It won’t get better by chance, but by change (Part 1)
You’d be forgiven for thinking that the UK is a step ahead of the curve when it comes to personal finance.
With the explosion of contactless and mobile payments, as well as a conveyor belt of new financial apps for our smartphones, you’d be forgiven for thinking that the UK is a step ahead of the curve when it comes to personal finance. Yet, sadly, despite these impressive advancements, financial exclusion still exists in the UK today. While most of us are familiar with checking our account balance on our iPhones, or even using quirky apps that help us track our spending on a monthly basis, this is a stark contrast to the financial experiences of 1.7 million adults in the UK.
At the end of March, the full extent of this problem was brought to light by the House of Lords Financial Exclusion Committee Report. The fundamental goal of the report was to figure out how to work towards a future whereby the “scandal of the poorest being excluded from even basic financial services” no longer exists.
One of the primary recommendations within the report is the appointment of a Minister for Financial Inclusion. Having a government official devoted to solving this issue is a great idea in theory, and would really help to bring relevant parties together to shine the spotlight on the problem. However, for this person to truly make a difference, they must be ready to address a few key areas.
Bust the ‘free’ banking myth
While the myth of ‘free’ banking is beginning to dissipate, we need to ensure this façade is exposed once and for all. The banks have long been making money from current accounts through hidden fees such as on missed direct debits or extortionate extras like hefty charges on overseas payments.
These fees prop up bank revenues and can send vulnerable consumers into a world of debt. The real stinger here is the ‘unavoidable’ costs, where customers are forced to spend money that simply isn’t there – like the fees charged when you dip into your overdraft for a week or two before payday, for example.
This must be a top priority for an incoming Minister – they must realise that ‘free’ banking cannot be accepted as an industry standard because it does not exist. If it seems too good to be true, it probably is. Instead, the Minister must work to promote financial providers that are completely transparent – by charging a customer a monthly fee, for example, so they know exactly what they are getting for their money with no nasty surprises at the end of the month. Anything that adds to financial stress for vulnerable customers must be stamped out.