Living without a bank account: findings from our research on the unbanked

30 Mar 2017 By Sian Williams and Carl Packman

Today sees the publication of the 2017 Consumer Digital Index report by Lloyds Bank, an extremely vital piece of work that benchmarks the digital and financial capability of UK consumers.

This year, Toynbee Hall contributes substantial and ground-breaking research to the Consumer Digital Index on unbanked consumers, the most up-to-date study of the ‘lived experience’ for people without a bank account.

We find:

  • The three main reasons for not having a bank account were: a preference not to use banks (32%), incorrect identification for an account (29%), and a previous negative experience (15%).
  • 94% of people without a bank account have a personal income of below £17,500 per annum, and 91% live in households where the total income is £17,500 per annum.
  • 55% are in council housing, while 24% are in the private rental sector
  • 31% are between the ages of 20-29 and 26% between the ages of 40-49.
  • 70% are recorded as having nothing in savings, while 20.5% have between £1-100.
  • 73% primarily use another financial product, such as a Post Office Current Account or credit union, while 27% are cash-only.
  • 5% are recorded as saying they get to the end of every month without any money while 35.5% are recorded as doing so fairly regularly.
  • 42% currently use, or have previously used, debt advice services.
  • Nearly 67% are either “very confident” or “fairly confident” using an online search engine for good deals on comparison websites.
  • 53% are either “very confident” or “fairly confident” using email and social media websites, and leaving feedback on shopping websites.
  • 44% use a smartphone

This year, our contribution to the research includes:

  • A national quantitative study of 104 respondents
  • Depth interviews with 29 participants
  • Two one-hour in-depth interviews with people who are newly banked
  • 17 in-depth interviews with FinTech suppliers who offer products and services to this group of people.

The relatively limited understanding of the ‘lived experience’ of people without a bank account is primarily down to two reasons: firstly this group of people are relatively small in size (2016: 1.71m), and secondly it’s often very difficult to reach this group of people and understand their lives in relation to people who do have a bank account.

Our research does two important things: firstly, it provides a voice for those people whose financial story typically goes untold (namely those people who do not currently have a bank account). And secondly, it helps us to understand this segment of people better, to understand what more financial services providers could be doing to bring them into the financial mainstream, and to look at areas of improvement for the future.

Typology of the unbanked

Using our research, we are able to segment people without a bank account into three types:

Bank-ready, high motivation, barred: This person displays many of the characteristics of a bank customer and will have some digital experience (though it won’t be important to them), however they will either perceive themselves as being either barred from having a bank account or will have had a specific experience which has knocked them back from accessing banking services.

Bank-ready, digitally confident, searching: This person is much like the above, only digital tool usage is much more important to them. They will believe there is a barrier to them getting access of a bank account, but feel unable to find out whether that’s genuinely the case or not. This person will be much more motivated by checking their balance online, as well as being someone who uses the internet in their everyday lives, and as a form of communication, and so will have a lot more trust.

Bank-suspicious, no motivation, unprotesting: This person does not want to have a bank account, for a variety of reasons. This person may have either high or low digital capability, but whether they use the internet or not they are more likely to be cash-only. This person will feel like they are good with their money. If they don’t feel financially capable then that is likely to be for external reasons (debt, cost of living).

During the course of our research it became very clear that all groups had their own way of managing the situation they were in. However there were particular times where those we engaged with felt having a bank account would help them better manage their financial lives.

This will be a call to arms. Providers of vital financial services need to be explicit about which identification requirements are needed for opening a bank account, and about ways they can help people find the correct ID, in a way that doesn’t incur additional costs (for example if someone feels that they need to pay for the correct ID).

Clearly there is some degree of choice involved for some people who don’t have a bank account. But what kind of choice? Could that choice be different if that same group felt catered for? And for those with other barriers, what could financial services providers do to help them?

We know our research raises many questions, but it answers some vital ones about the unbanked as well. We look forward to playing our part looking for the correct solutions.

Read the full Consumer Digital Index report here.