If the media was to be believed, the fact that there are people without access to bank accounts in the UK has only just been discovered. Nothing could be further from the truth. The issue is real and ongoing. Let's have some facts. A thread....
The Financial Conduct Authority (the FCA) has responsibility for monitoring this issue. It issued a report on it earlier this year. The data in this thread all comes from there.
The number of unbanked adults in recent years was as follows:
Around one in fifty adults are unbanked.
The demographic looks like this:
As ever, it seems to be the young who lose out: it is also especially hard for them to be unbanked, I suspect.
The demographics of those unbanked are further explained as follows:
As the FCA also notes:
There were higher proportions of unbanked adults in Southern Scotland (6%), Outer London – West and North West (5%), Greater Manchester (4%), and the West Midlands (4%).
They add:
There is also a strong link to deprivation, as 3.6% of adults in the most deprived areas of the UK are unbanked, compared with less than 0.6% in the least deprived areas.
So, let's be clear that the problem of being unbanked does not mainly arise from having a bank account closed: it arises because a bank account is not available.
This, however, is not seen as a problem for all those without bank accounts. As the FCA notes:
One-quarter of the unbanked might not want a bank account. Around one-fifth do. The rest would like the option.
What is apparent is that people are not aware that large banks are legally obliged to offer basic bank accounts. These do not allow overdrafts. They di provide payment cards:
It would seem that very little effort is being made to make people aware of this service.
Around 15% of all applications for financial services products are refused, according to the FCA. Those being refused have the following profile, with all the usual prejudices in society obviously present:
Credit facilities were by far the most likely product to be refused:
However, bank accounts were also refused:
A staggering 16% of those who applied for a basic bank account were refused, double the rate for routine accounts.
There were reasons for rejection, of course:
It would appear that potential political bias by the organisation to which the application was made is a very limited issue.
There were much stronger reasons why people felt unbanked. One was because some (mainly older) people have a dependence on branch banking:
Too many of these people are being unbanked by the closure of their branches:
There is also a massive problem with exclusion as a result of banks relying on digital access:
There is also a barrier to data on banking for the same reason:
So, what to suggest?
I think that there are three vital issues to note.
The first is that if access to banking is now a social necessity (and I think it is), then the current situation of those unbanked is unacceptable.
Second, it is apparent that the current behaviour of commercial banks is not addressing this issue. Their focus on supposed efficiency is achieved at a considerable cost to many of their customers, many of whom might be considered the more vulnerable.
Third, when 16% of applications for basic bank accounts are being refused there is no safety net being provided.
In that case there is a need for real reform and this can only come from a state bank that:
- Guarantees basic bank accounts
- Has a wide High Street presence
- Is focussed on providing financial assistance
- Has the goal of achieving inclusion.
Which party will offer this?
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I suspect none of them, for fear of becoming unbanked themselves, together with their spouses and families as has just happened to Dr Joseph Mercola and his team in the States. Who really runs this so-called civilisation? I am led to conclude the banks do. It’s only at odd moments like this that that becomes apparent. Setting this scenario up is, I assume, why the Dutch bankers decided to throw their weight behind William in his bid to become King of England leading to the so-called ‘Bloodless Revolution’ of 1688/89. On his lonesome, William was only able to muster 15 ships, but with banker backing he was able to make the trip accompanied by 400-600 sails, according to which version one reads. Why would the banks be so keen? Because England was seen as virgin turf, full of naive innocents unaware of the intricacies of banking, ready to be engorged, ripe for the plucking.
Thus it is we find ourselves as we are today – plucked!
In a scenario in which bank branches are being closed wholesale and Post Office branches are being thinned or sometimes it is just the local postmaster gives up, small business is also often being ‘unbanked’ because it becomes more and more difficult to pay in and draw out cash.
Cash is particularly important to customers who are financially more precarious or unconfident as it is simpler to control that credit/debit cards. Indeed this is how the unbanked must survive.
Cash is the current safety net.
How remarkable then that the banks on the one hand avoid handling it for small business and yet on the other the unbanked must use it.
This is closer to my perspective on the matter. Notes and coin have always provided a viable answer; and they offer more freedom from central, arbitrary control. The desire of banks and government to capture everyone (whether to include or exclude them), is only possible in a new digital banking age. The sidelining if notes and coin comes with a greater practical threat to liberty than any political idea. Money is the most powerful human mechanism in the world: that is just a brute fact as immovable as the second law of thermodynamics. Control the money and you control everything, and everybody
How do the unbanked access notes and coins?
How did they ever? Coin preceded banks. For most of our history it was all we had. Notes were introduced on the back of the power of coin. Patterns of money circulation followed the path first established by coin. The digital revolution is the first time we are confronted by the banker’s dream of hegemony: no sovereign money at all save for the exclusive use of elite bankers: everybody else will require to use banker’s credit: on the bank’s terms. The banks can then cut a deal with sovereign government on the terms of engagement: the protocols for who is included, and who is excluded.
