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6 Reasons why people are unbanked or underbanked

While many of us may take having a bank account for granted, there remains a sizeable amount of people who find themselves with limited access to mainstream banking services. The terms most commonly…

While many of us may take having a bank account for granted, there remains a sizeable amount of people who find themselves with limited access to mainstream banking services.

The terms most commonly used to refer to these individuals are ‘unbanked’ or ‘underbanked’ and over one million people in the UK can be classed as such.

There are a variety of different reasons why people are unbanked, some are of their own their choosing while other have been imposed on them due to different circumstances.

Among the many reasons why people are underbanked are:

Poor Credit History

Many banking products involve an element of borrowing in them, such as overdrafts and credit cards. If an individual has a low credit score, they will find their access to such banking products restricted. People can have a poor credit history if they have missed payments on loans or credit cards. Also, people who are new to banking may not have built up enough of a credit history for them to be offered certain products.

Credit Rating Scale

Lack of Trust in Mainstream Banking

Many people still hold a lot of distrust in financial institutions and aren’t confident that they will take care of their money. Some people believe that the fees banks charge are too high and voluntarily remove themselves from the mainstream banking system.

Convenience and Access

With many banks closing branches in rural areas, many people have found their access to banking curtailed and limited. Although many have embraced online banking, other customers, particularly older people, are not as computer literate and so have not been able to access the products they would like to. Even in areas where there are enough high street bank branches, many people find themselves underbanked because branch opening hours simply aren’t convenient for them.

Online Banking

Problems with Language and Literacy

A large number of unbanked individuals find it difficult to understand the jargon and different terms associated with various banking products. This means they are not confident enough to take on certain products or to even ask advice from bank staff.

In other cases, migrant workers, people who have moved to the UK from other countries don’t speak English well enough to be able to communicate their banking needs and most banks don’t have translating services to help them. Therefore, they go underbanked as a result.

Unemployed or Lack of Steady Income

To open a bank account, many banks will insist that you have a job or a steady source of income. This is because many current accounts require you to deposit a minimum amount each month – usually around £500 – to keep the account open. People who are unemployed, therefore find it difficult to access a majority of banking products. Even those who work on a part-time or freelance basis cannot guarantee that they will earn the same amount each month. This leads to them unable to open an account which requires a minimum deposit each month.


People who have been declared bankrupt may not be able to open a new bank account until they have settled all their outstanding debts or had their assets unfrozen. 

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