The Unbanked

by Sarah-Jayne Dunn, manager of the CAS Financial Inclusion team.

This article was first published in The Herald on 8th August 2006.

Every week in this column we talk, not just about the problems that we see in the CAB network, but about how public policy needs to change so that these problems can be eliminated or at least reduced. 

It’s always pleasing to be able to report that our campaigning has met with success.

Last October I used this space to launch a new campaign called Banking on the Basics, which used evidence from Scottish CABs to show the challenges faced by people who don’t have bank accounts. It called for banks to make it easier for people to open Basic Bank Accounts, instead of hiding the option - as many of them do. 

Because not having a bank account is one of the worst forms of financial exclusion there is. It means you can’t receive your wages or social security, you can’t get a tenancy agreement, you can’t get cheaper forms of insurance or apply for affordable credit products. You can’t even get a mobile phone contract. And everyday bills become more expensive because you can’t take advantage of cheaper deals offered to people who pay by direct debit.

You might be thinking, who doesn’t have a bank account? Well, across the UK 900,000 people don’t, including 160,000 in Scotland. People who've been made bankrupt, ex-prisoners, refugees, homeless people and those who have experienced domestic abuse. In other words, people who are already vulnerable and likely to be struggling financially.

Research by Virgin Money has found that the average annual cost of not having a bank account is £598 per year. To inflict this additional cost on people who are already struggling is not just cruel, it also makes no economic sense, because it makes it harder for them to get back on their feet and become economically active.

Basic Bank Accounts are supposed to be available to everyone: a simple, no-frills type of account that anyone can open. With no credit or overdraft facility they offer no risk to banks. But the problem is they also don’t make money for banks, and so they are practically hidden from view or made difficult to access. Often people can’t apply directly for them or are rejected due to poor credit scores or lack of approved identification. These were the problems we highlighted in our campaign.

So, what’s the good news? The Financial Conduct Authority (FCA) recently revealed that it conducted a secret analysis, using evidence supplied by our campaign, to expose the extent of the problem. And as a result, nine major UK banks have been compelled to improve their service in this area, pledging to make Basic Bank Accounts easier to open.

As ever, we must keep a close eye on the situation to make sure these commitments are made real, but the FCA has done a terrific job here and we commend it for following up our work. 

It’s a very good example of how the Citizens Advice network makes a difference. Not just by helping people in individual cases but by compiling evidence from those cases to identify systemic problems that affect people, and then campaigning to get those problems fixed.