How can banks help ensure financial independence and inclusion?
Financial inclusion is a hot topic within industry press at the moment. In the UK, an influential group of MPs are proposing that banks should have a ‘legal duty for care for customers’ – with their report highlighting that some vulnerable consumers are finding themselves effectively excluded from access to financial services. Directing people to use the Post Office when bank branches close has been deemed ‘not good enough’. Amazon has also been forced recently to start accepting cash in one of its ‘cashless stores’ amid growing criticism that the format discriminates against poorer customers and those without bank accounts.
In some ways, this does seem to jar with the big push for banks to ‘go digital’. The demand is clear – cash transactions fell from six in ten a decade ago, to three in ten today. However, recent events have highlighted that not all of the Banks’ customers are equally comfortable with digital banking – customers like Winifred, Susie and Charles who may be unable to go completely cashless.
Who’s paying for lunch?
Some time ago, I was volunteering at a charity, helping out in their lovely café. Winifred, an elderly customer, placed her lunch order and I summed up the order total. At this point she cheerfully handed her purse over to me. Huh? I instinctively worried about whether Winifred was in the habit of handing over her money to strangers (OMG, Winifred – no!). And similarly with Susie, whose disabilities impact her speech and movements, when she needed to pay for her sandwich. By contrast, Charles, whose range of vision has diminished substantially during adulthood (it will continue to do so), counted out his own cash. All of them seemed to prefer cash (rather than, say, a contactless card) to manage their daily transactions.
The preference for cash is understandable – it’s tangible. You can see what you have, you have what you can see and you can spend what you have. You can see your balance; you don’t have to remember it and accidentally going into overdraft is less likely than with tap and go. The Financial Inclusion Commission notes more reasons and the World Bank connects the success of digital payments to a reliable cash-out experience.
The bigger picture
A report released earlier this year suggested that, in the UK alone, around eight million adults would struggle to cope with a digital-only system. It is thought that around two million people use physical cash for all their payments. Either way, fiddling around with loose change, entering PINs or even reading the amount on a contactless device may be problematic for many. Unsteady hands or cognitive functions scuppered by dementia mean that you might have to place your trust in others. Are digital payment devices at the point of sale accessible enough to be as trustworthy, transparent and stoppable in all situations?
Winifred, Susie and Charles represent only a few concerns about the financial security of vulnerable adults. More issues can be gleaned from Age UK and the Alzheimer’s Society, who have researched and reported on financial abuse of elderly people, as well as Government reports on disability. There are multiple layers of problems and the affected population is only going to grow in relative proportion. Financial services play an important role in understanding the issues faced by these groups and helping them to navigate their way confidently through paying for what they need.
What can banks do?
Better legislation, awareness and training are obvious. Various banks and building societies have services for people with hearing, speech or visual impairments. However, protecting vulnerable adults from financial abuse requires multi-faceted solutions. The BBC recently reported on the success of training bank branch staff to spot targets of fraudsters.
Technology plays an important role too – for example, by ensuring that fraud detection systems can identify factors that could particularly affect vulnerable groups from the time a payment is initiated on their account. This might mean finding ways to check with vulnerable customers that their payment is both intentional and not coerced. It might also mean regularly engaging with them to ensure that they are fully aware of what’s going on in their account.
Banks and FinTechs should collaborate more with legislators and customers as well as the public, commercial and third sectors to identify the risks of a problem that is only going to grow in size. They need to work together to create innovative products and services that address these risks. Together they must be proactive in engaging customers to make them aware of the services available to help them transact their daily lives and to protect their money.
Disrupt and transform
In 2016, 18% (11.8M) of the UK’s population was over 64 years old – with about 45% of these representing a big chunk of the 11.6M people with disabilities in the UK around that time. The ONS predicts that more than 20% of us will be over 64 years old in 2026. Over time, the demographic distribution becomes more of a bottle than a pyramid.
To me, this a compelling reason for payments transformation – payments are what oils the machine. We need to remember what that machine does, who it serves and for what purposes. FinTechs promise to disrupt FSS. Some argue that we “harness a force for good” [PwC]. Looking at the demographics, looking out for Winifred, Susie and Charles is one area where collaboration and transformation can make a real difference.