Making financial inclusion a top political priority in the UK

THE FACTS

Financial exclusion remains a significant challenge for 21st century Britain which prides itself on being a global leader in financial services. 

28%

of adults or 14 million people have experienced a direct negative effect on their income due to the coronavirus pandemic (as of May 2020)

12.5 million

UK adults have little or no confidence in their ability to manage money

22%

of all adults in the UK have less than £100 in savings

1 in 5

adults would not be able to cover more than one month of living expenses if they lost their source of income

1 million

people in the UK do not have a bank account

16%

are borrowing to pay for essentials because they have run out of money

WHO WE ARE

We are an independent body of experts from financial services, businesses, the charity sector, academia and parliamentarians from all major parties.

We want a financially inclusive UK where financial services are accessible, easy to use and meet people’s needs over their lifetime, and where everyone has the skills and motivation to use them.

We provide leadership to improve the state of the nation’s financial wellbeing, championing financial inclusion as a public policy priority for public bodies, businesses, and civil society and challenge exclusion wherever it occurs.

We convene, understand and influence through assembling a coalition for change, gathering evidence, and creating and championing practical policies to achieve change.

About us

OUR LATEST STRATEGY, RESEARCH & CONSULTATION RESPONSES

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LATEST NEWS

The Commission provides evidence to the Work and Pensions Select Committee

To date, pensions have largely been absent from the financial inclusion debate, even though they are a major factor in ensuring people are financially and socially included in retirement. A large and worrying pattern of disparity in savings and outcomes is emerging, with 8.5 million people lacking any pension savings at all. 

The Work and Pensions Select Committee call for evidence on protecting pension savers touches on several barriers to saving for retirement. The Commission was delighted to be invited to offer oral evidence to the Work and Pensions Select Committee on the topic of accessing pension savings this month. Commissioner Laurie Edmans spoke on 16 June alongside other pensions policy experts, emphasising the importance of having access to pensions advice or guidance earlier in life to help people on their pensions journey. You can watch a recording of the evidence session here

Perhaps the most important issue to tackle is people’s ability to obtain guidance and advice. To overcome the disappointment many people feel when they reach retirement, they need to have a clearer picture of their retirement savings throughout their lives and the option to seek advice to make better financial judgements before it is too late. The Commission recommended better promotion of Pension Wise and an automatic enrolment into a Pension Wise interview throughout a person’s career, hopefully leading to an increase in the take-up of this vital resource. 

Beyond better, more consistent advice or guidance, the Commission has also recommended a refresh of the Pensions Commission, bringing it up-to-date and into the 2020s. The last thorough review of the system took place nearly 20 years ago, and since then the problems have changed. It is time for the solutions and thinking to change too. 

Pensions must be placed front and centre of any future strategy on financial inclusion, ensuring that retirement does not mean exclusion for millions.

UK FinTech Week 2021

During a year when everything moved online, FinTech has come to the forefront of many aspects of financial services. From banking apps to contactless payments, it’s clear that the Covid-19 pandemic has accelerated the adoption of digital tools. UK FinTech week is an opportunity to reflect on the role FinTech plays in everyday life, as well as the possibilities it presents for financial inclusion.

At the Commission, we recognise that FinTech can help in solving many of the challenges that lead to people being excluded from financial products and services. Too often, traditional products and services have little flexibility and are not serving the needs of consumers. More tailored products can lead to a greater number of people being able to manage their money in a way that works for them.

We were pleased to see financial inclusion given prominence in the recommendations of the Kalifa Review of FinTech earlier this year. In particular, the incorporation of financial inclusion in future regulatory design and strategic thinking will be vital to ensuring that no vulnerable consumers are forgotten as the financial services landscape changes. While barriers remain which fall beyond the scope of the review, it is encouraging that the sector will not move forward without consideration of its power to include more people financially. 

However, while the exciting developments in FinTech often present opportunities, there are still challenges to overcome. Digital and financial exclusion often overlap, creating a danger that people will be left behind financially if they face difficulties getting online. The pandemic has thrown into sharp focus the inequalities many households face when it comes to accessing the internet. Despite common narratives that young people are digital natives, CapGemini found that 43 per cent of the offline population globally are below the age of 35. The high cost of devices and internet access can prove a barrier to many on low incomes, while complexity and lack of skills can hold others back from transitioning online. Equally, we must not forget the number of small businesses owners who are not ‘digital by default’. Many small businesses, and particularly micro businesses, still need support to adopt new methods of payment and understand the online tools available to help them run their businesses so that they are able to thrive. 

Investment in digital skills and infrastructure must therefore be a high priority as the UK FinTech sector continues to boom. As we move, increasingly, towards digital solutions, there is a need to upskill the population to make sure that no one is left behind. Greater education in tech and digital will also pave the way for sustainable job growth in emerging sectors. FinTech leaders can contribute not only to the UK’s global pre-eminence in the sector, but also to employment as the country emerges from the economic impacts of the pandemic. 

The next year will be a crucial one for the UK’s recovery. We hope that FinTech can remain a key part of that recovery and move us closer to a country where everyone is financially included.

UK FinTech Week runs from 19 – 23 April and is run by Innovate Finance. You can find more details about their events at innovatefinance.com/ukfintechweek/

Amendments to the Financial Services Bill

This week marked the start of the Committee Stage of the Financial Services Bill in the House of Lords. Committee stage is the first stage in the legislative process where amendments (or changes) can be suggested to the Bill. 

We support the amendments proposed by Lord Holmes which are integral for improving financial inclusion in the UK through protecting SMEs, reviewing financial service regulation and adding a financial inclusion objective to the remit of the Financial Conduct Authority (FCA). You can find full details of these amendments here

In particular, we support the third amendment to add a Financial Inclusion Objective to the Remit of the Financial Conduct Authority (FCA). The Commission recently submitted a joint response, along with Fair By Design, to the Financial Services Future Regulatory Framework Review which included a recommendation that the FCA should be required to have a cross-cutting statutory duty to promote financial inclusion as a core objective. You can find our full response here.

Currently the FCA has no clear statutory requirement to address financial inclusion issues at all. It also does not routinely have regard to issues of financial inclusion across all of its work, wherever it is appropriate. By their very nature essential services, such as credit, payment systems and insurance are needed by everyone. However, currently poorer people pay more for products and services than those better off and products and services often do not meet people’s needs. Some people are excluded altogether. This is the justification for having a social objective like financial inclusion.

With our proposed new objective, the FCA will have responsibility for addressing the ways that markets often exclude those that are most vulnerable or disadvantaged. 

This amendment will not only help achieve this, but also give the FCA the responsibility to require firms to report on their use of financial technology (FinTech) in the pursuit of this objective. 

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