Better information must be provided to consumers helping them access basic banking and choose payment services that suit their needs and budgets.

This is the outcome of a report compiled by the Financial Services Consumer Panel¹ which calls on the Financial Conduct Authority (FCA) to ensure financial institutions promote the benefit of Basic Bank Accounts (BBA) – a crucial banking facility to support those in financial difficulty.  It also recommends the FCA ensure consumers understand the risks and costs relevant to non-traditional payment mechanisms to protect them from harm.

Why and how was this research carried out?

The Consumer Panel wanted to understand and explore consumer use of BBAs and new payment methods on the market. This was in light of a rapidly evolving and complex payments sector, the long-term cost of living pressures, and increasing vulnerability.

Opinium Research was commissioned to conduct a nationally representative survey of 3,001 UK adults in March 2024 to test:

  • Consumer awareness and experience of BBAs; and
  • Consumer use and understanding of risks and protections related to non-traditional payments (e.g. Open Banking, PayPal, mobile payments, third-party money transfer services, crypto, pre-paid cards) compared with traditional payments (e.g. cash, debit/credit cards, bank transfers)

The survey was designed to understand the needs and experiences of vulnerable consumers.

What did the survey unlock about the valuable potential of BBAs?

13% of the respondents had a BBA, stating that they opened one to make it easier or less complicated to manage their money, budget and stay debt-free. Of this group, 94% said this type of account met their requirements.

Data from this survey suggests that a quarter of those without a BBA would have benefited from a BBA due to their financial situation at the time. Low consumer awareness of the benefits, and lack of promotion by banks, appear to be key barriers to unlocking the value of BBAs for more consumers. Of those with a BBA, only 25% opened an account following a proactive approach from their bank, with 55% having to request one. These findings are consistent with those reported in the FCA’s recently published UK Payment Accounts Access and Closures update.

Are more consumers understanding new payment methods?

The majority of those surveyed stated they prefer using traditional payment methods. However, 62% of the respondents said they used at least one non-traditional payment method during the previous year. This was driven primarily by PayPal (50%) followed by mobile payments (27%).

Lack of knowledge, and trust in the provider/technology, prevent greater use of other new payment types, such as Open Banking, crypto, and third-party money transfer services.

From the survey, 45% cited convenience as the main reason for choosing a payment type, placing lower importance on safety (19%) and redress (11%). While respondents claim to have a good understanding of protections, redress and costs related to new payment methods, the Panel is concerned that this may be at odds with the real situation, which is varied and complex with levels of protection often lower, and fees higher, than some traditional methods.

What does the Panel recommend regarding Basic Bank Accounts?

The FCA should ensure that financial institutions promote and make BBAs available through a wide range of communication channels that are easily accessible to consumers. This will ensure information reaches the greatest number of consumers, according to their circumstances, needs, and preferences, enabling them to make suitably informed decisions.

What does the Panel recommend regarding non-traditional payments?

The FCA should ask the businesses providing non-traditional payment methods how they communicate information regarding costs and risks with customers, so the latter understands the relevant information.

At the same time, the FCA should conduct consumer research to find out how customers understand the relevant costs and risks themselves.

In conclusion…

Panel Chair, Helen Charlton, said: “It is important that consumers, particularly those in vulnerable circumstances, are empowered to make informed decisions about basic banking services and payments, which are essential to participating in society.

“To deliver good consumer outcomes and reduce the risk of financial exclusion, firms should be proactive, in promoting services that best meet consumers’ needs. They should also provide clear and timely information ensuring consumers understand the benefits, protections, risks, redress, and costs of their payment methods.

“We are pleased to see this reflected in the FCA’s recent report on UK Payment Accounts Access and Closures Update and look forward to engaging with the FCA further on this important topic.”

The Consumer Panel is a statutory body under the Financial Services and Market Act 2000.  The Financial Services Authority originally established it in December 1998. The Panel advises the FCA on the interests and concerns of consumers.  The Panel is independent. Its views do not represent those of the FCA.