Tackling financial exclusion: A country that works for everyone? Contents

Chapter 6: Access to financial services

193.A major theme of the evidence we received was that many people are financially excluded because they are unable to access the standard banking system. The reasons for this can be economic, physical, social or technological. This chapter deals with a number of these obstacles and potential solutions that have been suggested for them.

Opening a bank account

Basic bank accounts

194.Basic bank accounts are a simplified form of current account. Most provide direct debit facilities, a debit card and access to cash machines and over-the-counter banking. It is, however, impossible to go overdrawn on a basic account and therefore impossible to receive overdraft charges.252 This means they can be offered to customers with poor credit scores and others who might not qualify for other products, as well as people who do not want a conventional current account.

195.Basic bank accounts were first introduced to the UK in the mid-1990s, but the offer has expanded and improved in recent years in light of the EU Payment Accounts Directive (PAD)253, which requires member states to ensure that everyone can access a bank account with “basic features”, and a subsequent agreement between high street banks and HM Treasury.254

196.This agreement, expressed in a Memorandum of Understanding255, was concluded in December 2014 and resulted in a new, entirely fee-free basic bank account product being offered by 12 companies from 1 January 2016.256 Subsequently, and in line with the requirements of the PAD, the provisions of the Payment Account Regulations on basic bank accounts also came into force on 18 September 2016.257

197.A December 2016 report by HM Treasury into the implementation of the industry agreement found that over 4 million of the new basic bank accounts had been opened by the middle of 2016. In addition, there remained open around 3 million basic accounts based on previous industry agreements—largely through Lloyds.258 The report showed a disparity between the numbers of basic bank accounts being opened by the various banks. Lloyds were still opening more than twice as many as any other bank, while the Co-operative and Clydesdale/Yorkshire Banks were opening a notably large number in proportion to their relatively small market share.259

198.Despite these figures, we were told that basic bank accounts are not always very well promoted.260 Citizens Advice Rossendale suggested that they did not appear to be well advertised, and that people who might benefit from them were not always aware of them.261 We were also told that even branch staff were sometimes unaware of them.262 Citizens Advice York highlighted a number of examples which suggested that branch staff were sometimes misinterpreting rules and eligibility criteria for the accounts.263 This lack of availability and awareness can only be exacerbated by the recent trend towards large-scale bank closures, which reduces still further the potential for easy access to basic bank accounts. We heard that 53% of UK bank branches closed down between 1989 and 2016.264 We consider the effects of bank closures later in this chapter.

199.The BBA outlined research which suggested that banks incurred significant costs from the provision of basic bank accounts; the total cost was estimated at £300–£350 million per year.265 Barclays and the Co-operative Bank told us that they were taking on more than their share of these loss-making accounts (the Co-operative Bank reported that basic accounts formed some 20% of all their current accounts), and suggested that this was because too many banks did not currently offer the account. Barclays said:

“The basic bank account is a key component of financial inclusion. That is a loss-making product but part of our investment in society . . . Ensuring that all banking participants are party to that, not just the subset that is currently signed up to it, is important; otherwise you have people going into the branch of a bank that they think would be great for them and they are told, ‘Sorry, you’re not someone we want to bank. Can you go down the road and be supported by someone else?’ That is not a good outcome.”266

200.The Co-operative expressed the issue as one of fairness to the sector:

“How do we make sure as an industry . . . that we all move together in the right way and in a way that shares the burden and responsibility across new entrants and existing players, big or small? That is the only way in which you get consistent application. We have an absolute commitment to support this and to drive this forward as one of our key social goals, but at the same time we do not have bottomless pockets.”267

201.For HM Treasury, the issue of encouraging banks to promote the basic account was also a matter of not wanting to exacerbate financial exclusion even further:

“We do not want people to go into a bank and someone reaches into a dusty drawer and makes them feel as though they are asking for something that is not quite legitimate, so we work closely with the banks to make sure that the basic bank account is part of the normal suite of banking products, and we are very keen to monitor that to make sure that it is.”268

202.Martin Lewis suggested that one way to resolve this situation could be to require banks to mention their basic bank account offer at the point of rejection for a standard account.269 The Competition and Markets Authority suggested that banks should bear the cost of more actively advertising and promoting the accounts:

“The cost of mounting even a pretty effective campaign to publicise basic bank accounts is not huge compared with the financial resources of the banks. It seems to me entirely reasonable that the banking sector, as part of the overall deal of supplying this regulated product, should also be responsible for effectively promoting it.”270

203.The Committee welcomes the 2014 Memorandum of Understanding on Basic Bank Accounts between HM Treasury and the banking sector, and the significant progress achieved subsequently in reducing the unbanked population. We believe, however, that banks should do more to promote these accounts. In addition, bank branch staff must receive sufficient training to ensure that they can promote the accounts appropriately to eligible customers.

