Financially excluded communities in the UK want high street banks, not alternative organizations, to provide them with community banking facilities, a new study has found.
A Joseph Rowntree Foundation investigation into financial exclusion discovered that among low-income consumers ‘there was little support for dealing with non-mainstream financial service providers’. Instead they favoured ‘household names’ used by the rest of society.
The report, Kept Out or Opted Out? claims mainstream banks could provide the cheap ‘no frill’ products needed by making small adjustments to existing products.
‘On the whole their requirements are not so very different from those of most other consumers,’ it says. ‘Where there are differences, these generally require fairly minor adjustments to existing products rather than fundamentally different forms of provision. Nor is there much appetite for dealing with alternative providers who specialise in the needs of low-income households.’
Report researchers Elaine Kempson and Claire Whyley, of the independent Personal Finance Research Centre at Bristol University, claim that simpler mainstream financial products would be cheaper to provide and to regulate, and could be made available at lower prices.
They also claim that cheaper products could, in some cases, be achieved by breaking down complex financial products into smaller, more affordable elements. Banks should therefore:
consider allowing savings products to be used as security for cash loans
create current accounts that give no direct access to credit
offer insurance policies that provide second hand replacement value
tailor financial products for Pakistani and Bangladeshi households that require financial vehicles in line with the teachings of Islam.
Most financially excluded individuals also want the option of making weekly or fortnightly payments rather than monthly ones, according to the report.
‘Many of the requirements identified in our focus groups are very similar to those of any consumer,’ say the researchers. ‘They want simplicity and transparency, cost and value for money, and appropriate marketing.’
Despite this, they conclude that sometimes private sector involvement is not enough and that ‘public-private partnership may be the way forward.’
The report is optimistic about the future, noting that banks are beginning to tackle financial exclusion and that the climate of opinion is more disposed to finding solutions to financial exclusion than at any time in the past.