Nationwide Building Society’s Open Banking for Good (OB4G) – an initiative to use Open Banking technology to help ‘financially squeezed‘ people – ran from 2018 to early 2020. With around 4 million UK households currently struggling to manage financially, the COVID-19 pandemic has highlighted the value of these propositions as well as presenting opportunities and challenges for the fintech Challengers in terms of their ability to grow and scale.
Open Banking for Good (OB4G) was launched by Nationwide Building Society in 2018 and ran throughout 2019 into early 2020. It brought together user experts (charity partners), solution experts (fintech Challengers) and process experts (Nationwide’s OB4G team) to solve real-life financial challenges for people who are ‘financially squeezed’.
Our newly-published evaluation of the impact of the OB4G programme shows that it largely met the expectations of the five fintech Challengers that completed it, by creating time and space for innovation though collaborative learning with user experts. As a result, all five Challengers successfully developed and tested propositions that tackle real problems which were grounded in the experience of people who are ‘financially squeezed’.
The COVID-19 pandemic took hold in March 2020, just as the OB4G programme was wrapping up. The economic and social impact of the pandemic has fallen especially heavily on OB4G’s target audience with an estimated 4 million people currently struggling to manage. While the pandemic brought home the potential value of the propositions that were developed in the OB4G programme, it also impacted the OB4G Challengers in a range of different ways:
Income smoothing challenge: Trezeo brought forward the development of its sickness insurance for independent workers and gave existing members complementary cover from early March to the end of June 2020. The pandemic also meant it had to delay its next funding round and put on hold its partnership with an online employment platform.
Income and expenditure challenge: Both Ducit.ai and OpenWrks saw increased demand for their Income & Expenditure propositions as the pandemic led to large-scale drops in earnings and people turned to creditors for forbearance and support. OpenWrks also created a payment relief solution that enabled lenders to offer an automated online channel for customers to apply for mortgage and consumer credit payment deferrals.
Money management & help challenge: The first national lockdown in March 2020 – when 2.5 million people were advised to stay at home or ‘shield’ – highlighted the value of Touco’s ideas for using tech to provide a safe way for individuals to give money to a helper to spend on their behalf. The pandemic also created significant challenges for Touco’s planned user testing of the new version of its app. The major changes to people’s spending patterns also had implications for how people interacted with Tully’sMoney Coaching app, and in particular the spending challenges they might set.
Nationwide asked us to evaluate the programme so that they could learn and improve the current Nationwide Incubator which is focussed on addressing the challenges of living in financial difficulty. Our evaluation of the OB4G programme is also important as it helps build a new evidence base around the potential of technology and innovation to ‘move the dial’ on big social issues. This knowledge sharing has become even more important in the wake of COVID-19, which brings opportunities to use a Grounded Innovation approach to ‘build back better’ and improve the UK’s financial wellbeing.
However, since the pandemic began significant gaps in financial support have arisen. Our analysis of Standard Life Foundation’s Coronavirus Financial Impact Tracker shows that up to 3.8 million people who have lost income have been unable to benefit from either the Coronavirus Job Retention Scheme (CJRS) or the Self-Employment Income Support Scheme (SEISS) – a group known as ‘the excluded’. There are two broad reasons why some financially-impacted working people have remained ineligible for support:
Exclusion for practical reasons, such as the difficulty of administering schemes, or tax system/data constraints. For example, the newly self-employed were originally excluded because HMRC did not hold complete 2019/20 tax return data for this group.
Exclusion for ‘policy reasons’, where groups were deemed to fall outside of a scheme’s stated objectives. For example, self-employment support was initially designed to target those “mostin need”, which underpinned the decision to cap SEISS eligibility at £50,000 of annual trading profits.
How did the March 2021 Budget help the excluded?
There was good news for many of the newly self-employed: SEISS eligibility has been extended to include 2019/20 tax return data, which means that up to 600,000 more people will be eligible for a grant. But beyond this, there was little in the Budget to extend direct financial support to the excluded, because these limited extensions fail to help those with more complex patterns of employment.
For example, the self-employed who have less than half of their earnings from self-employment – including many freelancers and gig economy workers – will continue to be excluded. This exclusion arose because the Government was keen “to make sure only the genuinely self-employed [would] benefit”. But this fails to take into account the lived reality of the labour market for people who are piecing together an income from different sources, including having earned some of their income during the year as an employee and some from self-employment. There are no practical constraints preventing this adversely affected group from being supported, and the cost of doing so would be relatively minimal. Similarly, no tapered support was offered to the self-employed with previous profits of £50,000 – a hard cut-off that has led to some stark inequalities both between CJRS and SEISS and within the SEISS.
