For too long financial inclusion has been considered to be an issue restricted to the developing world. In fact, 100 million people are thought to be unbanked or underbanked across Western Europe. When individuals and small businesses cannot participate in the financial system and transact exclusively in cash, a significant amount of wealth is stored outside of the financial system and credit is scarce and expensive. Individuals and economic growth suffer.
As a socially responsible business, Mastercard recognises the role it can play in driving inclusive growth by addressing this challenge. Across the globe we are sharing our digital payments expertise with Governments and others with the aim of reaching 500 million excluded people by 2020 and here in the UK we are also proud to sponsor the independent Financial Inclusion Commission.
Business has a role to play, but Governments must provide leadership. Encouragingly, Theresa May has recognised the relationship between inclusion and economic success by setting-up the Inclusive Economy Unit within the Cabinet Office only a few weeks ago.
By taking a lead on tackling exclusion and unlocking growth in this way policy is likely to have a positive effect on people’s lives and Government revenues.
However, if the ‘economy is to work for everyone’ we all must have access to it – being financially included is key to this. Right now, 1.5 million people in the UK remain unbanked. This locks them out of the digital economy and unable to contribute to it. It leaves those who can often afford it the least to pay more for goods and services (about £1,300 a year), and to have less choice and control over their finances.
The UK has a flourishing digital economy which relies on electronic payments to enable businesses, governments and individuals to connect. However, as an increasing number of services and consumers go digital the social and economic cost of financial exclusion is likely to increase exponentially if Government does not address this issue quickly. Universal Credit, the new combined single welfare payment, provides a unique opportunity do just that, financially and digitally enabling excluded families and individuals.
We believe this opportunity should be grasped, because inclusive growth without financial inclusion is impossible.
Jennifer Duncan is Vice-President of Public Affairs and Policy at Mastercard UK&I. She is also responsible for the business’ inclusive growth policy across Europe and is part of the Financial Inclusion Commission Secretariat.