204.We recommend that the Government should require banks to promote their basic bank accounts appropriately and effectively, both in store and in advertising. In evaluating the ongoing rollout and uptake of basic bank accounts, the Government should address the concerns expressed to us that not all banks are issuing an equivalent proportion of these accounts, and that the cost burden of offering the accounts is not shared appropriately across the sector. (Recommendation 11)

Identity and address verification issues

205.Since the 1990s banks in the UK have been subject to several iterations of anti-money laundering legislation, collectively known as ‘know your customer’ regulations. The Money Laundering Regulations 2007 (amended 2012)271 require all regulated bodies (which includes all banks, as well as most other financial institutions) to obtain certain information on the identity and address of all new individual customers, in order to prevent accounts being set up in fake names to enable financial crime. This information is usually obtained by asking customers to produce their passport, driving licence or similar documentation. 272

206.Several witnesses suggested that implementation of these requirements could have severe, if unintended, consequences for people who were not involved in financial crime but who nevertheless could not easily provide acceptable identity documentation to open a bank account. This additional hurdle would represent a significant form of financial exclusion for certain groups:

207.The tension between the need to prevent money laundering and the needs of the financially excluded was highlighted repeatedly. Barclays and Nationwide both told us that finding the balance between these two priorities was “challenging”.278 The Money Advice Trust told us that money-laundering rules can lead to unintended consequences, explaining that:

“...The major banks will give you a big list of documents that you can use to open a bank account, but when you go into a branch you may well find that bank staff are, perhaps understandably, wary of anything that looks non-standard. Professor Paul Jones of Liverpool University told the Financial Inclusion Commission that he had talked to people in Liverpool who told him, ‘You have to have a letter from God to open an account round here.’”279

208.The Financial Conduct Authority (FCA) Occasional Paper on Access to Financial Services reported that:

“A significant barrier for some groups is the way banks implement their obligations to ‘know your customer’ to prevent crime, screen for fraud or check creditworthiness. These practices can exclude individuals who are not able to produce standard forms of identification”.280

209.The FCA noted that the Joint Money Laundering Steering Group281 (JMLSG) “makes clear that the type and amount of evidence that is required depends on the risk involved and the quality of the evidence”.282 Guidance notes that “some customers . . . pose higher money laundering risks than others”, and that while “documents issued by the Government are considered to be the highest quality evidence . . . many other types of evidence may also be acceptable”.283 Despite this, the FCA found that many banks demanded customers produce the same ‘standard’ documentation, such as a driving licence, a passport, or a household bill with their name on it, even though the true range of permissible documents is broader.284

210.The BBA told us that it was working with the industry to bring greater consistency and clarity to identity verification across the sector, with the aim of expanding the list of commonly acceptable documents and ensuring a greater focus on customers who were typically excluded due to a lack of ‘mainstream’ documentation.285 The BBA also noted that the banking industry was “exploring with DWP alternative benefits and Universal Credit-related documentation that may be used for ID purposes,”286 and investigating how to overcome practical hurdles such as the fact that customers often mislay such letters before they have the chance to use it for identification.287

211.Witnesses suggested that electronic verification could potentially help to resolve this issue. Leeds City Council bemoaned the fact that electronic identification was not currently deemed sufficient to open a bank account.288 The BBA informed the Committee of an estimate that as many as eight in ten customers of some financial institutions could be identified electronically289—meaning that this could be a worthwhile area for further work for at least some customers who were financially excluded due to their circumstances or simply by not having had cause to obtain photo identification. Experian pointed to information showing that a form of digital authentication including people’s rent data could have an extremely positive impact on digital identification for social housing tenants290—a population group known from other evidence to have a high incidence of financial exclusion.291

212.However, the BBA also cautioned that:

“The cohort that we are discussing in terms of financial exclusion will find the same challenges in getting themselves registered on an electronic ID programme as they might do currently in trying to open a bank account . . . As an industry, we would like to see the identification process move electronically, as we think it is more secure and more efficient. However, there are gaps, and those gaps, regrettably, are around those who are currently more financially excluded.”292

213.In December 2016 the Economic Secretary to the Treasury confirmed that an agreement had now been reached between the banks and HM Treasury to accept Universal Credit award letters as a form of verification.293 He also noted that the Chancellor’s 2016 Autumn Statement had contained an announcement that the JMLSG would be modernising its guidance on electronic identity verification to support the use of technology to access financial services.294

214.The Committee welcomes and encourages the use of Universal Credit letters as identity verification for bank accounts. We are encouraged by the announcement from the Economic Secretary to the Treasury that banks are to accept these as standard procedure.

215.We recommend that the annual report which we have proposed in recommendation 3 should contain updates on the rollout of electronic identification for bank accounts—particularly in regard to the success of bringing previously unbanked people into the banking system. The annual report should also provide an update on the level of acceptance by banks of Universal Credit and other non-standard but legally sufficient identity documentation. (Recommendation 12)

Access to bank branches and services

Bank branch closures

216.The Committee was told that the number of bank branches in the UK had more than halved since 1988.295 This decline had been much steeper than in many other parts of Europe. In 2014 the UK had 180 branches per million inhabitants, compared with 447 in Italy, 521 in Germany, 589 in France, and 718 in Spain.296 It was reported that this trend was significantly more pronounced in rural and low-income areas.297

217.Banking sector representatives argued that the reason for these closures was a sea-change in the way that people in the UK interacted with banks. The Co-operative Bank told us that in 2015 alone it had experienced a 30% reduction in branch transactions, and that many of the branches it had closed in the previous year were taking as few as 50 or 100 transactions a week.298

218.Witnesses reported that the potential for financial exclusion caused by a lack of physical access to a bank branch was comparatively higher in rural areas as many such areas had relatively poor internet access, making online banking much harder,299 and because the relatively sparse population of these areas meant that the closure of one branch would often require transferring to a different branch many miles away.300 This especially posed a problem for older people,301 people with poor mobility,302 and small business owners who needed to bank their takings.303 The Committee also heard that the loss of face-to-face banking services was a greater problem for people with learning or mental health difficulties, who needed human support to access services.304 Issues specifically affecting some of these groups were considered in more detail in Chapter Five of this report.

