As the U.K. moves toward its recovery from the COVID-19 pandemic, a recent report by Her Majesty’s Treasury and the U.K.’s Department for Work and Pensions (DWP) has outlined measures that will help boost financial inclusion and capability for more people in the country.
According to the report, the measures will help people move beyond “the basic necessity of being able to open your first bank account, to accessing credit, insurance and the right mortgage products at an affordable price, and when planning for retirement.”
Access to banking services is one of the key areas highlighted in the publication to promote financial inclusion. This is because “the government recognizes that most individuals in the U.K. primarily interact with financial services and products through their bank, from budgeting their monthly salary to managing their mortgage or credit card payments,” the report stated.
The report found that during the pandemic, an increasing number of customers shifted to digital banking methods and relied less on access to a physical bank branch, with 83% of U.K. adults using contactless payments, 72% using online banking and 54% using mobile banking in 2020.
“This increasing use of a wider set of banking channels rather than just a traditional bank branch means that more consumers and businesses than ever are enjoying the convenience, security and speed of online and telephone banking,” the report added.
But while the pandemic has accelerated a shift to digital channels and a considerable number of customers have started using online banking services for the first time, some people — particularly those who might be vulnerable or digitally excluded — may still need access to a local physical branch.
“While the government does not intervene in commercial decision-making, it believes that the impact of branch closures should be carefully understood and – where possible — mitigated so that all consumers can access over-the-counter banking services,” the report stated.
It added that banks and building societies will need to balance customer interests and commercial factors when making decisions about the size and shape of their branch networks.
It’s the reason that in 2017, the government inked a deal with major high street banks known as the Access to Banking Standard, making it a requirement for these establishments to keep customers informed about branch closures and the alternative banking options available to them.
To further ensure the availability of banking services to all, the Financial Conduct Authority (FCA) published guidance for firms considering a reduction in their physical branches or the number of free-to-use ATMs in September 2020, with a requirement to “consider possible alternative access arrangements and communicate any changes to their customers” when a branch closure is being planned.
Related news: UK Takes Steps to Protect Cash, Reduce Consumer Borrowing and Support FinTech Growth
Apart from access to banking, the report also shed light on the measures taken to facilitate access to cash, which remains the second most frequently used payment method in the U.K. and represented almost a fifth (17%) of the total number of payments made in 2020.
Given its popularity, the government has committed to legislation to “protect cash in the future” and ensure that the country’s cash infrastructure remains sustainable in the long term, including supporting the widespread offering of cash back without a purchase by shops and businesses.
Developing a strong FinTech ecosystem is also at the top of the financial inclusion agenda; earlier this year, the government announced the introduction of a new “scale-up” visa stream in spring 2022 to attract global talent and to boost the country’s FinTech workforce.
Additionally, a commitment to provide 5 million pounds ($6.6 million) in seed funding toward the establishment of a new industry-led Centre for Finance, Innovation and Technology (CFIT) is another way the government is helping to support the broader FinTech sector.
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