Basic bank accounts help “financially excluded”1

Britain's banks are working together with the Government and voluntary organisations to produce fresh ideas on how to help the UK's financially excluded, the British Bankers' Association said today.

Welcoming today's Treasury Select Committee's report on financial inclusion for individuals, the BBA pledged to continue its work on practical plans to lift the least well-off on to the savings ladder.

BBA Chief Executive Angela Knight said:

"The Treasury Select Committee has asked how we encourage saving among those who have very little to set aside. Britain's banks are playing a key part in discussions to make this a reality."

"Key to all of this is the use of basic bank accounts, which now number nearly seven million. Around 50,000 new accounts are opened every month, and a further 10,000 each month upgrade to more sophisticated accounts."

Figures released today by the BBA show that since the start of so-called 'universal banking' in April 2003, 2.6 million post office-accessible accounts have been opened and more than ¼ million have been upgraded. More than half of all customers with basic bank accounts had no previous banking relationship: subsequently they can join the banking mainstream, using a wider range of services. The second quarter of this year saw an additional 151,534 accounts opened net (i.e. accounts opened less accounts closed) and 31,550 existing accounts upgraded.

Banks currently manage more than 3.8 million basic-functionality accounts, accessible through branches, mobile branches and cash machines.

The BBA also welcomes other proposals in the Treasury Select Committee's paper, including further strengthening the link between work on financial inclusion and financial capability. The banking industry is already actively involved in many of the key areas that the TSC is giving consideration to; either through piloting of initiatives, provision of data, engagement in policy development, product provision (basic bank accounts) and funding.

Notes to Editors

1. There are two types of basic banking accounts; those operated through branches and ATMs, and those that can also be operated through post office counters.  HM Treasury monitoring of progress towards the shared financial inclusion goal was based on the latter type of account.

2. There are 6,968,099 'Basic Bank Accounts' currently in operation. These accounts are designed for people who might not meet the banks' criteria for opening a standard current account or who want to ensure that they cannot overdraw their account. Account features typically include the ability for payments, e.g. pensions and benefits, to be credited directly to the account, for withdrawals by plastic card through cash machines and the facility to pay bills by direct debit, though they do not offer overdraft facilities nor, for example, a cheque book.  The accounts fall between two types:

a. Post-office accessible accounts Historically, around 750,000 'basic-functionality' bank accounts could be accessed at the post office but, from the launch of universal banking in April 2003, direct payment into bank accounts or Post Office Card Accounts became the normal method of payment for government benefits and tax credits. From that point sixteen banks have offered specific accounts that can be accessed through Post Office counters. Full details of these are published by the Financial Services Authority (FSA) both on their website and in their leaflet “Basic bank accounts - your questions answered”.  Monitoring these accounts formed the basis of measuring progress towards the shared financial inclusion goal with HM Treasury of making significant progress towards reducing the number of adults in unbanked households by half by November 2006, based on the figure of 2.8 million in April 2003. The numbers of accounts opened, net of closures, during each quarter were:

Since April 2003, 298,171 accounts have been upgraded to more fully‑featured accounts.  The total number of post-office accessible accounts stands at 3,170,178.

Banks offering accounts accessible through the Post Office are:

Abbey, Alliance & Leicester, Bank of Ireland, Bank of Scotland, Barclays Bank, Clydesdale/Yorkshire Bank, Co-operative Bank, First Trust Bank, Halifax, HSBC Bank, LloydsTSB, NatWest Bank, Northern Bank, The Royal Bank of Scotland, Ulster Bank.

b. Accounts accessible through branches and ATMs
In the context of ‘social banking’, these accounts were in existence long before the launch of universal banking, with some having been opened in the 1980’s and they operate alongside post-office accessible accounts.  Since April 2003, 207,888 accounts have been upgraded and, although some accounts will typically be closed by banks due to long-term dormancy or inactivity (In line with good practice), there are 3,797,921 of these accounts in existence.

3. Account 'upgrading'
Basic accounts are regarded as a convenient stepping stone to fuller-featured accounts for people without previous banking relationships.  As part of customer relationship management, banks will, when appropriate or on customer request, present options to move from a basic account to other accounts, e.g. a current account.  The term ‘upgrading’ is used in this release to reflect a customer closing a basic account in favour of opening a fuller-featured account with their bank.

4. Data contained in this release may have been re-stated from previous releases as a result of revised or improved data becoming available.