The Access to Banking Protocol

219.The Access to Banking Protocol was launched by the BBA in 2015 as a way of mitigating the impact of branch closures. In a press release, the BBA described it as follows:

“The main high street banks, consumer groups and Government have signed up to an industry-wide agreement to work with customers and communities to minimise the impact of branch closures. This agreement will make sure customers still have banking services close at hand if a branch closes. Communities will be given fair notice of any closure and clarity about the alternative places and ways to bank. The agreement also commits the industry to making sure there is the right support to help customers use internet or mobile banking.”305

220.The Protocol commits banks to a number of actions. They will carry out an analysis of the potential impact on branch users and how else those users could access banking services. They should communicate with local stakeholders in order to understand how to help the community continue to bank, with particular focus on the impact on small businesses and more vulnerable customers. Where banks determine there is a continuing need for services, suitable alternative ways to bank should be put in place before the branch is closed.306

221.Banks were keen to emphasise that the Protocol did not provide for a consultation process on branch closures themselves, but on what alternative measures could be put in place to maintain access for customers and ease their transition to alternative forms of banking. The Co-operative Bank explained that the Protocol focused on how the closure could be managed in a way that ensured continuity of service, financial inclusion and customer education.307

222.Banks told us that the Protocol had affected how they had administered branch closures and the additional services they had put in place. The Co-operative Bank reported that the Protocol had led it to review and update closure processes,308 while Barclays stated:

“As an example of some of the things that have changed as a consequence, customers are often most concerned about ATMs, so leaving those behind to enable people to access cash is very important. We have also postponed closures. Where significant roadworks have meant that getting to the nearest branch was taking twice as long as it should have, we have postponed the closure or changed opening hours for some of the nearest branches.”309

223.No witnesses, however, could point to any occasion where a bank had reversed a branch closure decision following the Protocol process. A November 2016 review concluded that banks were following the Protocol, but recommended that a greater amount of post-closure research into the effects on customers should be carried out.310

224.We note that the Protocol is a voluntary exercise drawn up by the BBA. While it is commendable that some banks have been able to give examples of changes they have made to their activities to mitigate the impacts on customers, there is nothing forcing banks to take action to prevent the financial exclusion of people in communities where branches have closed.

Box 3: Nationwide in Glastonbury: an innovative solution

When HSBC closed its Glastonbury branch in 2015, the town of nearly 9,000 residents311 was left without a single bank branch. We heard how Nationwide Building Society made contact with the local community and stakeholders and expressed an interest in opening a branch in the town provided that enough local people and businesses committed to opening an account with them. Over 1,000 local people and businesses have now signed up, and the new branch is planned to open in 2017.312 The building society told us it plans to make the branch cost-effective by using video link technology so customers can conduct their banking business with staff at Nationwide headquarters.313

A greater role for the Post Office

225.The importance of the Post Office in providing financial services was consistently emphasised in the evidence we heard. It was noted that banks (under the Access to Banking Protocol) and Government (in considering its response to the branch closure trend) were placing growing emphasis on the availability of banking services from branches of the Post Office.314

226.With over 11,600 branches across the UK,315 the Post Office has more physical outlets than all the high street banks combined.316 Over recent years the Post Office and the banks have been working to establish a single common and standardised set of banking services available at post offices. This has resulted in 99% of current account customers in the UK being able to access some banking services over a post office counter.317

227.Barclays and the Co-operative Bank both told us of the importance of the Post Office in offering customers continued access to physical banking.318 The Competition and Markets Authority agreed, saying:

“The Post Office is going to become an important point of access to banking for those customers who need local banking and for whom the closure of conventional bank branches is a problem.”319

228.Similarly, the Economic Secretary to the Treasury said that post offices played “a valuable part” in financial inclusion, especially in rural areas, and that the Government should be doing all it could to support them. He concluded that post offices were likely to become even more important in an era of increasing branch closures and moves towards online banking.320

229.Several witnesses suggested innovative ways in which Post Office branches could support access to financial services. One suggested that branches could host video terminals through which bank customers could talk over more complex financial matters with staff from their own banks.321 Others suggested that the Post Office could provide an access platform for either commercial or not-for-profit personal loans.322 Another suggested that “pop-up” branches could be set up in empty units in rural areas,323 while others pointed out that the positive public perception of the Post Office brand meant that it could be a good host for identity verification, setting up basic bank accounts and even debt advice.324 It was also suggested that the Post Office could follow the example of the New Zealand Post Office’s Kiwibank and provide a full retail banking service of its own.325 However, it was also repeatedly noted that, for the Post Office to be able and willing to provide such services, they would have to represent a realistic income stream, with financial support possibly provided by the banking sector or via the Government.326

230.It is important to note the evidence from witnesses that there are some major issues around the increasing reliance on Post Office branches to maintain physical access to banking services. Firstly, many customers are simply unaware that these services exist.327 We were told of a representative survey of the public in Northern Ireland in which just over half of responders were unaware that banking services could be accessed at the Post Office.328 A second problem is that some services, such as cash and cheque clearing facilities, also appear to be processed more slowly than in bank branches, which for customers without cash reserves in their current account could mean the difference between a bill bouncing and being paid.329

