Banking in the UK may be a colossal industry, but a significant number of people cannot get access to a UK current account for a various number of reasons.
The majority of adults in the UK have at least one account with a bank or building society, but for many, this is an avenue that is closed off to them and these people are referred to as the ‘unbanked’ or ‘underbanked’.
It is estimated that there are around 1.5 million unbanked adults in the UK. That means they cannot open a current account with a major bank or building society and this may be for a number of reasons.
Below we discuss some of the main reasons why people are unbanked in the UK:
They Can’t Prove Their Identity
Opening a bank account requires you to prove you are who you say you are and that you are living in the UK. Some people who are new to the country, whether they are refugees or migrant workers, may not be able to provide proof of a permanent address.
Even people who have lived in the UK for a long period of time may find it difficult to prove their ID if they have never been on an electoral register, not had a utility bill or bank statement with their home address on it or changed their name.
Previously Been Denied Credit or Been Declared Bankrupt
A poor credit score can see some people excluded from many banking products. Many current accounts offer overdrafts, which is effectively a form of credit, and credit cards, therefore having a history of poor credit can work against you.
Those with CCJs or who have been declared bankrupt will also be limited as to the type of financial products they can access.
Can’t Guarantee a Minimum Deposit
Many bank accounts will insist the holder deposits a minimum amount in each month, usually £500 for many accounts in the UK. If you are not in regular employment or work as a freelancer whereby your income fluctuates considerably, you may not be able to deposit the required amount each month.
How Can the Underbanked Access the Banking Industry?
Basic Bank Accounts
For those with poor or limited credit history, a basic bank account is a good option. It does not offer an overdraft or credit card, so there will be no credit check required before being approved. All you need is ID and proof of address.
Some basic bank accounts may require a minimum monthly deposit, but it is usually much lower than for standard current accounts. Basic bank accounts aren’t great money-spinners for the banks, so they won’t advertise them and you’ll need to ask about them.
Challenger banks are those which operate solely online or in-app form. These banking accounts are sometimes also referred to as fintech banks. These are good options for people who lack sufficient identification documents such as utility bills or proof of address.
Challenger banks use biometric methods and can even chat to you or allow you to send in a short video to prove who you are. You will have an account number and sort code, like a normal bank, but have to manage all your banking online or via a mobile banking app.
- Do you suffer from a poor credit history or have trouble proving your identity? Discover how Suits Me® is working to provide financial inclusivity for everyone.