John That is not answering the question.
Very few payments to individuals are paid in cash. Even in 1973, when I had a holiday job in the DHSS, social security claimants received giro books which they had to take to the Post Office to be cashed. Now they can only be paid into a bank account. If they have no bank account they can nominate someone else to receive their money into their account and hope their nominee will give them their money. So even if they have no bank account themselves, they have to have access to one.
Actually I have written about this here often enough. Money as notes and coin; money in free circulation is still there and available. Financial institutions and government prefer that form of credit which can be more clearly managed and controlled; along with the people who use it. Unfortunately most people fall for or are led by convenience; but only in the digital age have we reached the stage that liberty can be immolated on the pyre of human convenience: and everyone happily falls for it.
John
I have to disagree. I know almost no one who wants to take cash now. It is utterly inconvenient and a red flag for tax evasion I am afraid. Money aludnering regs are also a nightmare with regard to it, and widening in scope.
It is also costly to bank and suppliers will not take it so that cannot be avoided.
Cash really is dying out, like it or not.
Richard
If you really want to secure freedom of access to money, there should be powerful advocacy of notes and coin: but there isn’t. Nobody cares. The new God is consumer convenience. We want it now. Well, AI and digital wallets are going to provide it; but Mephistophelean promises come with a big big price in liberty. But they will offer you more credit. …
Richard, I knew you would disagree. There it is. Of course there are downsides. This is money; it is the nature of the beast. The downsides are far less egregious than digital banking and AI in the hands of bankers. The real problem is bad actors whether in banks or government, and you can’t fix it. Digital makes it so, so easy for them. Your argument is convenience. I have already made the point. The problem of free circulating cash is known, abd is far less dangerous than digital. I do not believe there are virtuous politicians somewhere, who will somehow ride to the rescue. If any exist they will be swallowed whole before you can blink. Where are they? Who are they? We can only use what we have, and it ain’t much.
I am not arguing for digital
I am not convinced it will happen
I am saying cash is dying
Young people will not touch it
Richard, I know. The young get convenience, in spades. They do not get the concept of unintended consequences. They do not read Adam Ferguson. I know cash is the loser. So is liberty. There it is.
Oh, and digital has already bludgeoned liberty. Think of Cambridge Analytics.
Yes.
But that was not about cash.
It was an example of the silent way
digital technology manipulates power. An illustration of the principle in another critical context. It cost Brexit. If you control money and data you have everything.
The Post Office is the obvious place to run a basic account for people with a branch network. We are in retail and cash is a nightmare for us. Barclays have steadily closed all its branches near us and we have to deposit cash at the post office. Other than old folk the only people who pay cash (we sell big ticket items) are “at it”. Tax evaders in a nutshell. Cash costs us billions in uncollected tax. I’d abolish all notes > £5
So would I
Perhaps you could call this new bank the Girobank.
‘Fraid I’m with @ John S Warren
Cash represents freedom from bank control – no %age for cards and no handling – small businesses can pay cash together to each other.
Banks always take their cut.
Why should on earth should small business concur?
Where exactly is the actual benefit for them to pay the banks?
I have to disagree
I have long had this bias
I basically would not do accounts for businesses that took cvash, rare exceptions apart
Zero control
“Zero control”. But we must always ask, control for whom? Control by whom? Banks? Government? We have both, and we have little control over either. Will it be any different under Labour? You tell me. The law of unintended consequences rules. Always. Good intentions are insufficient.
Banks charge 0.5% for cash deposits. Supply chains can’t work with cash. It’s 2023 not 1823
Bank credit is just credit. It is at risk. Cash isn’t . Banks are subsidised to rip you off. And you are. Royally.
Cash can also cease to be legal tender.
Richard, it is the least at risk; the hierarchy of money.
My local chip shop is strictly cash only, they cite issues with getting the required internet connection for a card machine and costs.
Also there is a cashpoint next door
I have one like that
The one that takes cards is also very much better
Guess were i go?
Cash has its place. For the old and vulnerable (although I don’t know what’s difficult about contactless) and it’s useful for settling small private debts. Some very small businesses prefer to use it (eg chippies) but even the Newcastle market traders have card machines. As I stated above.1) Let’s guarantee everyone a basic bank account thru the PO 2) Limit cash to 10,20,50p,£1 & £2 coins and a new £5 coin. NO NOTES. These are only needed by drug dealers & other criminals, tax avoiders and conspiracy theorists like some of the commentators above.
Banks earn their profits as a consequence of the privilege they have been granted, to create money. The government, on behalf of the public, issues banking licenses. It should be a condition of those licenses that physical branches are maintained wherever there is a viable community to support. These branches don’t have to be individually owned by every bank, but they should operate on behalf of, and be supported by, all banks.