231.A third concern, which was raised by numerous witnesses, is the fact that some Post Office branches themselves are under threat of closure.330 It was noted that, despite being publicly owned, the Post Office has to operate as a business, and thus cannot justify keeping branches open where they are making a loss.331 In particular, in January 2017 the Post Office announced plans to close 37 Crown Post Offices, with services in these locations to be delivered instead through retail partnership arrangements. This followed an announcement in April 2016 that services at 61 branches would be transferred to WHSmith stores over the following year. All of this is part of a long-term plan to retain services while reducing costs, by integrating Post Office services into mainstream retail outlets.332

232.It should, however, be acknowledged that the number of Post Office branches has now stabilised, after significant declines in the 1990s and 2000s, and the current Government and its predecessor have determined not to allow the total number of post offices in the UK to fall below 11,500.333

233.We acknowledge the important role of the Post Office in preventing financial exclusion through the provision of money transfer services in those areas where bank branches have closed, and the commitment by the Government and the Post Office itself to maintain access to Post Office services in a context of increasing bank closures.334 We note, however, the limited levels of awareness among the general public regarding the banking services that can be accessed from the Post Office.

234.We note also the number of creative ideas put forward by witnesses for improving the Post Office’s provision of access to banking services, and acknowledge that the banking services provided by equivalent institutions in other countries are often more developed. We believe these ideas merit further analysis and consideration.

235.We are concerned that the growing trend towards integrating Post Office services within retail stores will require effective training for staff, in order to maintain the high quality of service expected by Post Office customers. This is particularly true where the management of their money is concerned, and forms an important element of developing confidence in, and awareness of, the financial services operated by the Post Office.

236.The trend towards a growing number of bank branch closures is contributing towards financial exclusion, particularly for vulnerable customers who experience difficulties accessing alternative services. The Post Office, with its extensive branch network, has the potential to meet the needs of such customers. This potential is currently unrealised, due to low levels of public awareness of the financial services available through Post Offices. It is essential that the Government, and the banking sector, do more to promote and support the role that can be played by the Post Office in providing access to physical banking services.

237.We recommend that the Government work proactively with the Post Office and banks to fund and launch an extensive public information campaign on the banking services that are available through Post Office branches. The Government—as sole shareholder in Post Office Ltd—should also ensure that the Post Office provides adequate training for staff at branches within retail outlets, so that they can carry out banking services for customers with confidence and competence. (Recommendation 13)


238.We received some written evidence regarding exclusion from certain insurance products and services. It was noted that some groups can find it hard to obtain some kinds of insurance on account of being viewed as a higher risk by the industry. We were told that people living with HIV335 or other conditions including cancer336—even those in long-term remission—sometimes have to pay significantly more for travel, health and life insurance. This is if they can obtain it at all; the Financial Conduct Authority and Macmillan Cancer Support reported that many people with long-term conditions are denied such products altogether.337 The charity Clinks, which works with ex-offenders, noted that all forms of insurance can be hard to obtain for people who have been in prison.338 The British Insurance Brokers’ Association suggested that the popularity of price comparison websites had resulted in a “computer says no” scenario for many customers who posed “non-standard” risks, going on to state that such groups could include older people or those with pre-existing medical conditions.339

239.Representatives of the insurance industry explained that a joint Code of Practice had been launched between the Association of British Insurers and the British Insurance Brokers’ Association. The Code aims “to help insurers and brokers recognise potentially vulnerable customers who may need extra support” in renewing some kinds of insurance, and defines vulnerable people as those “who may be particularly at risk in their interaction with financial services”.340 The Code of Practice does not, however, encompass the health, travel and life insurance products that witnesses told us posed a particular problem for some customers.

240.Beyond this, however, the topic of insurance did not figure prominently in our oral evidence sessions or wider written evidence base. We were unable, within a time-limited inquiry, to pursue these issues further; we note, however, that such matters would fall within the remit of the long-established House of Lords Economic Affairs Committee.

Digital exclusion and financial technology (FinTech)

Online banking

241.Online banking and use of financial services has seen an enormous rise in recent years; the BBA reported that one large high-street bank now sees 93% of contact from its customers completed via the telephone, internet or smartphone, while 97% of cash withdrawals are made via an ATM.341

242.Banking online can offer better value for money due to online-only bank accounts with rewards and benefits attached to them. The Lloyds Banking Group Consumer Digital Index has calculated that low-income families can save around £516 a year through taking their custom online—the ‘digital dividend’.342 The Committee also heard that online banking could deliver improved access to banking services for people with certain vulnerabilities such as mobility or sensory impairments.343

243.Many witnesses, however, expressed the fear that an increasing reliance on online services—and the accompanying atrophying of the physical bank branch infrastructure—would exacerbate financial exclusion for people who were less capable or connected online.344 It was pointed out that nearly a quarter of UK households still did not have access to broadband in their home. This rose to nearly a third of households in Scotland, and in some places—such as Glasgow—the figure was closer to 40%.345 Some 5.3 million adults in the UK—just over 10% of the population—said that they had never been online, and 13% of UK adults did not use the internet regularly.346

