvertent overdrafts—no interest
or charges apply; and
— are not charged for returned direct
debits or standing orders.
We have been working with the Government and
the Financial Inclusion Task Force towards the shared goal of
halving the number of adults in households without a bank account,
and of demonstrating significant progress by 2007. Our progress
has been good. We currently have over 325,000 Basic Bank Accounts
and the latest figures show that our market share of net openings
for basic bank accounts during 2005 stands at over 19.5%—above
our market "footprint" of 15%. Indications are that
the industry as a whole is on track to meet the shared goal. Nevertheless
we are mindful that, as the number of people without a bank account
is reduced, the task of reaching the remainder becomes more challenging.
Indeed, there appears to be a significant number
of people who are not interested in having a bank account. Research
commissioned by the National Consumer Council[177]
showed that 64% of the unbanked "had no difficulties operating
without an account", 50% felt "they do not really need
an account" and "a similar proportion of basic bank
account holders prefer to withdraw all their income and manage
it as cash." This clearly poses challenges for both the industry
and Government in meeting the shared goal.
In addition, over 4.7 million Post Office Card
Accounts (POCAs) are currently not included in the figures for
basic banking products. HSBC is providing £30 million over
five years to fund POCAs, which satisfy the needs of many consumers.
Where this is the case it is difficult to move them to a Basic
Bank Account product. As a result there is in our view a strong
case for adding functionality to POCAs so that they mirror the
Basic Bank Account.
Surveys have been undertaken into the operation
and use of Basic Bank Accounts to explore current practices and
customer perceptions of the product:
— The Banking Code Standards Board
(BCSB) has regularly undertaken mystery shopping to establish
whether banks are fulfilling their responsibilities under the
Banking Code. While survey results for individual banks are not
disclosed, HSBC is satisfied with its performance.
— Research by Millward Brown[178]
for the British Bankers' Association looked at customers' views
of Basic Bank Accounts and the account opening process. It found:
— 59% of customers were unbanked prior
to opening a Basic Bank Account, demonstrating the progress that
the industry has made toward reducing the numbers of unbanked;
— advice from bank staff is by far the
largest driver of awareness of Basic Bank Account products, followed
by recommendation from others and then leaflets in branches;
— 91% are satisfied with how their account
has been handled;
— 92% agreed that it was simple and straightforward
to open their account;
— 92% of customers agree that it is good
that the accounts do not allow the them to get into debt;
— 91% believe the account meets most of
their needs, reflected in the fact that only 1% were considering
closing their account.
In order to ensure that our staff are more easily
able to properly identify and deal with customers for whom a Basic
Bank Account is the most suitable product we developed and implemented
a modular training programme across our network. The launch of
the training was accompanied by visible, high profile support
from our Chief Executive. HSBC staff are also incentivised to
provide Basic Bank Accounts in the same way as for other current
accounts and, to help customers for whom English is not their
first language, we are currently developing a multi-lingual guide
to the account opening process.
For many people one of the greatest potential
barriers to opening an account is providing the required identification
and address verification (ID & VA). HSBC's ID & VA requirements
are based on the industry recommendations in the money laundering
guidance notes. We require one form of identification and one
form of address verification. Acceptable identification documents
include:
— Current National Identity Card
— IND Application Registration Card
— Recent Benefits Agency Letter confirming
a right to benefits
Acceptable address verification documents include:
— Council Tax bill (valid for the current
year)
— Utility bill (dated within the last
4 months)
— Telephone bill (dated within the
last 4 months)
— Tenancy Agreement (from a council
or reputable letting agency)
— Letter from a reputable employer
confirming recently arrived Foreign nationals address
— Letter from a reputable university,
college, language school confirming recently arrived Foreign nationals
identity
We expect the Joint Money Laundering Steering
Group to introduce further changes to ID & VA requirements
to make opening an account easier, particularly by recognising
that the standard level of identification for individuals is capable
of being met, at least in face to face situations, by a single
document.
ACCESS TO
AFFORDABLE CREDIT
The Government has stated that it wishes to
see greater access to what it describes as "affordable credit".