Over 14 million people in the UK population live in poverty, and many more live on low incomes. Unfair poverty premiums – the additional costs people on low incomes incur when paying for essential goods and services – put undue strain on the household budgets that can least afford it, locking people into cycles of poverty. Since we published our 2016 research, the nature of the poverty premium may have changed but it certainly hasn’t gone away. And according to our latest research for Fair By Design and Turn2Us, a national charity providing practical help to people struggling financially, people already struggling financially are paying almost £500 more for essentials like energy, credit and insurance.
The average premium is almost £500, and reflects the current market and regulatory landscape
In 2019, Fair By Design and Turn2US asked us to explore recent changes to the poverty premium landscape – including both regulatory and technological changes – to understand if they are having an impact on the cost of poverty premiums or the number of people paying them. To do this we surveyed 1,000 people living in low-income households who had contacted Turn2Us for help. Our research showed that low-income households incur an average £478 of extra costs through energy, insurance, and credit poverty premiums:
Car insurance was the biggest contributor to the premium in 2019 at nearly £500 – some pay nearly £300 more per year because they live in a deprived area, and additional charges for paying monthly instead of annually could add a further £160. This premium is markedly higher than it was in 2016, when together these cost an extra £155.
Credit is particularly expensive on a low income, in whatever form it takes. For example, a sub-prime credit card costs around £200 more per year on average, and personal loans cost more than £500 extra.
And we found similar inequalities in relation to energy; the best prepayment tariff could still be around £130 more expensive than the best online-only deal, and paying on receipt of bill could cost an additional £143 more per year. However, the drop in the premiums incurred via energy costs since 2016 suggests that the tariff caps implemented by Ofgem have had a positive effect.
Unfair poverty premiums are yet another example of the inequality of poverty
Our research was undertaken in late 2019, before the onset of the pandemic. However, recent evidence shows that the economic and social consequences of Covid-19 are being felt most keenly by those on low incomes, with lower-paid workers more likely to have been furloughed or to have lost their jobs. Coping with tough times is hard enough when approached from a generally constrained financial position, but the finances of low-income households had already been worsening in the years leading up to 2020 – real income growth stalled in 2017-18, something that affected the poorest the most. And the social safety net had been badly damaged, with cuts to working-age benefits and tax credits further pushing down the incomes of low-income households. Seen in this context, poverty premiums are yet another example of the inequality of poverty, compounding and extending hardship at a time when increasing numbers are experiencing major falls in income, perhaps tipping people over from just about managing to not managing.
What happens next?
We can be certain that the pandemic’s economic impacts are with us for the foreseeable future. But while much in 2020 remains outside of our control, the poverty premium was and remains a solvable problem. Regulators and policymakers should now work together to find solutions for people struggling across all markets. In recent years we’ve already seen the positive impact of such interventions, most notably in the form of price caps. So what more can we do now?
In what many will consider a somewhat worrying sign of the times, in the UK, job adverts for debt collectors surged in August. This comes after news that during and following lockdown, households receiving financial support from the Government were increasingly likely to have missed debt repayments or fallen behind on household bills.
Where the UK’s economy heads next is something that will cause concern for many of us. Financial difficulty and, in particular, debt can be a major source of stress and poor mental health – and can also impact on numerous other aspects of our lives, including our relationships and productivity at work.
But, while debt itself can be problematic, the actions of creditors when collecting money owed to them are just as – if not more – important. Where good debt collection practices will hopefully help the debtor find a route out of difficulty, poor practices will simply make problems worse.
Government debt collection practices ‘worst in class’
As I outlined in a new briefing paper for the House of Commons Library, the debt collection practices of central and local public sector bodies have increasingly been called into question in recent years. There are reported to be as many as 500 different public bodies that an individual might owe money to, including the Department for Work and Pensions (DWP), HM Revenue & Customs (HMRC), the NHS, and local authorities.
In 2019/20, public sector bodies were owed an estimated £16 billion across several types of debt – including benefit overpayments, council tax arrears, benefit advances, criminal court financial impositions, and rent arrears on local authority housing. The total value of all debt owed to the public sector, however, is not currently measured.
While commercial lenders and debt collectors have begun to improve debt collection practices in recent years – mainly as a result of regulatory action from the Financial Conduct Authority (FCA) –government bodies have been heavily criticised for not following suit.
