New UK report: Access to financial services: 1 in 7 people are financial excluded

April 13, 2022 ESG, Financial Inclusion, Sustainable Finance, FinTech and Alternative Finance, Fintech International, Innovation and Resources, Leadership, Productivity, Competition, Human Capital, Health, Research, Stories No comments

LexisNexis | Apr 4, 2022

According to the World Bank, 1.7 billion, or around 30% of people across the globe lack access to useful and affordable financial services that meet their needs.

Access to affordable financial services can play a huge contributory role in social mobility. Those with a basic bank account, for example, are more likely to apply for credit and savings products, to own their own home and to protect their assets through insurance. Financially included people are more likely to be offered affordable rates on utilities and other credit risk-dependent services. Inclusion can vastly improve personal and economic outcomes – increasing the likelihood of people accessing proper healthcare and education, encouraging
entrepreneurialism and boosting consumption.

See: World Bank’s investment arm injects $10 million into FintechOS to help boost financial inclusion

Fintech is making it better but long way to go

The global financial inclusion picture has already vastly improved over the past 10 years. Since the last financial crash, an estimated extra 1.2 billion global citizens have gained access to basic financial services, driven in part by the rise of Fintech. Yet, inequality remains, with those from poorer households, rural areas and ethnic minorities disproportionately underserved.

One in seven financially excluded in the UK

Analysis shows that around 7.1 million people (one in seven, or around 14% of the adult population) in the UK fall into the definition of ‘financially excluded’, meaning they could potentially struggle to access affordable and fair financial services. It also found that over 637,000 people fall into the definition of Credit Invisibles, rendering almost three-quarters of a million people effectively un-scorable in credit-risk terms.

Regional matters

Combining 2.6 billion records with powerful statistical linking technology, the analysis also provides a detailed, regional overview of financial exclusion and its underlying causes across the UK adult population. Using data across 380 UK local authorities, LexisNexis® Risk Solutions has provided a granular picture of the extent to which populations, right down to community levels, could be suffering from financial exclusion and vulnerability. An interactive heat map shows how financial exclusion is distributed across the UK population, and how regions compare.

At the heart of the issue is the way in which providers traditionally determine risk.

See: So what is financial exclusion in the era of Open Finance?

Credit checks pull data from credit bureaus, which only look at a very narrow view of an individual. And they don’t just discriminate against bad credit history, but also look disapprovingly at so-called ‘thin credit files’, otherwise known as a lack of a credit history.

Flaw in UK credit sector - New UK report: Access to financial services: 1 in 7 people are financial excluded

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NCFA Jan 2018 resize - New UK report: Access to financial services: 1 in 7 people are financial excluded The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org