244.This issue does not affect all population groups equally. 42% of disabled people, for instance, are not online,347 while online banking can also pose challenges for people with learning difficulties,348 as well as people experiencing poor mental health.349 Furthermore, 37% of retired people are not regular internet users compared to just 6% of the general population, according to the Money Advice Service’s 2015 Financial Capability Survey.350

245.There is, therefore, extensive evidence counselling against too heavy a reliance on online channels to address financial exclusion, as those who cannot easily access the internet can be doubly excluded, both digitally and financially. It was suggested that digital inclusion needed to be tackled in parallel with financial inclusion, to ensure that it did not cause or exacerbate financial exclusion.351

246.Indeed, witnesses from many sectors—not least the banking and financial technology industries—strongly indicated that, for an online offering to be truly financially empowering, it must have an offline presence, be that by phone or ideally face-to-face. Age UK cautioned that, in dealing with older customers, “we will not get rid of the need for non-digital options for several decades to come, if we ever do.”352 Lloyds Bank and the Good Things Foundation353 noted the value of local support from libraries, bank branches and other sources—”trusted faces in local places”—in encouraging bank customers to make the transition to online banking and other online activities in order to reap the benefits of being connected in this way.354

247.The Co-operative Bank told us that mobile and digital banking were crucial, but only as part of a multi-channel approach.355 Lloyds echoed this view, emphasising that digital banking must remain only one of several pathways for customers to access their bank:

“Digital has to be taken in a multi-channel context. There is a danger that we focus purely on the online services, be it the internet or a mobile app. We think about it very much as a complementary service to our physical channels.”356

248.A strong expression of this approach came from Virraj Jatania, Co-Founder of the pre-paid debit card provider Pockit, who told us:

“When a FinTech company that is solving a problem for financially excluded customers is building its product set, it is extremely important to think about the digitally excluded customer as well. Therefore there is a big piece around product design; whenever you think about any changes or any introduction of new products in your product set, you need to make sure that you are thinking about providing the simplest, most transparent and convenient product to the customer. If you can do that, you will not exacerbate the problem with digitally excluded customers.”357

Financial technology (FinTech)

249.We considered the increasing array of financial inclusion products that relied on the use of financial technology, or FinTech. A number of web- and app-based solutions were mentioned by witnesses, including the aforementioned Pockit,358 budgeting apps and jam-jarring products such as Squirrel,359 payroll-based services such as Neyber,360 and income-smoothing products such as Wollit.361 Some witnesses expressed concern that any positive impact that these had on financial inclusion would be limited to people with the capability and the money to have a smartphone, tablet or other convenient access to the internet.362

250.Toynbee Hall suggested there was a risk of FinTech development addressing “perceived” rather than “real” needs, and warned against unsubstantiated assumptions such as “everyone has a smartphone now” and “young people are all digitally included”. They concluded that FinTech providers must acknowledge and test their assumptions carefully in order to avoid designing solutions which were unwanted and ineffective.363

251.Responsible Finance set some of these concerns out in more detail, noting that new entrants to the financial services market were mainly targeting the financially included, rather than those who were currently excluded. They suggested that:

“The costs of entering the financial services markets are significant so it is hard to see how, without any incentives, new players would provide services to financially excluded groups who are often (although not always) higher risk.”

They went on to state:

“Those FinTech companies which are developing products and services appropriate to those on low incomes have yet to reach scale to provide a universal solution or to demonstrate their own sustainability.”364

252.In light of these pressures on FinTech companies, a number of witnesses mentioned the potential of the FCA’s ‘regulatory sandbox’.365 This is an initiative that allows for a slightly lighter-touch approach to regulation for businesses to provide the solution to a specific problem or need, when the product concerned represents something genuinely innovative, with a real consumer benefit, and largely focused on consumers in the UK.366 The sandbox enables businesses to test out new financial products in a ‘safe space’ without immediately having to meet all the usual regulations when doing so, while also ensuring that consumers are still protected.367

253.This was seen as a positive way of encouraging potential FinTech solutions to aspects of financial exclusion, since the FCA chooses a limited number of projects for each iteration of the sandbox and would be free to select projects designed to combat financial exclusion in the range of projects picked each time.

254.Other witnesses, without specifically mentioning the sandbox, suggested that there was a role for repayable investment funding368 in financing FinTech projects to create products that would be specifically appropriate for people experiencing financial exclusion. They noted that this was not something that the market was likely to do on its own and that it would therefore require co-ordination and leadership from the Government.369

255.We are pleased to note the popularity of the FCA’s regulatory sandbox and the healthy environment that it creates for innovation; we also note, however, the potential danger that FinTech companies might, for understandable commercial reasons, be drawn towards developing products for customers who are already financially and digitally included, at the expense of those who truly need support to access financial products and make them work in their favour.

256.We welcome innovation in the provision of new financial services products and technologies, especially when such innovations help to meet the specific needs of consumers. As such, we support the work of the FCA’s ‘regulatory sandbox’; we hope that future rounds of the sandbox can be used to prioritise products that will help to meet the needs of those vulnerable customers who are at particular risk of financial exclusion.

