The Financial Inclusion Commission and Fair By Design is calling on the Government to introduce a statutory commitment for the FCA to take into account financial inclusion across the board as part of the Future Financial Regulatory Framework Review.

The Commission and Fair By Design believe that everybody should have access to financial products and services that meet their needs over the course of their lifetime. For this to happen the market needs to be able to accommodate the specific needs of people on low incomes and with certain characteristics, such as those with a physical disability or experiencing poor mental health – regularly referred to as consumer vulnerabilities. However, the market has evolved so that those who often have the least resources and are most vulnerable:

• struggle to afford, or pay extra for, appropriate products and services because they are deemed to be a higher risk/not as desirable to serve;
• are not able to access products and services that meet their needs because they are deemed to be ‘non-standard’;
• are excluded altogether.

The Financial Conduct Authority (FCA) has a range of powers and tools that it uses to regulate the market. These include its statutory objectives as well as the Treating Customers Fairly outcomes and its Public Sector Equality Duty. Despite all of this, it still does not have a clear duty or cross-cutting ‘must have regard’ provision to tackle financial inclusion. The new FCA Consumer Duty will not address this issue either.

We want a clearer remit placed on the regulator to ensure it routinely and properly explores financial inclusion issues across its work, allowing greater clarity on the unintended consequences of regulation, the best interventions needed to ensure financial inclusion, as well as who is best placed to act. This will sometimes be the FCA, the Government, or a mixture of institutions working together.

We believe that the Future Financial Regulatory Framework review provides an appropriate vehicle to achieve this and it is currently open for consultation. The FCA has a huge opportunity here to help those who are being let down by the current financial market, but they need the Government to introduce this duty.

Join our campaign by signing our open letter here.

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.

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/.