Who's financially excluded?
Millions of people in the UK can't access basic banking services or find the range of services they can access severely restricted.
We generally think of the problem, broadly referred to as 'financial exclusion', as affecting those with no or very poor credit histories.
For them, financial exclusion can mean deepening social exclusion: being paid and paying essential bills becomes more difficult; saving to ensure security for the future or for emergencies becomes near impossible.
The Better Banking Campaign, which fights for financial inclusion, says that between five and seven million people cannot access mainstream credit and a further 1.75 million adults don't have access to even a basic bank account.
Particularly over the past few years, however, the term 'excluded' has also been used to refer to those with good credit ratings who have been left unable to access financial services - especially top tier borrowing products and long term commitments such as mortgages - which would have once been available to them.
For them, the consequences are far less likely to lead to social exclusion more generally but they may feel that they have a paucity of available deals, which also signifies a paucity of opportunities for achieving life goals such as owning a home.
This article will look more closely at the problem and ask: is exclusion just a fact of (financial) life? Or should it be fixed?
Causes of exclusion
Current or past debt
Those who have been made bankrupt or are in a Debt Management Plan (DMP) of one form or another are particularly likely to face financial exclusion.
Banks are often unwilling to extend even normal current accounts to them, offering basic or managed bank accounts instead.
The problem with those accounts from the banks' point of view is that the accounts are stripped of the elements which can make them money.
The problem from the consumers' point of view is that, as we look at in more detail here, as a result, the accounts can be hard to get, easy to lose and bereft of many services which would generally be regarded as 'basic'.
A prime example was RBS's decision, in August 2011, to stop its basic bank account holders using most cash machines.
To cut costs, basic customers were restricted to RBS ATMs, meaning that they had to walk on by 8 in every 10 machines.
Every time consumers use one bank's debit card in another bank's cash machine it costs the debit card provider about 25p, a cost that, RBS argues, soon adds up.
However, Lord McFall of Alcuith, the former chairman of the Commons Treasury Select Committee disagreed that the move was fair.
"The ATM network exists together or falls together," he said.
"It all falls apart very fast when they start excluding groups of people. It is extremely worrying and a big step back, in these times of financial hardship, financial exclusion can mean social exclusion."
As is often the case with basic accounts, financial inclusion takes second place to the banks' profit margins. And they're not the only product hit by that tension.
According to some, top tier applicants - those who never miss a payment or pay interest on their accounts - have found themselves rejected by the providers for being 'too perfect'.
David Seaman, of US site Credit Outlaw, is typical of commentators both in the UK and across the pond when he says: "They [credit card providers] don't lend for charity's sake. They lend to make money.
"And if they have concrete proof that you have never added a cent to the bottom line of any card company, you aren't terribly attractive to them."
Lenders themselves deny that they screen applicants for their likely profitability, just how likely they'll be to pay back debts.
However, if the existence of 'too perfect' applicants is up for debate, the fact that providers prefer more loyal, and therefore more profitable overall, customers is not.
In September 2010, for example, Defaqto warned that credit card providers were increasingly restricting their deals to existing customers.
The market analyst found 45 credit cards which were only available to those who have a current account with the lender already. In 2007, just 8 credit cards were only available to existing customers.
Of course, another reason that providers might prefer to lend to their existing customers is simply that they have more information about them.
Indeed, missing or incorrect records are often the root cause of rejection despite the large amount banks do share.
Records might be lost because an applicant has moved from abroad - there are few opportunities to 'move' a credit history overseas - or just moved - accidentally or purposefully - by providers.
In February 2010, for example, thousands of pre millennium borrowing records started failing to appear on credit reports.
50 million active financial accounts were lost after banks carried out a clause of the Data Protection Act preventing them from sharing information about customers without consent.
Since old account terms and conditions didn't include permission from customers to pass their details to other organisations, the histories disappeared from reports.
"A missing account could have a significant impact on a lending decision. We do not think anybody should be forced to agree to share data but if you are applying for credit it makes sense that lenders see what other accounts you have open," a Which? spokesperson said.
Even if customers have agreed to let their information be shared, not all banks and building societies will release it.
Some, particularly smaller outfits such as regional building societies or private banks, simply don't like to share.
Finally, around four million Britons don't have access to the internet.
Research from Which? has shown that the average rate for an instant access account in branch is just 0.56%. Online it's 1.14%.
An online saver with a variety of accounts would be 37% better off than a branch saver with the same type of accounts over the course of a year, the report concluded.
Again, this is a clear case where digital exclusion is tied to social exclusion.
In addition, 39% of those that can't get online are over 65.
Products for this group are particularly likely to be cheaper online Which? found. The consumer group's best buy travel insurance policy for over-75s when the research was carried out was 276% cheaper online.
"In our view, banks have a duty to be socially responsible, serving all of society, not just those customers who are the most profitable."
- Which? spokesperson
"Considering how much public money has propped up the financial institutions, it is deplorable that they aren't currently supporting the people and businesses most in need in our communities."
- Better Banking Campaign spokesperson
Government and regulator intervention
Government, regulator authorities and consumer groups generally agree that some form of intervention is necessary to stop financial exclusion.
Consensus is particularly likely where social and financial exclusion meet.
According to research carried out for the Better Banking Campaign, 70% of people think having access to mainstream financial services should be a basic right.
Despite the problems outlined above, the fight to offer very basic services appears to be being won: in 2003 3.6 million people didn't have a bank account and by 2011 that had fallen to around a million.
That increase in inclusion is at least partly down Labour's 'inclusion taskforce' which, from 2005, worked with banks to reduce the number of people without an account.
In early 2010, Consumer Focus claimed that nearly 1 million of the poorest people in the UK could be better off if a new simple to use bank account was launched by the Post Office network, a Post Office bank was subsequently a Labour election promise and a 2010 budget promise.
The inclusion taskforce was dropped by the Tories in 2011.
On the other hand, the increasing popularity of payday lenders and home credit companies, discussed here, which often charge interest equivalent to 2,500% APR or more, springs, it's often claimed, from exclusion from mainstream borrowing.
Government is much more reticent about intervening to make banks increase lending, however.
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