Digital by default

257.The Government has made clear that Universal Credit is to be ‘digital by default’, and many aspects of the claimant journey have been specifically designed with this in mind. Claimants are invited to claim online in the first instance, and the helpline is encouaged for use only if a claimant cannot access the required website.370

258.Lord Freud told us that this encouragement to use digital channels had been successful, with 90% of customer contact for Universal Credit taking place online. He was encouraged that this mode of access had been chosen by a wide range of customers, not only the younger adults who had been involved in the initial stages of Universal Credit rollout.371

259.Some witnesses, however, expressed concern at a perceived rush to provide a ‘digital by default’ service. We were told that “digital by default should not mean digital only”.372 Keep Me Posted, which campaigns to ensure customers retain the right to choose paper-based communication, told us:

“The government’s ‘digital by default’ strategy risks having a negative impact on financial and other forms of exclusion by failing to take into account the needs of those who are digitally excluded. This is an especially pertinent consideration in relation to the government’s digital strategy, as the highest users of public services are also those who are the most likely to be digitally excluded.”373

260.We believe that digital by default should not mean digital only. It remains vital to ensure the presence of, and access to, offline means of communicating with service providers. We have consistently heard that digital exclusion is likely to have a particularly significant impact on those who are already most at risk of financial exclusion.

261.We recommend that the Government should ensure that non-digital access to social security benefits, and other services, remains possible. Access via free telephone lines, and through face-to-face meetings where appropriate, should remain available indefinitely. (Recommendation 14)

252 Money Advice Service, ‘Basic bank accounts’: https://www.moneyadviceservice.org.uk/en/articles/basic-bank-accounts [accessed 14 March 2017]

253 Directive (2014/92/EU), on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features, OJ L 257/214, 23 July 2014

254 Written evidence from the BBA (FEX0019)

255 HM Treasury, New basic fee-free bank accounts to help millions manage their money: https://www.gov.uk/government/news/new-basic-fee-free-bank-accounts-to-help-millions-manage-their-money (15 December 2014); the full text of the agreement can be read at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/386953/141211_basic_accounts_agreement_text.pdf [accessed 14 March]

256 The banks and building societies offering a basic bank account and the corresponding bank products were: Barclays (Barclays Basic Current Account); Santander (Basic Current Account); NatWest (Foundation Account); Ulster Bank (Northern Ireland) (Foundation Account); The Royal Bank of Scotland (Scotland) (Foundation Account); RBS England & Wales (Basic Account); HSBC (Basic Bank Account); Nationwide (FlexBasic); The Co-operative Bank (Cashminder); Lloyds Banking Group (including Halifax and Bank of Scotland Brands) (Basic Account); TSB (Cash Account); National Australia Bank (including Yorkshire Bank and Clydesdale brands) (Readycash Account). See HM Treasury, Fee-free bank accounts launched (27 December 2015): https://www.gov.uk/government/news/fee-free-bank-accounts-launched [accessed 14 March 2017]

257 The Payment Accounts Regulations 2015 (SI 2015/2038), Part 4

258 HM Treasury, Basic Bank Accounts: January to June 2016 (December 2016) pp 5–6: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/576033/Basic_bank_account_2016_dec_final.pdf [accessed 14 March 2017]

259 HM Treasury, Basic Bank Accounts: January to June 2016 (December 2016) pp 5–12: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/576033/Basic_bank_account_2016_dec_final.pdf [accessed 14 March 2017]

260 Written evidence from Leeds City Council (FEX0030)

261 Written evidence from Citizens Advice Rossendale (FEX0043)

262 Written evidence from CAP (FEX0014)

263 Written evidence from Citizens Advice York (FEX0036)

264 Federation of Small Businesses, ‘Bank Branch Closures’ http://www.fsb.org.uk/standing-up-for-you/policy-issues/finance-and-the-economy/bank-branch-closures [accessed 14 March]

265 Q 156 (Eric Leenders)

266 Q 39 (Catherine McGrath)

267 Q 49 (Matthew Carter)

268 Q 34 (Gwyneth Nurse)

269 Q 143 (Martin Lewis OBE)

270 Q 191 (Prof Alasdair Smith)

272 The required documentation comprises either:

Full name, residential address and date of birth, ideally from a government issued document including a photograph, such as a valid passport or valid photo card driving licence; or:

A government-issued document (without a photograph) which includes the customer’s full name, along with a second document (either government-issued, or issued by a judicial authority, a public sector body or authority, a regulated utility company, or another FCA-regulated firm in the UK financial services sector or in an equivalent jurisdiction), which includes the customer’s full name and either residential address or date of birth.

Taken from PricewaterhouseCoopers, Know Your Customer: Quick Reference Guide (January 2015): https://www.pwc.co.uk/assets/pdf/anti-money-laundering-quick-reference-guide-2015.pdf [accessed 14 March 2017]

273 Written evidence from Toynbee Hall (FEX0073)

274 Written evidence from Bournemouth Churches Housing Association (FEX0058)

275 See written evidence from Barclays (FEX0074)

276 Written evidence from Lloyds Bank Foundation for England & Wales (FEX0010). The evidence notes that “Young people in and leaving care can be very disadvantaged financially. Most financial services assume you have one name, one address and access to your birth certificate and many of our clients don’t have this”.

