People should find it easier to access basic bank accounts, after major banks committed to improving widespread poor practice identified by the City regulator.
Basic bank accounts are simplified accounts which serve people who may not otherwise be able to access standard current accounts – providing access to essential services with no overdraft.
People with a poor credit history may struggle to access a standard current account.
This means that a basic bank account can be vital in supporting financial inclusion and helping people to receive payments such as wages or benefits or when paying bills.
Some of the biggest UK banks and building societies are legally mandated to offer basic bank accounts.
Under the Payment Accounts Regulations 2015, the nine biggest standard personal current account providers in the UK must offer basic bank accounts to legally resident consumers who either do not have a UK bank account or are not eligible for all other payment accounts.
A mystery shopping exercise by the Financial Conduct Authority (FCA) found around a third of experiences with basic bank accounts rated as poor or very poor.
The exercise covered 298 interactions across branches and by telephone.
It tested two scenarios – a person experiencing financial hardship with non-standard ID, and someone who had been through bankruptcy but had standard ID. Both showed characteristics of vulnerability.
Across 298 mystery shops, the FCA rated 28% of interactions as good or very good, 38% as fair, 20% as poor and 14% as very poor.
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
Go to website
ADVERTISEMENT
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
Go to website
ADVERTISEMENT
The mystery shop indicated that firms did not consistently mention and discuss basic bank accounts early enough in the conversation.
Bank account providers were not consistently offering the accounts to customers who could benefit from them.
This included people facing financial hardship or without standard identification, and people with no fixed address.
Staff often did not recognise and respond to characteristics of vulnerability, or adapt their approach for consumers who needed help to complete a standard or digital process.
Firms often failed to mention basic bank accounts at all and pushed customers in vulnerable circumstances towards online applications unsuitable for their needs, the regulator said.
Overall, the issues create a risk that firms will prevent people getting an appropriate account, according to the FCA.
To tackle this, banks and building societies have agreed to individual improvement plans and the FCA has worked with banking and finance industry body UK Finance to secure a collective commitment for the firms.
The firms are committing to provide the right account for customers, first time, with clear communication and minimal friction.
They should also make it straightforward for customers without standard identity or a fixed address to open an account.
And banks should spot vulnerability early and offer accessible alternatives to online-only options.
The FCA’s Financial Lives survey indicated that in 2024, more than 97% of UK adults had a current account.
While 4.3 million UK adults had a basic bank account, around 900,000 adults were unbanked with no current account.
Emad Aladhal, director of retail banking at the FCA, said: “Progress has been made with over 97% of UK adults having a current account, but our latest work shows that all too often banking firms’ engagement with customers still needs improvement.
“Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out.
“That’s why the biggest banks have now committed to improving how they are offered – and we’ll be holding them to account to make sure change happens.”
Peter Tyler, director of personal banking at UK Finance, said: “A basic bank account can be an important first step towards financial independence, and while most customers who hold one have positive experiences, we recognise that more can be done to ensure consistently good outcomes for everyone.
“That is why UK Finance and our members are committed to raising industry standards and expanding access.
“The recently expanded ‘breaking the cycle’ initiative is a key part of this work, providing practical support to those facing barriers to accessing essential banking services, such as individuals without a fixed address.”
The banking institutions that are legally required to offer basic bank accounts are Barclays UK, The Co-operative Bank, HSBC UK, Lloyds Banking Group (including Halifax and Bank of Scotland brands), Nationwide Building Society, NatWest Group (including RBS and Ulster Bank brands), Santander UK and TSB, and Virgin Money UK.