I recognise that there is a sensible discussion to be had about what, exactly, constitutes a “viable community”, but it shouldn’t be acceptable that banks can completely withdraw from large villages and small towns, as they have done all over the country. They owe these communities something for being granted the right do something that no other business in the country can do.
Agreed
Not practicable. The Internet banks would have to close and we’d be left with old inefficient banks. Who is going to pay for this? The whole reason branches closed is that individuals are not prepared to pay for banking. Current system is fine apart from the unbanked. As I stated above the state should subsidise local banking for the old and vulnerable through the post office
It’s astonishing that you would think that internet banks would have to go, when internet banking is very much in the majority. My suggestion about retaining a shared outlet (at least) in all communities is that it should be considered as a cost of doing business. With bank profits at the levels we constantly see, this should be affordable.
In response to Kevan Voce’s assertion (at 12:31pm today) that “The whole reason branches closed is that individuals are not prepared to pay for banking” is not wholly true. The principal reason for branch closure was increasing profits through massively reduced costs made possible by developments in digital technology.
We had an RBS branch near my home which was closed “due to reduced footfall” but, in years of regular use of the branch, I can only remember one occasion when there was no queue when I walked in. I asked the staff about the footfall and they said they didn’t recognise RBS’s figures (there is a sizeable retail park and an even bigger general business park close by as well as large resident settlements).
There can be no doubting digital advances have made it much easier to bank on-line, but it comes with considerable risk to the user. In the world of systems development and security, convenience generally comes with a price and that price is security. Just look at the massive increase in fraud that has occurred since online banking became widespread, which is why industry regulators (eventually) made the banks partly financial responsible for compensation in cases of fraud.
I agree with John S Warren’s views on the the need for cash and the rentierism that is enabled by digital finance. I’d rather pay full whack for B&B to the owner than pay a slightly reduced price on a website for the same accommodation in the same B&B and see 15% of the owner’s gross profit going to the website owner. My way means the local economy gets the full benefit and not some rich entrepreneur on the other side of the world who owns the website and knows and cares nothing for that local economy.
Banks are “efficient”? Bust in 2008, saved by the public purse; repaired with a sticking plaster solution, that the £40Bn interest rip-off on central bank reserves has exposed for the free lunch it is; and licences to rip-off the public on margin, at leisure. That “efficient” banking? Tour comment is certainly worth a passing laugh.
One thing being talked about that might prove to be a useful compromise would be the creation of ‘banking hubs.’ A place in a town or city (or even village, if we’re really dreaming) that is staffed by tellers empowered to facilitate simple banking transactions for several different banks. They could also dispense cash, for those who need it.
I have recently had dealings with some people who are now so scunnered with the online/on-phone banking changes that they have given up. Their finances are in a state, because they can no longer get to grips with the technology. At least one of them doesn’t have a digital phone he can use, and his computer has died. Another friend—not so elderly—depends on her bank branch. She does use a banking card, but she doesn’t have a computer or the kind of phone that allows her to monitor her bank account. Banking hubs would be a godsend for these folk. I recently received two cheques from the US IRS, which could only be paid in to my account at a physical bank. I had to travel quite a ways to get one that could deal with me.
A Royal Mail Post Office offering the same multiple-bank service (which they more or less do now) would also work …but then you can’t go around shutting all the Post Offices in most areas, and expect this kind of approach to be a howling success.
As to the need for cash at all, I take Richard’s point—that most people use cards for commercial transactions. (I also deplore this trend, for the reasons John S Warren cited.) However, having just paid a neighbour IN CASH who picked up a loaf of bread and a carton of milk for me …I’m left wondering how this sort of transaction would be handled if cash was no longer available. My significant Other pays a small admission fee every night he goes to his folk club, and to buy raffle tickets while he’s there—using cash. This is a volunteer-run event, and card machines aren’t available.
If there is a reasonable way to handle these kinds of small, interpersonal (not commercial) transactions without cash, fair enough. But I certainly hope cash doesn’t get yanked from our system before the people responsible for making these changes have done some pretty thorough troubleshooting. “Don’t be so negative. It’ll be all right on the night,” just won’t cut it, in many instances.
They could be part of a public services hub, also helping people fill in forms, etc.
And it won’t cut it at all in the event of a power cut.
Newcastle Building Society have viewed he departure of high street banks from communities as a business opportunity; and have moved in.
https://www.newcastle.co.uk/powering-communities/reimagining-branches
Across Europe, from Austria to Italy to Wales there are examp!es for service hubs in more remote areas which bring together essential services (including financial services) and ‘services of general community interest’ but they all seem to require some level of public sector intervention.
And we have governments that do nit believe in public sector intervention.
Exactly. Customers won’t pay for banking hence no private sector bank will run a branch network. Has to be run with public subsidy. Either PO or these guys. Sadly, this awful govt isn’t interested in this sort of thing they’d rather spend the money supporting wars. As the great Tony Benn said “if they can find money to kill people, they can find money to help people”.