What is financial inclusion?
In the UK there are around 1.5 million adults without a bank account (Financial Inclusion Commission). These people won’t be receiving any formal financial advice and will find it difficult to access any financial support.
There are up to 8.3 million adults in the UK who are unable to pay off debts or household bills (National Audit Office), and 50% of those adults will have a mental health problem (Mind, In the Red report, 2008).
It is estimated that in total 25.6 million people (half of UK adults) display one or more characteristics of being potentially vulnerable (Financial Lives Survey 2017).
All these people could be better supported and protected by more inclusive services that provide further guidance and access to relevant products.
An inclusively designed financial service is one that enables everyone to use and enjoy the experience, no matter what their situation or background. Financial inclusivity enables people to better understand and manage money. It provides access to a world of services that can improve lives, reduce poverty and boost the economy.
Inclusive design opens up your service to people who may have otherwise been excluded and means your current customers have a safety net if they need it
Being there for people when they need it most gives your organisation the chance to create real loyalty and advocacy in the long run. There is a clear business case for inclusive design.
Anyone can become vulnerable or excluded
Most people will be situationally or temporarily impaired — and therefore vulnerable — at some point in their life.
A vulnerable person could be someone who has a gambling addiction, a disability, or someone who has recently developed depression. Financial exclusion can also happen at any time for a myriad of reasons — from ex-offenders struggling to find affordable insurance products, to a newly divorced person trying to open a bank account without recent accounts in their name or proof of address.
While financial exclusion could affect anyone at any time in their life, it often impacts people with low or unstable incomes, those who have experienced a significant life change, are single parents, migrants, have a long-term illness, are disabled people or are long-term unemployed.
Financial inclusion is an area of growing importance. As our population ages, so does the probability of vulnerability.
There has been some positive progress in developing financial inclusivity over the past few years. Robo-advisors, for example, have helped provide access to financial advice for people with little or no means to get it otherwise. As have protective financial features, such as those that enable people to block transactions to gambling sites.
Digital has done much to improve our access to banking services, making it easier and safer to tend to our financial needs online. However, the shift online has meant that some less digitally-able users have found themselves increasingly excluded.
Many financial services are still not supportive or even adequate for vulnerable users, even though we might all become vulnerable or financially excluded at some point in our lives.
Regulation leads the way
All government websites have been required to be accessible since 2003 and, from 2010, the Equality Act ensured all public services were also accessible and inclusive. Regulators have started to slowly follow this trend over the past few years, and the Financial Conduct Authority (FCA) has put increasing pressure on UK banks to ensure they provide greater support for vulnerable and potentially excluded customers.
The FCA has provided a very broad definition of consumer vulnerability for the financial sector. The guidance the FCA has provided does not prescribe exactly what firms need to do as each firm will need to approach this differently to have the best impact. Successful financial organisations will need to ensure they are supporting vulnerable and possibly excluded users across the board from policy to delivery.
“Vulnerable consumers are those who are especially susceptible to harm because of their circumstances.“ (FCA, FCA Mission: Our Future Approach to Consumers.)
The last few years have seen an exciting step towards a more inclusive financial future. But there is a lot more to be done.
Designing for real life
There are many areas where financial services are commonly failing to actively support vulnerable users. Key service materials are still not inclusive, such as bank statements that are not easily understandable and accessible. Or services fail to offer the breadth of communication channels needed for vulnerable users within common customer journeys.
However, there is one area that stands out as a particularly obvious place to start improvements for many organisations: delegation.
There is currently a severe lack of temporary delegation services to support customers if a family member passes away suddenly or a friend needs someone else to take over their affairs due to a sudden illness or vulnerability. Unfortunately, these situations are quite common.
Customers currently have two main options:
Option 1 they apply for Lasting Power of Attorney (LPA) or Option 2 they pretend to be the person in need of assistance.
Option 1: Apply for Lasting Power of Attorney (LPA)
Imagine that a family member has suddenly been taken very ill. You are told they will hopefully make a full recovery but will need support — including finances — over the next few weeks.
You decide to apply for an LPA as it seems like the only legitimate option available. The LPA application is a long and arduous process and it can take up to 10 weeks. Almost 750,000 people apply each year for an LPA and this has been increasing over the past few years. LPAs are designed to support customers who will need someone else to take over their financial affairs indefinitely they are not designed for customers who need help managing their accounts for a short time. After applying for an LPA, you have to wait at least 10 weeks before you can access the accounts of your family member. They are now in rent and utility arrears, which has led to them being charged late payment fees and incurring debt.
Option 2: Pretend to be the person in need of assistance
You looked at applying for an LPA but you realised that it could take up to 10 weeks and by then your family member is hopefully going to be better. You tried calling up and explaining the situation, but due to security reasons, the bank is not able to give you access to the account without speaking to the account holder first. Your family member — the account holder — will not be well enough to talk on the phone for a few weeks. At this point, it becomes far easier for you to impersonate your family member by using their login details.
Now you’re at risk of prosecution for fraud. This creates hidden customer journeys, meaning that the service provider is not made aware of the customer’s situation and is not able to provide any support. It also means that service providers cannot accurately understand how many consumers are currently in this position. This is possibly why this issue has not been addressed sooner.
People get ill, accidents happen, and it’s not nice to hear, but everyone dies at some point. Yet most services are not designed to support customers with these facts of life in mind. This is not only an issue across the financial sector but across many utility services as well.
Everyone benefits from inclusive design
By making mainstream products and services more accessible and easier to navigate, we create a better and more positive experience for everyone.
The FCA is not alone in focusing on improving services to be more inclusive. Many other regulators like Ofgem and Ofcom are also making this a priority.
Inclusive design is no longer a ‘nice-to-have’ addition; it is a business imperative. Not only do customers expect it, but regulators are increasingly sharpening their directives to demand it. For now, those who fail to offer a service that is accessible and inclusive will quickly find they are left behind.
Here are some questions that you should be asking yourself and your business to ensure that you are working towards creating inclusive services:
- Do we understand who our vulnerable users are?
- Do we have methods in which to identify future vulnerable users?
- Do we have the processes, services and training in place to enable staff to support vulnerable users?
- Do we have rhythms and rituals in place to ensure we are continuously delivering inclusive services?
