15th December 2014

Back to Basics

Written by Eric Leenders, Managing Director, Retail and Commercial Banking

A decade ago there were nearly 3 million unbanked consumers in the UK.  And in a couple of years there needs to be none, to enable the Government’s Universal Credit programme to roll out.  This means that the remaining 1.2 – 1.5 million currently unbanked customers will need to get an account.

We know from independent research that the current design of basic bank accounts has been well received.  We also know that account holders find it easy to operate, but if there is a criticism, it is that customers who have found their finances difficult to manage have been deterred by fees and charges.  Looking ahead, it doesn’t take too much imagination to recognise that an account without a debit card will not be much use either.

Reconciling the above has inspired the revisions to the basic bank account that were announced today.  No fees (negotiated with the support of HM Treasury to ensure that the industry did not fall foul of anti-trust legislation), pretty much the same features as a standard current account – except for an overdraft and a cheque book, and easy access in line with other current account customers will all now be built in.

The BBA, working closely with the nine largest personal current account providers in the UK, has developed this new industry standard for basic bank accounts in the UK in order to expand financial inclusion and give customers the confidence to use a wide range of day-to-day banking services without fear of unforeseen charges.

The revised account is aimed at those who don’t currently have a bank account who might not be able to open a standard account, customers looking to switch and customers in financial difficulty. So if consumers are currently unbanked or want to switch but might previously have found that they can’t, the industry can help.

So, when we put this together with our work with the Department for Work and Pensions to help banks to verify the identity of new customers claiming Universal Credit, we are confident that we will be able to help those outside the banking system to take advantage.  Consumer Focus estimates that the benefits of having an account can be as much as £1,300 a year, so the customer benefit is hugely significant.

Revised basic accounts will be launched by providers over the course of the next 12 months – up to a year ahead of European legislation – putting the UK in the vanguard of financial inclusion as we continue to build a world class day-to-day banking service.

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