The FCA has published an Occasional Paper on Access to Financial Services in the UK which includes findings from an independent research report, Mind the gap – Consumer research exploring the experiences of financial exclusion across the UK.

The FCA’s Occasional Paper acknowledges that the issue of financial exclusion is enormously complex and that the FCA alone cannot address all of the issues.  It has commissioned the paper to act as a way of raising issues and acting as a catalyst for debate and dialogue amongst all sides including firms, consumer groups, charities and Government.  The FCA makes clear that the paper should not be seen as necessarily reflecting the view of the FCA, though the FCA may take the content into consideration when discharging its functions.

The paper recognises that consumers do not have an absolute right of access to financial services, that firms do not have an obligation to provide them and that there may be a range of reasons why limiting an individual consumer’s access to financial products and services might be the appropriate approach (for example, to prevent irresponsible lending).  However, it suggests that UK individuals and households can only take responsibility for their own financial well-being and help improve market integrity, competition and economic growth if they have access to financial services that meet their changing needs throughout their lifetime.

The paper describes three themes pervading access issues faced by customers:

  • The maze – complex and bureaucratic processes lead to a lack of transparency.  Certain consumer characteristics and circumstances can make obtaining a suitable product or service at an affordable price difficult or impossible.
  • The fog – financial products are often communicated and marketed in a way which makes them more difficult for consumers to search for and to understand.
  • The void – consumers can get ‘stuck’ or be ‘blocked’ from accessing financial products and services because of physical ability or capability issues.

The research discussed access issues through the lens of five major social and technological trends: digital transformation, especially in banking; compliance and crime prevention, in the form of the anti-money laundering and know-your-customer regulations; automated processes in the credit market; increasingly segmented markets for insurance; and how policies to tackle problems associated with an ageing population impact on people’s access to credit in later life.  Some examples of the problems found in the research include:

  • Consumers with no permanent address or who move often can have problems opening bank accounts and gaining access to credit, as this affects verification of their details.  This particularly affects members of the Armed Forces and people renting privately.
  • Not all consumers have access to digital or online networks which limits their ability to get online (for example, those in rural areas may not have access to fast broadband services).
  • Capability and willingness to engage with financial services in an online environment may lead to some being excluded because they lack the skills to engage digitally or excluding themselves because they are not confident or comfortable engaging digitally or online.
  • Not having a passport or a driving licence causes consumers problems in getting a bank account, as these are the typical standard documents used to verify identity.  The paper considers that it is important that firms are clear and consistent as to what their requirements are when it comes to proof of identity or verification of the source of funds.  In addition, where consumers are unable to meet identification and verification requirements, firms should signpost consumers to where these documents might be obtained or where they can access help and advice.
  • Consumers do not understand how credit scoring works, when it is used, the role of credit reference agencies, who makes the lending decision and how customers can obtain a copy of their credit file.
  • Quotation searches help customers when ‘shopping around’ for credit, but some lenders are reluctant to provide them.
  • A need to prevent customers from taking on unaffordable or unsustainable debt but that equally, older consumers should still be able to access products that meet their needs and circumstances.  Where they are not able to do so they should be given clear explanations as to why they have been declined and signposted to other sources of products or advice.