The Financial Conduct Authority (FCA) has secured commitments from nine of the UK's largest banks and building societies to improve the availability and accessibility of basic bank accounts, following a mystery shopping exercise that revealed widespread poor practice. Around 7 million fee-free basic bank accounts are currently open in the UK.
Mystery Shopping Reveals Poor Experiences
The FCA's mystery shopping exercise found that a third of experiences with basic bank accounts were rated as poor or very poor. The investigation showed that providers were not consistently offering these accounts to customers who could benefit from them, including those facing financial hardship, individuals without standard identification, and especially people with no fixed address.
Firms often failed to mention basic bank accounts altogether and directed vulnerable customers towards online applications that were unsuitable for their needs. Basic bank accounts provide essential services such as receiving wages and benefits and paying bills, but do not include overdrafts to prevent overspending.
Commitments to Improvement
The nine banks and building societies, which are legally required to offer basic bank accounts, have now agreed to individual improvement plans. These include a commitment to provide the right account for customers first time with clear communication, making it straightforward for customers without standard ID or a fixed address to open an account, and identifying vulnerable customers early.
Emad Aladhal, director of retail banking at the FCA, said: “Progress has been made with over 97% of UK adults having a current account, but our latest work shows that all too often banking firms’ engagement with customers still needs improvement. Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out. That’s why the biggest banks have now committed to improving how they are offered – and we’ll be holding them to account to make sure change happens.”
Industry Response
Peter Tyler, Director of Personal Banking at UK Finance, said: “A basic bank account can be an important first step towards financial independence, and while most customers who hold one have positive experiences, we recognise that more can be done to ensure consistently good outcomes for everyone. That is why UK Finance and our members are committed to raising industry standards and expanding access. The recently expanded Breaking the Cycle initiative is a key part of this work, providing practical support to those facing barriers to accessing essential banking services, such as individuals without a fixed address.”
The changes are expected to make it easier for millions of people with poor credit or no fixed address to open a bank account, promoting financial inclusion across the UK.
