So called 'basic' bank accounts, launched five years ago to help those on low incomes avoid the pitfalls of high interest personal loan and credit card banking are failing, says research conducted by the National Consumer Council (NCC) and the social and economic research consultancy Policis.
The 'no frills,' 'basic bank accounts' were launched to encourage social and financial inclusion through banking, but have failed to address the financial habits and lifestyles of their target audience, said the report.
Around half of all low income employees still prefer to conduct their banking in cash, the report says. It also found that those who conducted their banking through an account were less likely to lose control of their finances or be in arrears.
Basic banking accounts need to be more flexible, says the NCC, suggesting they should offer weekly direct debits to fit in with low-income budgeting cycles, a small free overdraft to act as a 'buffer zone' and automated payment systems that offer occasional payment holidays without penalties.
"There is a mismatch between the needs of the poorest to keep close track of their income and spending and to avoid debt, and existing basic banking account design which doesn’t help them achieve this," comments Claire Whyley, NCC deputy head of policy.
"Making sure people get the benefits of access to financial services isn’t just about how many people have access to banking - it’s about designing services that meet their needs. Financial inclusion is more than a numbers game."
'Basic' banking failing says research
Financial Services > e-banking > Banking news
'Basic' banking failing says research
Wed, 24 Aug 2005
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