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financial inclusion October 20, 2009

Posted by Bradley in : financial regulation , trackback

The UK Government is congratulating itself on having reduced the numbers of the unbanked (although the report points out that some of the “improvement” results from recharacterizing the status of some survey respondents (people who did not state whether they had a bank account had been treated as being unbanked and are now not so treated)). The press release makes it sound as though people who open a bank account get a whole range of automatic benefits. But that isn’t exactly what the report says. Poorer people who need to control carefully the expenditure of small amounts of money may not have access to some of the ways in which wealthier people save money (such as by using direct debit). This is sort of obvious. For example:

In December 2008 the Taskforce published a report on direct debit energy payments. We found significant risks to promoting monthly direct debit payments to low-income households, which often manage their money on a weekly basis. Our report also noted that direct payments do not provide households with the same control over their energy consumption and payments as pre-payment meters. Since then, a report by the Creative Environments Network found that “[fuel]rationing behaviour and being in debt with fuel suppliers were closely related to a household’s financial behaviour”.. This work suggests that it may be unrealistic to expect low income households to take advantage of discounts available for monthly direct payments. Government and service providers may therefore need to consider new ways to reduce transaction charges for more frequent bill payments by poorer households.

It’s not just about the bank account.

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