Debt advice charities, including Citizens Advice, StepChange and the Money Advice Trust, have all called on the Government to improve practices – and their calls have been echoed more recently by the Centre for Social Justice and a growing number of MPs and Peers. In 2018, the Treasury Select Committee concluded that public bodies are “often found to be the most zealous and unsympathetic of creditors in collecting arrears” and more recently former Conservative MP Nicky Morgan (now Baroness of Cotes) wrote the following:
“Regrettably, the public sector continues to lag behind. Despite glimmers of progress, the Committee’s verdict in 2018 that the public sector was ‘worst in class’ for debt collection remains sadly accurate.”
Aggressive practices causing downstream problems
Criticisms of the public sector’s approach to debt collection have focused on their perceived heavy-handed nature, with a reliance on enforcement agents (bailiffs), rapid escalation of debts (including the use of imprisonment for non-payment of council tax debt), and increasingly aggressive practices as the financial year-end approaches.
Overall, it is argued that a short-term incentive to collect money owed as fast as possible may come at the cost of longer-term sustainability and may in fact lead to a lower likelihood of all money being recovered or of individuals being able to escape the cycle of problem debt.
These issues are exemplified by the BBC’s docudrama ‘Killed by my debt’, which tells the real-life story of 19-year old courier Jerome Rogers who found himself in debt to Camden Council as a result of two minor traffic violations. In 2016, after the two initial £65 fines he received spiralled to a £1,000 debt and bailiffs clamped his motorbike – his primary means of making a living – Jerome sadly took his own life.
Jerome’s case raised awareness of the issues associated with debt collection and prompted Camden Council (and others) to introduce formal policies related to the treatment of vulnerable debtors. Nevertheless, according to Freedom of Information (FOI) requests made by the Money Advice Trust, in 2018-19, English and Welsh local authorities used bailiffs 1.1 million times to collect council tax debts and 780,000 times for parking debts.
Important geographical differences
The aforementioned FOI requests also highlight the variation in practices across the country, with bailiff use increasing in some areas but not in others and some local authorities adopting ‘good practice’ measures (such as policies for supporting vulnerable individuals). The Money Advice Trust have mapped these practices across England and Wales, as shown below.
Differences also exist between the constituent nations of the UK. England, for example, remains the only country in UK (and, more widely, in Europe) to imprison people for non-payment of council tax. Wales abolished this practice from April 2019, with Mark Drakeford describing the sanction of imprisonment as ‘an outdated and disproportionate response to a civil debt issue’. Scotland and Northern Ireland also have very different rules around the enforcement of debts more generally.
Recommendations for change
While the Government has already made some changes in this area, including reforms to the bailiff industry in 2014, it recognises that more can be done. In June 2020 the Cabinet Office published a consultation on fairness in Government debt management.
Campaigners argue that the Government needs go much further. In particular, there have been calls for independent bailiff regulation and an end to the practice of imprisonment for non-payment of council tax, as England is the only remaining country in Europe to continue using this type of enforcement. Campaigners also want to end rules which make individuals liable for an entire year’s council tax payments after just one missed instalment, as this fails to offer those having repayment difficulties a route out of debt.
Additionally, a group of 55 cross-party peers and MPs have written a letter to support the idea of a ‘Government Debt Management Bill’. This would place current codes of practice on a statutory footing and more generally ensure consistency across public bodies (and across the country) in the way that they calculate repayment affordability and treat those in vulnerable situations.
With the impact of the pandemic potentially leading to an increase in those facing financial difficulties, such calls for change are only likely to grow louder.
About the Author: Jamie Evans is a Senior Research Associate at the Personal Finance Research Centre, within Bristol’s School of Geographical Sciences. He is currently on a part-time Parliamentary Academic Fellowship at the House of Commons Library within the Business and Transport team. For more information on these fellowships, please visit UK Parliament’s website.
Evans, J., Fitch, C., Collard, S., & Henderson, C. (2018) Mental health and debt collection: a story of progress? Exploring changes in debt collectors’ attitudes and practices when working with customers with mental health problems, 2010–2016. Journal of Mental Health, 27(6): 496-503. https://doi.org/10.1080/09638237.2018.1466040
Anderson, B, Langley, P, Ash, J, Gordon, R. (2020). Affective life and cultural economy: Payday loans and the everyday space‐times of credit‐debt in the UK. Transactions of the Institute of British Geographers. 45: 420– 433. https://doi.org/10.1111/tran.12355
García‐Lamarca, M. and Kaika, M. (2016), ‘Mortgaged lives’: the biopolitics of debt and housing financialisation. Transactions of the Institute of British Geographers 41: 313-327. doi:10.1111/tran.12126
As students return to University campuses, the discussion has largely focused on worries over increased COVID-19 rates. But our survey of University of Bristol students suggests their approaching financial position should also be cause for concern.
