Identifying vulnerable communities at risk of being left behind in a cash-lite society

By Daniel Tischer, Sara Davies & Jamie Evans

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:

Map of vulnerable areas & protected ATMs

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.

 


Read the full report here:

Report: ‘Geographies of Access to Cash: Identifying vulnerable communities in a case study of South Wales.’

Making a difference in FinTech? Evaluating the impact of Nationwide’s Open Banking for Good programme

By Sharon Collard & Jamie Evans

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?

Moving the Dial report cover

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).

What next?

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.


Read the first stage of our evaluation here:

Report: ‘Open Banking for Good: Moving the Dial?’