Financial inclusion as a concept can stir mixed feelings in some people: on the one hand it means bringing as many people in to the safety of the financial mainstream as possible, away from those services on the fringes designed primarily to rip off people in vulnerable financial circumstances.

On the other hand financial inclusion might conjure up images of square pegs being forced into round holes: in other words trying to fit people in to a financial system not typically working in their best interest. Take for instance those people more comfortable only using cash: policies obliging them to get a bank account under the banner of financial inclusion, such as rules around receiving Universal Credit payments, might not be so attractive.
While financial inclusion has this contested meaning, financial exclusion seems relatively unambiguous: people shut out of mainstream financial services against their wishes.

Baroness Tyler of Enfield, the Chairman of the Select Committee on Financial Exclusion, summed the potential problem of financial exclusion up recently when launching a Committee report on the subject last year “The UK financial services sector is a world leader which makes it doubly unacceptable that it is failing those who need it most. Too many people still have no bank account or cannot get access to basic or fairly priced financial services. The ‘poverty premium’—where the poor pay more for a range of services from heating their home to accessing credit—contributes to a vicious circle driving people ever deeper into debt and distress.”

Yet we still know relatively little about what it means to be financially excluded today. While we are up to speed on these working definitions, there has been less emphasis, by government or any other agencies, to understand what the ‘lived experience’ of financial exclusion actually is: the impact it has on other aspects of somebody’s life, financially and socially, what digital skills that person may or may not have, and how it impresses upon a person’s financial capability and resilience.

This realisation informed Toynbee Hall’s work on the subject last year, which we contributed to Lloyds Bank’s Consumer Digital Index. During our work looking at financial exclusion and the ‘unbanked’ we found the following:
The three main reasons for not having a bank account were: a preference not to use banks (32%), incorrect identification for an account (29%), and a previous negative experience (15%).

  • 94% of people without a bank account have a personal income of below £17,500 per annum, and 91% live in households where the total income is £17,500 per annum.
  • 55% are in council housing, while 24% are in the private rental sector
  • 31% are between the ages of 20-29 and 26% between the ages of 40-49.
  • 70% are recorded as having nothing in savings, while 20.5% have between £1-100.
  • 73% primarily use another financial product, such as a Post Office Current Account or credit union, while 27% are cash-only.
  • 42% currently use, or have previously used, debt advice services.
  • Nearly 67% are either “very confident” or “fairly confident” using an online search engine for good deals on comparison websites.
  • 53% are either “very confident” or “fairly confident” using email and social media websites, and leaving feedback on shopping websites.
  • 44% use a smartphone

This year we are updating our work to see what impact some of the changes for consumers have had, including the introduction of fee-free basic bank accounts and the wider rollout of Universal Credit.Knowing just the number of people without a bank account (approximately 1.71m on last measurement) is not enough. We need to dig deeper and understanding what actually contributes to that exclusion: is it self-exclusion? Is it linked to digital exclusion? To what degree is it a generation issue?

The work we are doing is our contribution to that challenge. By going out and talking to the people for whom financial exclusion most affects we can begin to inform meaningful solutions, and move the conversation from mere assumptions to evidence-based research.

This year’s survey, which we will contribute to Lloyds 2018 Consumer Digital Index, can be found here.

Carl Packman, Research and Good Practice Manager, Toynbee Hall