The first “Finclusion Day”, an event dedicated to financial inclusion, was launched today by the Inclusion Foundation, an organisation that raises awareness among businesses and policymakers about the impact of lack of digital inclusion on the underbanked society.
Underbanked is a term for individuals or families that may have a bank account but usually rely on alternative financial services to manage their finances.
The underbanked and digital divide
Although financial inclusion has improved significantly over the last decade, around 1.3 million adults are still underbanked in the UK and don’t have access to a bank account, according to data from the Inclusion Foundation.
The digital inclusion divide has also been exacerbated by the pandemic, which has accelerated the change in the way people shop, bank and pay, which is increasingly online.
During COVID-19 and the successive lockdown periods, digital payments exploded, and 12% of UK adults downloaded banking apps for the first time. While internet use has increased by 50% in the last year, some 4% of the UK population don’t have digital access.
Because of these innovations, people who rely on non-digital processes like cash will face increased financial exclusion as the ‘digital divide’ widens.
Education is key
The digital divide is creating a two-tier society which is excluding significant numbers of the population from careers as well as from better personal financial services. For those who are not digitally literate, employment prospects have been hampered. “There are currently 11.8 million people in the UK workforce who lack the basic digital skills needed to work effectively. That’s 36% of the working population,” said Holly Chate of FutureDotNow, a coalition of industry leaders with a mission to close the digital skills gap.
Marion King, Chair of the Payments Association Advisory Board, believes that digital and financial inclusion should be top priorities today: “All UK adults should be able to access financial services that meet their everyday needs, goals and aspirations.” King also said that being financially included “begins with opening a bank account, which is much more than just a means to make and receive payments: it’s also a gateway to credit, insurance, pensions and saving products.”
Overall, the issues of digital inclusion and digital exclusion go far beyond managing personal finances, it’s about social and economic mobility, with a digital divide stalling career opportunities for large numbers of people in the UK.
The Inclusion Foundation has also published an eBook “The Network Effect: Digital payments as a gateway to financial inclusion”, highlighting the importance of digital innovation to support financially excluded people, and explores the four pillars that enable financial inclusion: technology, government, education and inclusive communities.
- Technology can reduce the costs of providing financial services and, through technologies such as Open Banking, companies can get to know their customers better.
- Government has a role to play in monitoring the availability of credit and the need to strengthen fraud prevention tools due to the increasing number of complex financial offerings.
- Education is one of the key digital innovations in business to retain and train adults for work, with the seismic shift to digital in all sectors.
- Inclusive communities are important to drive change – many older people will appreciate being educated by their children or grandchildren, so in most cases, financial education will need to start at home.
For more information on the work and services of the Inclusion Foundation and to download the eBook: click here.
In this article, you learned that:
- Underbanked is a term for individuals or families that may have a bank account but usually rely on alternative financial services to manage their finances.
- Around 1.3 million adults are still underbanked in the UK and don’t have access to a bank account.
- There are currently 11.8 million people in the UK workforce who lack the basic digital skills needed to work effectively, around 36% of the working population.