But one group whose financial position we have heard less about during this time is that of university students. Each year we conduct a survey for the University of Bristol’s Widening Participation team to look at the impact bursaries have on students, comparing the financial experiences of those from low- and middle-income backgrounds who receive financial support from the University, with those from higher-income backgrounds, who do not. This year the timing of the survey allowed us to ask students about their financial experiences both pre- and post-COVID, and to look at how they may have fared during the crisis.
Financial impacts so far
As with the wider UK population, COVID-19 and the subsequent lockdown has had an unparalleled impact on student employment. Prior to the pandemic half of students surveyed (51 per cent) were employed in some form. Since the outbreak however, over two thirds of those previously working were no longer doing so, with a further 12 per cent working fewer hours than before. Of those no longer working, two thirds said this was due to their employer being closed (either temporarily or permanently). Although the majority of students receiving some form of maintenance loan, earned income is still important to students in order to manage financially, particularly among those who are not in receipt of a bursary, where this loss of income could be worryingly detrimental.
“My maintenance loan does not even cover my rent which means I have to borrow money from family and work in order to cover my rent and food.” – Year two, unfunded
Overall, the impact of coronavirus on the students we spoke to had been fairly evenly split across those finding it easier to manage financially (30 per cent), much the same (40 per cent) and harder to manage (30 per cent).
This means that, for the majority of students, COVID-19 had not had any major negative impact on their financial situation. Indeed, nearly half said they had been able to save money as their costs had generally reduced – a finding which is perhaps unsurprising as lockdown prevented social spending. A third also reported not having to pay for their final term of accommodation, representing a further considerable saving. This does, however, still leave 65 per cent of students paying for at least part, if not all, of their accommodation for the summer term, despite no physical teaching and (for the majority) returning home. Unsurprisingly the majority (95 per cent) of those who weren’t required to pay for their final term of accommodation were first year students (typically living in University owned halls), as opposed to second and third year students who were more likely to rent privately.
“No change at all despite the fact that our bills are included in rent so we are paying more for water, electricity etc that none of us are using (no one living there at the moment). When we contacted to ask for some reduction in rent, we were told that the property is the landlord’s primary source of income (seems an irrelevant argument) so we wouldn’t get any reduction.” – Year two, funded
Overall, 3 in 10 reported their costs and outgoings being harder to manage due to the outbreak. This rises to over half for mature students (who were more likely to have financial dependents) and around two-fifths for those who had lost income from employment.
Support from family
Many students rely on financial support from their families and friends to manage. Indeed, eligibility for bursaries and maintenance loans is based on parental household income from the previous tax year, and there is an expectation that those from higher-income households will receive support from their family. Almost two thirds of Bristol students who were ineligible for bursaries relied on support from family and friends, with 19 per cent having their accommodation paid for and 57 per cent receiving a set amount of money each week or month. Since the outbreak, a small number of (mainly non-bursary) students had received additional support from family or friends. Mature students were also more likely than younger students to have turned to family and friends for financial support since the lockdown, whereas beforehand they were significantly less likely to have done so.
However, the ongoing impact of COVID-19 – particularly once the furlough scheme comes to an end – may have dramatic impacts on family household income, and the worry is that students may fall through a gap, without university funding or family support.
“[I have] concern over lack of employment for my parents, who I rely on financially to pay for my living and accommodation in Bristol, as my maintenance loan was significantly lower than my accommodation cost.” – Year one, unfunded
While almost a third of students were currently finding it harder to manage financially, even more were worried about the coming academic year. Half were concerned over their lack of paid employment/income during the holidays or coming year and 41 per cent were worried about how they would manage financially in the Autumn term. Those who usually rely on paid work may run into financial difficulties, particularly if they are unable to return to work or find alternative employment. In our survey, over a third who worked considered employment income ‘very important’ to financially continuing at the University.
It is also important to consider the longer-term financial impact and job prospects for students. The unemployment rate is expected to rise to almost 12 per cent by the end of the year, and those who have recently left education are likely to be disproportionately affected. We are already seeing a reduction in job vacancies and in our survey 69 per cent reported being generally worried about their future, with nearly four in ten third-year students concerned over their post-graduate prospects since COVID-19.
“Now is literally the worst time in decades to be entering the work force.” – Year three, funded
Given the general worry about the future, concern over personal and familial health, uncertainty around teaching in the coming year and reduced socialising with friends, it is unsurprising that some students also commented on the negative impacts on their mental health.
