Financial exclusion is a growing problem in the UK, with an estimated 1.5 million people without a bank account. Many more have severely restricted access for financial products for a number of reasons. Financial exclusion can manifest itself in many different ways and be caused by a number of factors.
Those who don’t have or are unable to open a current account in the UK are generally referred to as ‘unbanked’ or ‘underbanked’. Then there are others who are operating with the most basic banking products available to them and find it almost impossible to secure any form of credit.
Among the many causes of financial exclusions, here are just a few:
Poor or Limited Credit History
If a person has had a history of poor credit, whereby they have had difficulty paying off loans and credit cards in the past and have missed payments, a bank is less likely to give them access to certain products. Some people have a limited credit history due to a lack of borrowing or difficulty proving their identity. Those who have been declared bankrupt or have CCJs to their name, can also find certain areas of the financial services industry shut off to them
Many older people who tend to rely on physical bank branch have been hard hit in recent years by sweeping branch closures by the main banks in the UK. Some have struggled to adapt to online banking, don’t have adequate broad or don’t yet trust it. Those in rural areas have been especially affected as there may not be a bank branch from miles and public transport is often unreliable.
Banks Don’t Want Your Custom
As strange as that may sound, some people can be excluded from certain financial services because they simply don’t make banks any money. These could be people who always pay their credit card bills on time and never go overdrawn, and therefore pay no interest. Banks may avoid customers who they aren’t going to profit from.
So What Can be Done to Combat Financial Exclusion?
Here are three steps which can bring more people into the financial world:
Address Credit Issues
It can seem like a bit of vicious circle for someone with a bad credit history to remedy that because they need to show they can a responsible borrower, but to do that need to borrow first. If you can, you should pay off all outstanding debt or a least switch it to a 0% card to make it easier to pay off.
You should also study your credit report to see if there are any discrepancies or black marks against your name which you are unhappy with. You can raise a dispute if there’s something on your credit report which you contest.
Find out alternatives to bank branches which don’t involve a crash course in online banking. Some banks offer mobile branches, which travel to different areas on certain days.
You can also look into banking services offered by the Post Office. Many rural shops now house a branch of the Post Office and you can open and maintain a bank account through them.
Banks which tend to shun less profitable customers are often the more traditional ones. It can be a lot easier accessing products offered by fintech and challenger banks, who also offer lower fees and rates.
You can also look at prepaid debit cards, where you simply load money onto them and can also set up regular payments on such as direct debits and standing orders.