Financial inclusion means making financial products and services available to everyone who needs them, at the time when they need them. In 2021, with almost half of banking customers saying they have experienced negative wellbeing as a result of the financial impact of COVID-19, there has never been a more important time for the financial services industry to focus on financial inclusion. Financial inclusion is both a moral imperative, and good for business. In fact, it's a triple win. This blog is the first of a series of blogs, in which we will cover various aspects of financial inclusion.
A Win for Customers Too many people are "under-served" by financial services, in that they are not able to access financial products and services at a price they can afford, at a time when they need them. Certain groups are disproportionately affected by financial exclusion, including women, certain ethnic groups, certain age groups, disabled people, and people living with mental health conditions. Financial inclusion is an opportunity for inclusive innovation: by creating products and services that meet the needs of the most excluded customers, there are likely to be benefits for others as well.
A Win for Financial Services Social impact is increasingly important to banking customers; 52% customers say social impact is more important to them as a result of the COVID-19 pandemic and over two thirds say social and environmental impact is important to them in choosing a bank. This presents an opportunity for financial services to improve customer attraction and retention. By committing to financial inclusion, banks and insurers can improve their brands as well as improve trust: one third of banking customers trust their bank more as a result of their bank's response to the pandemic. Regulators and investors are both also increasingly focused on sustainability, and financial inclusion is a key factor of social sustainability, and one that is likely to see increasing scrutiny following the pandemic. Finally, whilst financial services organisations may have typically viewed financially excluded or "vulnerable" customers as less profitable, our research shows that exclusion should not necessarily be considered a permanent state. Throughout life, certain life events (including the COVID-19 pandemic) can cause someone to become more or less excluded. The financial services industry's response plays a critical role in enabling someone on their journey to becoming more included which in turn means they will be able to access more products and services.
A Win for Society Right now, financial inclusion is urgently needed in the UK. Prior to the pandemic financial exclusion was already affecting millions of people, and COVID-19 has made the situation worse for people who were already struggling, as well as pushing a new group of previously comfortable people into financial difficulty. At the time of the first UK lockdown, half of the people accessing food banks had never needed to do so before. Even people who have not lost income are struggling with worry, anxiety and depression as a result of financial concerns related to the pandemic. Financial inclusion therefore is a critical lever to enable the economic recovery of the UK. In contrast to the 2008 crisis, the financial services industry now has a major opportunity to demonstrate that it is part of the solution.
In summary, there are triple benefits to financial inclusion: for customers, financial services and society. Our latest report Growth through financial inclusion explores the barriers to inclusion and potential solutions in more detail.