“Due to some of my family members being high at risk to corona, I am increasingly anxious as to what is going to happen to them. My mental health has suffered a lot from being very isolated over the Easter term. I am worried that the global economy is about to collapse and the whole world is going to go into recession. So all in all, quite a lot to be stressed about.” – Year one, funded
“My depression has got much worse, my father is at risk, I am struggling to focus at all so I am behind in all of my work and I don’t know how I will cope financially if I cannot work in the summer” – Year two, funded
Overall, the student community has faced an unprecedented situation with remarkable resilience, but it is apparent that the challenges brought by COVID-19 will impact students for a long time to come. It is crucial that universities understand that, for some students at least, it will be much harder to manage financially than in previous years, and institutions therefore need to provide an appropriate level of practical and pastoral support to help them.
Firstly, we need greater recognition of how important earned income is to students’ financial position and participation at university. Secondly, the increased likelihood of financial difficulty among families of students should be considered, and the impact of this on students – both financially and emotionally – given the role that family support plays in getting by while at university. This suggests that there will be a need for a well-funded and accessible hardship fund in the coming years, because increased financial difficulties may well effect likelihood of withdrawal from studies.
Some students will need more help than others; previous surveys have found that bursaries appear to have some protective effect, therefore attention should also be given to those from higher-income households, particularly those just outside of eligibility, as they are more likely to rely on income from employment. Mature students, who we have previously found struggle financially more than their younger peers, are already turning to their families for support in greater numbers, but what about those who do not have people to turn to?
Finally, the ongoing emotional toil of dealing with a global crisis should not be underestimated. It is worrying enough leaving university in normal times, let alone doing so during a time of recession and increasing unemployment. Giving students as much support and guidance as possible, both to manage during their studies, and to help them to prosper as they leave, is going to be vital over the next few years.
 Low income = Residual Household Income (RHI) > £25k; Mid income = RHI £25-44k; Higher income =RHI £43-80k
When I applied for a job at the University of Bristol’s Personal Finance Research Centre (PFRC) three months ago, I never expected my first week would be spent working from the comfort of my own home. No commute, no struggling to navigate my way around campus and no face-to-face introductions with colleagues. Instead I find myself writing this blog as a way of introducing myself to everyone at the University and to those within the wider research community.
So hello, I am Katie the new Research Associate at the PFRC. My background is in quantitative, policy-focused research, most recently working for the Association of Convenience Stores, a trade association that lobbies government on behalf of small shops. The best thing about working in an applied social research setting is that your research can have a direct impact; the intention is that the findings you produce will be used to inform and drive change. This was just one of the reasons I was drawn to working for the PFRC.
Moving into personal finance and being able to work at the University is an extremely exciting opportunity, which will bring with it a whole host of new experiences. But researching small shops has more in common with personal finance than you might think.
Access to cash
Firstly, during my time at ACS I saw how many people were dependent on the financial services that local shops offer, including post offices, cash machines and bill payment terminals. From a business perspective it is important that offering these services remains viable, as retailers can end up operating them at a loss, replacing ATMs with pay-to-use models or removing them all together. From a personal finance perspective, the removal of these services can be detrimental, especially to the most vulnerable. Almost half of the UK population (47%) believe it would be personally problematic if there was no cash in society and 17% (over 8 million adults) would struggle to cope without it. These figures were reported prior to the coronavirus outbreak, which will only have brought this into the spotlight even further. With hygiene concerns around the use of cash, an increase in the contactless card payment limit and more shops only accepting card, it is now even more important that we do not leave those who rely on cash behind. This makes the work that the PFRC and Dr Daniel Tischer are doing with the Financial Conduct Authority, Payment Systems Regulator and various industry stakeholders on mapping access to cash across the country even more valuable.
Helping people in vulnerable situations
Secondly, helping people in vulnerable situations is a top priority for the PFRC, and the same is often true of local shops. I was always impressed by how much local shops do for their communities, whether this is through delivery services for the elderly, training staff to become dementia friends, or just being there for people who don’t have anyone else to talk to. This has become more apparent during this unprecedented period, with shops going even further to get vulnerable customers the help they need. With Coronavirus pushing many more into vulnerable situations, this is now more important than ever. If the virus has taught us anything, it is that our lives and personal circumstances can change quickly, and sometimes with very little warning.
It is with that in mind that I start my new role.
I am really looking forward to working within the area of personal finance, especially at a time of such great economic uncertainty when we need this research more than ever. I can’t wait to use my past experience and research abilities to help inform all areas of personal finance and help drive change for those who need it.
The UK has pretty good data on people’s internet access and – by extension – their capacity to bank online. This also tells us who the banks are leaving behind in their digital transformation programmes, which have been given an extra boost by COVID-19.