277 Written evidence from Mencap (FEX0060)

278 Written evidence from Barclays (FEX0074) and Nationwide Building Society (FEX0059)

279 Q 1 (Joanna Elson OBE)

280 Financial Conduct Authority, Access to Financial Services in the UK (May 2016) p 59: https://www.fca.org.uk/publication/occasional-papers/occasional-paper-17.pdf [accessed 14 March 2017]

281 An industry body that publishes guidance on how to implement the Money Laundering Regulations.

282 Financial Conduct Authority, Access to Financial Services in the UK (May 2016) p 61: https://www.fca.org.uk/publication/occasional-papers/occasional-paper-17.pdf [accessed 14 March 2017]

283 Ibid.

284 Financial Conduct Authority, Access to Financial Services in the UK (May 2016) p 63: https://www.fca.org.uk/publication/occasional-papers/occasional-paper-17.pdf [accessed 14 March 2017]

285 Written evidence from BBA (FEX0019)

286 Ibid.

287 157 (Eric Leenders)

288 Written evidence from Leeds City Council (FEX0030)

289 Q 157 (Eric Leenders)

290 Written evidence from Experian (FEX0078)

291 See, for example, written evidence from Barclays (FEX0074)

292 Q 157 (Eric Leenders)

293 Q 247 (Simon Kirby MP)

295 Written evidence from Demos (FEX0063), citing the House of Commons Library, Bank Branch Closures, Briefing Paper 385, June 2015 (updated December 2016) p 5

296 Campaign for Community Banking, quoted in This Money, Need a bank branch? Then head to Europe (25 February 2015): http://www.thisismoney.co.uk/money/saving/article-2967619/Need-bank-branch-head-Europe.html [accessed 14 March 2017]

297 Written evidence from Citizens Advice Rossendale (FEX0043); Later Life Ambitions (FEX0050); see also Financial Conduct Authority, Access to Banking Services in the UK (May 2016) p 49: https://www.fca.org.uk/publication/occasional-papers/occasional-paper-17.pdf [accessed 14 March 2017] and the Federation of Small Businesses, Locked Out: The impact of bank branch closures on small businesses (October 2016) p 11: http://www.fsb.org.uk/docs/default-source/fsb-org-uk/fsb-bank-branch-closures-(final).pdf?sfvrsn=0 [accessed 14 March 2017]

298 Q 45 (Matthew Carter)

299 Written evidence from Age UK (FEX0094), Citizens Advice Redcar et al (FEX0048), Gateshead Council (FEX0046), Keep Me Posted (FEX0020) and others; see also Financial Conduct Authority, Access to Banking Services in the UK (May 2016) p 45: https://www.fca.org.uk/publication/occasional-papers/occasional-paper-17.pdf [accessed 14 March 2017]

300 Written evidence from Citizens Advice Redcar et al (FEX0048), Citizens Advice Rossendale (FEX0043)

301 For example, supplementary written evidence from Age UK (FEX0094).

302 For example, written evidence from the Merton Centre for Independent Living (FEX0003).

303 Written evidence from Association of British Credit Unions Ltd (FEX0037); see also the Federation of Small Businesses, Locked Out: The impact of bank branch closures on small businesses (October 2016): http://www.fsb.org.uk/docs/default-source/fsb-org-uk/fsb-bank-branch-closures-(final).pdf?sfvrsn=0 [accessed 14 March 2017]

304 Written evidence from Mencap (FEX0060) and Money and Mental Health Policy Institute (FEX0071)

305 British Bankers’ Association, Industry Protocol on Branch Closures (26 March 2015): https://www.bba.org.uk/policy/retail/financial-inclusion/access-to-banking/industry-protocol-on-branch-closures/ [accessed 14 March 2017]

306 The full text of the Protocol can be found at British Bankers’ Association, Industry Protocol on Branch Closures (26 March 2015): https://www.bba.org.uk/policy/retail/financial-inclusion/access-to-banking/industry-protocol-on-branch-closures/ [accessed 14 March 2017].

307 Q 45 (Matthew Carter)

308 Written evidence from the Co-operative Bank (FEX0033)

309 Q 45 (Catherine McGrath)

310 Professor Russel Griggs OBE, Access to Banking Protocol: One year on review (November 2016): https://www.bba.org.uk/news/reports/access-to-banking-protocol/[accessed on 14 March 2017]

311 Office for National Statistics, ‘Neighbourhood Statistics, Glastonbury Parish’: http://bit.ly/2mkIEhT [accessed 14 March 2017]

312 Nationwide, Nationwide tests using technology to bring financial services to communities left without a bank (November 2016): http://www.nationwide.co.uk/about/media-centre-and-specialist-areas/media-centre/press-releases/archive/2016/11/18-glastonbury [accessed 14 March 2017]

313 Q 221 (Stephen Uden)

314 Written evidence from the Post Office Ltd (FEX0101), BBA (FEX0019), HM Treasury (FEX0088); see also Q 191 (Prof Alasdair Smith) and Q 45.

315 Written evidence from the Post Office Ltd (FEX0101)

316 Financial Conduct Authority, Access to Financial Services in the UK (May 2016) p 44: https://www.fca.org.uk/publication/occasional-papers/occasional-paper-17.pdf [accessed 14 March 2017] which quotes the total at 8,400 at the end of 2015.

317 Written evidence from the Post Office Ltd (FEX0101), see also Post Office, Post Office and UK banks partnership secure access to local banking services (24 January 2017): http://corporate.postoffice.co.uk/our-media-centre#/pressreleases/post-office-and-uk-banks-partnership-secure-access-to-local-banking-services-1761968 [accessed 14 March 2017].