All of our personal lending products are available to both new
and existing customers, subject only to eligibility criteria and
credit risk assessment being met. When customers or prospective
customers apply for credit we use predictive scorecards to assess
their eligibility. This is a system-driven mechanism which uses
a number of criteria in reaching a decision, based upon an assessment
of the behaviour of any existing account relationship, a search
of the credit register and an evaluation of the information provided
within the customer's application form. Its sole objective is
to ensure that defaults and bad debts are minimised as far as
possible in the interests of both HSBC and our customers.
In terms of the supply of small sum credit the
Competition Commission is currently engaged in an inquiry into
the home credit market and will establish remedies to improve
competition in that sector should it be required. For HSBC, provision
of the short-term, very low value micro-credit typically required
by these customers is simply not deliverable in a cost-effective
manner. To cover our operating costs alone would require charging
a disproportionately high APR relative to our other lending products
and this is not a position we would wish to adopt.
The Government has identified Credit Unions
and Community Development Finance Initiatives (CDFIs) as playing
a key role in providing small sum credit to those on low incomes.
We support the proposal to extend the Community Investment Tax
Relief scheme to investments in CDFIs' personal lending activities.
The Government has also taken other measures with the objective
of improving access to credit, including:
— abolishing the "double debt"
rule for Social Fund Budgeting Loans;
— consideration of direct deduction
from benefits when normal repayment arrangements have broken down;
— doubling the capital limits for Budgeting
Loans, Crisis Loans and Community Care Grants;
— doubling the monthly interest rate
that Credit Unions will be able to charge;
— establishing a £36 million "growth
fund" to support third sector lenders providing affordable
credit.
Whilst the expansion of the Credit Union movement,
the development of personal sector CDFIs and proposed reforms
to the Social Fund will take some time, they have the potential
to make a significant impact in the market for small sum credit.
FINANCIAL EDUCATION
AND ACCESS
TO FINANCIAL
ADVICE
HSBC believes that education is a key driver
towards achieving a fully inclusive society. HSBC Group policy
is to focus our efforts on the education of disadvantaged young
people, together with environmental projects. A society which
is well informed, confident and empowered is clearly advantageous
to all. In terms of financial education we would support a decision
to make it a compulsory component of the national curriculum.
As a company we are actively engaged with the work of the FSA
on developing a national financial capability strategy, both through
our membership of the British Bankers' Association and HSBC's
involvement in the FSA Generic Advice Working Group. In addition
we provide £530,000 per annum to support the work of the
Money Advice Trust in improving the quality and availability of
money advice within the UK.
HSBC has a tradition of supporting the communities
in which we operate, both through the involvement of our employees
and through philanthropic donations. In 2005 these commitments
amounted to nearly £6.5 million in the UK. We are involved
in a wide range of projects and initiatives to help raise the
academic achievement of young people and improve their vocational
skills through formal and informal learning, including:
The HSBC Education Trust
The HSBC Education Trust was established in
January 2001 to open doors of opportunity for children by helping
to raise educational standards. The Trust gives priority to:
— primary and secondary education;
— disadvantaged children;
— projects to promote international
understanding among young people;
Examples of supported projects include a programme
launched in May 2005 to improve financial literacy with an emphasis
on young people and women entrepreneurs, and supporting the development
of a set of online course materials in GSCE mathematics which
aims, in a creative way, to generate an understanding of how maths
can be put into practice.
Young Enterprise
For over 40 years Young Enterprise has been
giving young people the chance to run their own business while
still at school. More than 167,000 students take up the challenge
each year. They are helped by around 700 HSBC Bank staff, who
act as advisers to the companies. Students allocate directorships,
market a product or service, raise share capital and present a
report and accounts. Regional competitions culminate in annual
national HSBC Young Enterprise Innovation awards. HSBC has supported
the programme for 23 years. Our Chief Executive Michael Geoghegan
is Chairman of the organisation.
pfeg
Personal Finance Education Group (pfeg) works
strategically with the government, education and finance sector,
with the aim of ensuring that young people can leave school with
the skills and knowledge they need in financial matters so that
they can participate fully in society. HSBC has supported pfeg
in the delivery of Excellence and Access, working with some 400
schools over a four-year period to provide teachers with the skills,
confidence and resources to teach personal finance in the classroom.
HSBC also sits on pfeg's advisory Forum.
January 2006
177 "Basic Banking" factsheet, published
by National Consumer Council, based on research commissioned by
NCC from Policis Back
178
Millward Brown, November 2005. Back
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