According to Ofcom, while 90% of the UK adult population used the internet in 2018, this falls to 67% among people with a disability. The gap in smartphone use is even bigger, with 78% of UK adults saying they personally use a smartphone compared with just 45% of adults with a disability.
The two most common reasons people gave (pre-COVID) for not using the internet were lack of interest and lack of digital skills. Lloyds Bank estimates that nine million people are unable to use the internet or their devices without assistance; and 6.5 million cannot open apps (which presumably includes banking apps). CapGemini highlights cost as an important reason for ‘digital disconnection’ among young people.
It is also hard to find any publicly available data on people’s experience of online banking. The most recent waves of the Financial Capability Survey of UK Adults and Financial Lives Survey (both fantastic data sources) don’t cover online banking in any detail – although future waves may do – and they are biennial. In the meantime, while banks have their own data and can pay for other data, these data are not freely or publicly available.
From a policy and advocacy perspective, these data gaps need urgent attention, especially as the UK’s ‘new normal’ will almost certainly mean ‘online’.
These days it’s common to hear discussion of the UK being on the verge of becoming a ‘cashless’ society – but, for a range of reasons, this may be premature. For the foreseeable future, a more appropriate term may be ‘cash-lite’. In this blog, Dr Daniel Tischer reflects on our research in South Wales in which we explore a new method for identifying and protecting the most vulnerable communities in a ‘cash-lite’ society.
Much recent commentary suggests that the UK, and a number of other countries, are rapidly moving towards becoming ‘cashless’ societies – but there remain multiple hurdles standing in the way of ‘cashlessness’. One such hurdle is that digital payments do not yet quite match cash for reliability: technical ‘glitches’ too often stop us from paying digitally. The (partial) outage of the VISA network in June 2018, for example, left many Europeans unable to pay by card, and other, smaller-scale incidents are not infrequent either. There are also big hurdles related to consumer needs and preferences, or the unsuitability of digital in certain circumstances (for example, in areas with no / a poor internet connection).
This leads to the conclusion that, in the near future at least, the UK will not become cashless. Rather it seems we are becoming a ‘cash-lite’ society – one in which cash usage is forecasted to decrease to about 1 in 10 transactions by 2028 – mirroring the experience of other low-cash countries, such as Sweden and Canada.
Vulnerability & the poverty premium in a cash-lite society
So what does a cash-lite society mean for consumers? Well for most people, most of the time, there will be few problems – but that does not mean that there are not significant risks that need to be mitigated. As fewer transactions are made in cash, more ATMs will be closed down or switched from free to fee-charging – and, as we saw both in our case study of Bristol’s cash network published in May last year and in national research from Which? in September, the latter of these is an issue which disproportionately affects more deprived areas.
Paying to access cash was a component of the University of Bristol’s ‘poverty premium’ calculations in 2016, albeit a relatively small one, and this suggests that vulnerable communities may be left even further behind. Even a small charge of £1 per transaction present a significant cost to low-income households, especially when only small sums—£10 or £20—are taken out to purchase basic food items or pay bills.
Identifying and supporting potentially vulnerable communities
As our society becomes more cash-lite, there is a danger of increasingly uneven access to cash across the country. This makes it important that we are able to map and identify those areas that are not only losing their ability to access cash but are also less resilient to such changes taking place.
Our second report on access to cash, published in January 2020, therefore advances our methodology from our Bristol case study to identify communities in South Wales that are most ‘vulnerable’ in terms of access to cash. We identify vulnerability in two steps: 1) by considering their current ability to access cash – where AvCash Index scores under 5 highlight communities with a low number of ATMs or other cash infrastructure within a 1km radius; and 2) by taking into account communities’ ability to cope without such access. The latter involves the construction of a measure of travel difficulty, indicating that a high proportion of residents in an area may find it difficult to travel far to access cash (or other essential services, for that matter). This measure incorporates: levels of car ownership, disability, age, income and access to public transport (in the form of nearby bus stops).
Looking at communities with poor access to cash and a high proportion of residents who may struggle to travel to access their money, provides us with a clearer idea of where poor cash infrastructures may have the highest negative impact. While this of course does not mean that there will not be individuals in other areas for whom access to cash is a problem, it does offer a useful tool for the industry to prioritise need – for example, when evaluating communities’ requests for a new ATM or identifying which ATMs to protect through additional subsidies. Indeed, as shown in the map below, there are many vulnerable areas without protected ATMs which may benefit from them:
Overall, we find that over a quarter (27 per cent) of neighbourhoods in our case study fall within the 20 per cent worst areas nationally for travel difficulty and have an AvCash Index score of less than 10. Similarly, 8 per cent of areas score poorly for travel difficulty and have no free ATM, while a further 12 per cent of areas have just one free ATM and high travel difficulty. These neighbourhoods are not solely rural; many are located on the outskirts of towns. Taken together, we find that over 100,000 people in this region (out of approximately 500,000) live in vulnerable neighbourhoods and do not currently benefit from a protected ATM.
