People should find it easier to access basic bank accounts, after major banks committed to improving widespread poor practice identified by the City regulator.
Basic bank accounts are simplified accounts which serve people who may not otherwise be able to access standard current accounts – providing access to essential services with no overdraft.
People with a poor credit history may struggle to access a standard current account.
This means that a basic bank account can be vital in supporting financial inclusion and helping people to receive payments such as wages or benefits or when paying bills.
Some of the biggest UK banks and building societies are legally mandated to offer basic bank accounts.
Under the Payment Accounts Regulations 2015, the nine biggest standard personal current account providers in the UK must offer basic bank accounts to legally resident consumers who either do not have a UK bank account or are not eligible for all other payment accounts.
A mystery shopping exercise by the Financial Conduct Authority (FCA) found around a third of experiences with basic bank accounts rated as poor or very poor.
The exercise covered 298 interactions across branches and by telephone.
It tested two scenarios – a person experiencing financial hardship with non-standard ID, and someone who had been through bankruptcy but had standard ID. Both showed characteristics of vulnerability.
Across 298 mystery shops, the FCA rated 28% of interactions as good or very good, 38% as fair, 20% as poor and 14% as very poor.
The mystery shop indicated that firms did not consistently mention and discuss basic bank accounts early enough in the conversation.
Bank account providers were not consistently offering the accounts to customers who could benefit from them.
This included people facing financial hardship or without standard identification, and people with no fixed address.
Staff often did not recognise and respond to characteristics of vulnerability, or adapt their approach for consumers who needed help to complete a standard or digital process.
Firms often failed to mention basic bank accounts at all and pushed customers in vulnerable circumstances towards online applications unsuitable for their needs, the regulator said.
Overall, the issues create a risk that firms will prevent people getting an appropriate account, according to the FCA.
To tackle this, banks and building societies have agreed to individual improvement plans and the FCA has worked with banking and finance industry body UK Finance to secure a collective commitment for the firms.
