Banks told to improve access to suitable basic accounts

New research by the Financial Conduct Authority (FCA)  has found that banks have been pushing homeless people or those in financial hardship towards unsuitable online applications and away from basic bank accounts. These accounts are free, do not include an overdraft facility, and provide essential banking for those unable to open a mainstream account.

Now, the nine UK banks and building societies that operate basic bank accounts have agreed to the Financial Conduct Authority’s (FCA) demands to make access more straightforward.

Basic bank accounts have many of the same functions as a regular current account, but are designed for those who might otherwise be excluded from the banking system. More than four million people in the UK have these accounts. They are offered by Barclays, The Co-operative Bank, HSBC, Lloyds Banking Group (including the Halifax and Bank of Scotland brands), Nationwide Building Society, NatWest (including the RBS and Ulster Bank brands), Santander, TSB and Virgin Money.

People struggling should find it easier to access basic bank accounts, after nine banks committed to improving widespread poor practice identified by the Financial Conduct Authority (FCA).  

A mystery shopping exercise by the FCA found that a third of experiences with basic bank accounts were rated as poor or very poor.  The mystery shop revealed that the bank account providers were not consistently offering these accounts to customers who could benefit from them. This included people facing financial hardship or without standard identification, and especially those with no fixed address. The firms often failed to mention basic bank accounts at all and pushed customers in vulnerable circumstances towards online applications unsuitable for their needs.  

To address this, the banks and building societies have agreed to individual improvement plans and to work with UK Finance to secure a collective commitment from firms to provide the right account for customers first time, with clear communication and minimal friction.  They should also make it straightforward for customers without standard ID or a fixed address to open an account.  They should also spot vulnerability early and offer accessible alternatives to online-only journeys. 

Emad Aladhal, director of retail banking at the FCA, said “Progress has been made with over 97% of UK adults having a current account, but our latest work shows that all too often banking firms’ engagement with customers still needs improvement. Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out. 

“That’s why the biggest banks have now committed to improving how they are offered – and we’ll be holding them to account to make sure change happens.” 

Peter Tyler, Director of Personal Banking at UK Finance, said “A basic bank account can be an important first step towards financial independence, and while most customers who hold one have positive experiences, we recognise that more can be done to ensure consistently good outcomes for everyone. That is why UK Finance and our members are committed to raising industry standards and expanding access. 

“The recently expanded Breaking the Cycle initiative is a key part of this work, providing practical support to those facing barriers to accessing essential banking services, such as individuals without a fixed address.”