Our geographical mapping approach therefore presents a potentially valuable tool to identify vulnerability by taking a community-based perspective. It raises further questions about the sustainability of the UK cash infrastructure and the ability of LINK and regulators to reign in private and profit-driven actions by providers of access to cash.
But crucially, we believe that our approach provides policy-makers and regulators with additional insights into the impact current changes have on the most vulnerable communities, and to better understand what vulnerability means in particular contexts. We are hoping to work closely with stakeholders to map access to cash nationally to inform policies towards ensuring cash is available for free to those for rely on it.
Nowadays, fintech startups often emerge with the ambition of ‘doing good’ and changing society for the better. This surely is to be welcomed – but what is the best way of ensuring it actually makes a positive difference to consumers? In this blog, we attempt to answer this question, outlining the first stage in our evaluation of Nationwide’s Open Banking for Good (OB4G) programme.
As its name suggests, OB4G was set-up with the ambition of being ‘for good’. Launched by Nationwide in 2018, it is a £3 million programme which aims to leverage Open Banking technology to create and scale new apps and services, all of which are designed to help the 12.7 million adults in the UK who are ‘financially squeezed’. The ambition to support this group of consumers – who tend to have high debt-to-income ratios, coupled with low savings – is clearly a positive one, but how can those designing innovation programmes turn this ambition into reality?
That is the question Nationwide has asked us to explore through an independent evaluation of the OB4G programme. We have already published a report outlining the lessons from the ideation and implementation of OB4G, and we share below three key lessons that we believe can inform the design of future ‘fintech for good’ efforts. We continue to support the successful OB4G fintechs (who we call Challengers) in measuring the financial and social impacts of their Open Banking-enabled products and services on end-users throughout, with a final report scheduled for Q2 2020.
Lesson #1: Problems looking for solutions, not solutions looking for problems
One of the early lessons of the programme is the importance of identifying real-world problems that might benefit from tech solutions – rather than retrospectively finding a socially useful purpose for an existing product or service.
To do this, the OB4G team at Nationwide involved charity partners from the very beginning to identify the real-life challenges facing people who are ‘financially squeezed’ that the programme could tackle. These charity partners – including Citizens Advice, Christians Against Poverty, the Money Advice Trust, the Money and Mental Health Policy Institute, and The Money Charity – have great insights into the needs of people living on a financial knife-edge, and so were well-placed to identify the issues facing consumers and help shape the programme. In the words of one challenger, this helped overcome the risk of ‘hipsters designing for hipsters’!
Lesson #2: Locking the ‘innovation cage’
Together, the charity partners and Nationwide’s OB4G team identified three pressing challenges for the OB4G programme to tackle:
Income Smoothing – helping the growing number of people who have irregular or unpredictable income to manage their regular outgoings
Income & Expenditure – making it easier for someone to produce an accurate statement of their income and expenditure
Money Management & Help – helping people to practice and maintain good money habits
In our qualitative interviews with OB4G Challengers, they emphasised the value of having well-defined real-life problems to solve, which kept them tightly focused on doing one thing well for a particular consumer segment. This was described by one as an ‘innovation cage’ that allows creative freedom and innovation but in a way that keeps the social purpose of OB4G front and centre.
Importantly, the startups were not alone in their ‘innovation cage’! They were partnered with a charity (or in some cases more than one charity), which could contribute its knowledge and insight about the target audience throughout the development process. This element of ‘co-creation’ was almost as valuable to the Challengers as funding.
Lesson #3: The challenge of different ways of working
Our evaluation not only sheds light on what works, but also on challenges that innovation programmes like OB4G invariably encounter. One such issue was the very different ways in which startups and established organisations work – whether charities or a large commercial organisation like Nationwide.
While ‘agile’ working is part and parcel of fintech startup culture, for charities – whose focus is often on fire-fighting and delivering their core purpose – this can be harder to achieve. The same is true for large commercial organisations, where there may be many layers of bureaucracy to navigate in order to get things done. So while the startups hugely valued the insight and support they got from OB4G, there were times when things didn’t move quite as quickly as they would have liked.