319 Q 191 (Prof Alasdair Smith)

320 Q 247 (Simon Kirby MP)

321 Written evidence from The Open University (FEX0009)

322 Written evidence from Oakam Ltd. (FEX0064), ABCUL (FEX0037), Birmingham Financial Inclusion Partnership (FEX0049) and Leeds City Credit Union (FEX0069)

323 Written evidence from Shelter (FEX0056)

324 Written evidence from Citizens Advice Redcar et al (FEX0048) and Shelter (FEX0056),

325 Q 45 (Catherine McGrath), see also Kiwi Bank, Homepage https://www.kiwibank.co.nz/ [accessed 14 March 2017]

326 Written evidence from the Post Office Ltd (FEX0101) and Birmingham Financial Inclusion Partnership (FEX0049); see also Q 211 (Christopher Woolard)

327 Q 208 (Andrew Bailey)

328 Written evidence from The Consumer Council (FEX0082)

329 Federation of Small Businesses, Locked Out: The impact of bank branch closures on small businesses, (October 2016) p 5: http://www.fsb.org.uk/docs/default-source/fsb-org-uk/fsb-bank-branch-closures-(final).pdf?sfvrsn=0 [accessed 14 March 2017]

330 Such as the written evidence from Housing Rights (FEX0021) and Later Life Ambitions (FEX0050)

331 Q 211 (Christopher Woolard), written evidence from the Post Office Ltd (FEX0101)

333 Department for Business, Innovation and Skills, Securing the Post Office Network in the Digital Age (November 2010) pp 8–9: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31809/10-1260-securing-the-post-office-network.pdf [accessed 14 March 2017]

334 Written evidence from the Post Office Ltd. (FEX0101); see also Department for Business, Innovation and Skills, Securing the Post Office Network in the Digital Age (November 2010):  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31809/10-1260-securing-the-post-office-network.pdf [accessed 14 March 2017].

335 Written evidence from the National AIDS Trust (FEX0042)

336 Written evidence from Macmillan Cancer Support (FEX0057)

337 Written evidence from FCA (FEX0083) and Macmillan Cancer Support (FEX0057)

338 Written evidence from Clinks (FEX0026)

339 Written evidence from the British Insurance Brokers’ Association (FEX0075)

340 Written evidence from the Association of British Insurers (FEX0085)

341 Written evidence from BBA (FEX0019)

342 Lloyds Bank, Consumer Digital Index 2016 (January 2016) p 19: http://www.lloydsbank.com/assets/media/pdfs/ConsumerDigitalIndex_280715AP_0116_v9_Web.pdf [accessed 14 March 2017]

343 See, for example, 170 (Nick Williams).

344 See, for example, written evidence from CAP (FEX0014).

345 Douglas White, Across the Divide: Tackling digital exclusion in Glasgow, Carnegie UK Trust (April 2013) p 5: http://www.carnegieuktrust.org.uk/carnegieuktrust/wp-content/uploads/sites/64/2016/02/pub14550115961.pdf [accessed 14 March 2017]

346 169 (Adam Micklethwaite)

347 Q 65 (Philip Connolly)

348 Written evidence from Mencap (FEX0060)

349 Written evidence from the Money and Mental Health Policy Institutes (FEX0071)

350 Money Advice Service, Financial Capability in the UK 2015 (November 2015) p 51: https://prismic-io.s3.amazonaws.com/fincap-two%2Fd08746d1-e667-4c9e-84ad-8539ce5c62e0_mas_fincap_uk_survey_2015_aw.pdf [accessed 14 March 2017]

351 Written evidence from Barclays (FEX0074)

352 Q 67 (Lucy Malenczuk)

353 Known until November 2016 as the Tinder Foundation.

354 Q 169 (Nick Williams)

355 Q 48 (Matthew Carter)

356 Q 170 (Nick Williams)

357 Q 161 (Virraj Jatania)

358 Pockit, ‘Homepage’ www.pockit.com [accessed 14 March 2017] see also the oral evidence from its co-founder, Virraj Jatania, QQ 159–167.

359 Squirrel, ‘Homepage’ https://squirrel.me/ [accessed 14 March 2017]

360 Neyber, ‘Homepage’ https://www.neyber.co.uk/ [accessed 14 March 2017] see also written evidence from Neyber (FEX0065) and oral evidence from its Co-Founder Monica Kalia, QQ 159–167

361 Wollit, ‘Homepage’ http://wollit.com/ [accessed 14 March 2017]

362 Q 146 (Martin Lewis OBE)

363 Written evidence from Toynbee Hall (FEX0073)

364 Written evidence from Responsible Finance (FEX0005)

365 Q 164 (Virraj Jatania) and Q 158 (Faisel Rahman OBE)

366 Financial Conduct Authority, ‘Regulatory sandbox’ https://www.fca.org.uk/firms/project-innovate-innovation-hub/regulatory-sandbox [accessed 14 March 2017]

367 Written evidence from FCA (FEX0083)

368 Q 158 (Faisel Rahman OBE)

369 Q 131 (Damon Gibbons)

370 HM Government, ‘Universal Credit: How to claim’ https://www.gov.uk/universal-credit/how-to-claim [accessed 14 March 2017]

371 Q 235 (Rt Hon. Lord Freud)

372 Q 170 (Peter Wells)

373 Written evidence from Keep Me Posted (FEX0020)

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