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Nikhil Rathi, Chief Executive for the FCA, recently delivered a speech at the Scottish Financial Enterprise event in Glasgow, which highlighted the importance of extending financial inclusion across the industry.
Financial inclusion can be defined as individuals, regardless of their background or income, having access to useful and affordable financial products and services.
There can be many factors that can prevent an individual from accessing a financial service. Common barriers include:
In addition, certain populations, such as low-income individuals, rural residents, or people with characteristics of vulnerability may face additional barriers when trying to access financial services.
Those who are unable to access certain financial services are more likely to find it harder to get back on their feet when things go wrong. A sudden expense such as a car or appliance failing, theft of property or an accident can have a severe knock-on effect, and in some cases may even leave some people out of work.
One of the biggest forms of financial exclusion is not having access to a bank account. According to the FCA, 1.1 million adults – or 2.1% in the UK - are unbanked – this is down from 1.3 million in 2017. The proportion of 18-24-year-olds without a bank account is more than double that of those aged 25 and over. Moreover, 10% of Muslims in the UK have no account; and 7.0% of those are without work.
The FCA has shown great focus on improving outcomes for customers in recent years, and building awareness of financial inclusion would be another huge step toward improving consumer outcomes. However, the regulator has itself admitted that it “doesn't have all the levers at its disposal” to tackle all issues of financial inclusion and, thus are unable to justify making it a statutory requirement. More work also needs to be done to address what barriers remain in place for consumers trying to access financial services.
Talking about finances remains a taboo subject for many people. Many are more willing to talk about mental health than financial health out of fear of judgment, and this can have an impact on how consumers communicate how they choose to manage their money.
Technology will play a key role in tackling financial inclusion, whether that is helping consumers to better understand how to handle their finances, opening up wider channels for communication and access to products and services, or more importantly, allowing firms to better understand to better identify clients that need more support.
Read the full speech here.
If you are interested in learning more, the Development Zone has a range of courses related to topics we have touched on in this article, including our ‘Consumer Barriers within the Financial Services’ course.
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