The key lesson for fintechs and innovation programme designers is that, yes, it is hugely beneficial to work with charities and people with lived experience to co-design products and services. BUT you need to build in sufficient time (and understanding) to make this happen. Our evidence also indicates that programmes should routinely offer to fund Charity Partners for their contribution (even if Charity Partners aren’t always able to accept such funding).
So far, our evaluation has focused on the process of setting up and running the OB4G programme. We are now considering the impact that OB4G actually has on consumers. As such, we are working with the five remaining Challengers – Ducit, Openwrks, Toucan, Trezeo and Tully – to measure the effect of their products on consumers’ financial wellbeing. Our aim is to make a useful contribution to a growing body of evidence around how fintech startups can actually ‘do good’ and make a difference to the lives of their users.
Yesterday’s move by the Gambling Commission to ban gambling using credit cards is a welcome public health intervention and one that now shifts the focus onto other ways for people to control their gambling spend. ‘Spending controls’, offered by a growing number of banks, provide one such solution, giving customers the option to block gambling transactions from their accounts. But how can banks maximise the effectiveness of such controls? In this blog, we provide an update from our strategic partnership with GambleAware, which aims to answer this and other questions about the potential role of financial services firms in reducing gambling-related harm.
In September 2019, we officially launched ‘Money and Gambling: Practice, Insight, Evidence (MAGPIE)’ – a three-year programme between the University of Bristol’s Personal Finance Research Centre (PFRC) and GambleAware, a charity who fund research, prevention and treatment into the harms of gambling. The programme is designed to explore and improve the way that financial firms tackle gambling-related harm.
Since then, we have been busy working on the first of several projects within the programme. This considers how ‘spending controls’ – otherwise known as ‘gambling blocks’ – that are available on a growing number of debit and credit cards can be as effective as possible in reducing gambling-related harm. To do this, we have conducted expert interviews with banks and other key stakeholders; consulted people affected by gambling through Advisory Boards and interviews; and reviewed academic and other literature on this topic.
We are also working with banks that have launched spending controls to understand patterns in customer data and are running an online survey of people affected by gambling to find out more about their views and experiences of spending controls. Collectively, we hope the new data collected from these different sources will help improve the industry’s understanding of what does and doesn’t work when it comes to spending controls.
So what spending controls currently exist?
Customers of several UK financial services firms now have access to gambling blocks on their accounts (as shown in the below diagram) – and we know of at least one other firm that offers a similar service on request if you telephone them. Blocks on credit card transactions should, in theory, be unnecessary once the wider ban on gambling with credit cards is introduced in April 2020.
The diagram shows that gambling blocks differ in terms of their ‘cooling off’ period (i.e. the length of time after choosing to turn off a gambling block that someone would have to wait until they can gamble again on their account). Some currently offer no cooling-off period, which means that a customer could use the card to gamble as soon as they turn off the block. CashPlus and HSBC both have a 24 hour cooling off period; while Lloyds Banking Group (including Lloyds Bank, Halifax, Bank of Scotland and MBNA) and Monzo require customers to wait 48 hours before they can gamble again.
This cooling-off period is generally recognised, by banks and treatment providers, as a crucial component of an effective gambling block – especially for customers engaged in more high-risk gambling behaviours. As such, we are very likely to see more firms incorporating this kind of ‘friction’ into their spending controls in the near future.
More than the ‘cooling-off’ period…
While obviously important, our work recognises that an effective gambling block is about more than just its cooling-off period. Friction can come in many forms and there are some really interesting ideas on the horizon about the shape that these could take.
There are also a range of other fascinating, albeit challenging, questions that we need to answer. For example, we need to understand more about the customer’s engagement with staff if and when they try to turn off the block, or what happens if they try to gamble when the block is turned on. How are gambling blocks being communicated to customers, and how do financial services firms reach the right people? Who even are the ‘right people’?! It might be the case that a whole spectrum of products and services should be made available to customers engaging in a wide range of gambling behaviours, including those who might not be engaged in risky gambling behaviours right now but may do so in future.
And there are questions that may stretch beyond the usual remit of the financial services sector. How, for example, might unscrupulous gambling operators try to circumvent such spending controls, and – crucially – what can we do about this?
Lessons from the literature
There exists a rich body of academic literature about gambling and ways to reduce gambling-related harm. To bring this literature to a wider audience – including financial services firms – we have published a Roadmap which sets out the rationale for our programme and summarises some of the existing evidence that is relevant to spending controls. It highlights, for example, the importance of viewing spending controls as one tool in a wider harm minimisation toolkit, as well as the importance of considering the other people affected by gambling (such as partners, families, friends) and the help and support they might require from financial services firms.
You can read this roadmap document here and sign-up for updates about the programme here.