3.4 Financial Inclusion + Financial Capability

Question 1

Financial inclusion

Answer 1

= individuals (regardless of their background or income) have access to useful and affordable financial products and services

Can make payments , deposit money and access credit
Insurance pensions

Question 2

Financial exclusion

Answer 2

= not having access to financial products
People who can’t cope with the required technology is financially excluded and digitally excluded

Question 3

Financial capability

Answer 3

= having knowledge, confidence and skills to manage personal finances

And make the best use of financial products available

Question 4

Digital exclusion

Answer 4

= not being able to use digital channels

Question 5

Financial exclusion (FCQs financial live 2020 survey):

Answer 5

Only 76% of the world adult population has a bank account in 2021
Unbanked:
- Unemployed (11%)
- Digitally excluded (7%)
- Adults with no educational qualifications (7%)
- Work in gig economy. (7%)

Increases inequalities in society

Question 6

Two main factors to those who are unbacked:

Answer 6

1) low income = homeless people don’t have a permanent address which is needed to open a bank account and others could have got it taken away due to poor credit history

2) Low financial capability = may not be good at managing money and on how to access a bank account or understand the complexities of some Banking products

Question 7

Unbanked people

Answer 7

• harder to spend or receive money

Without a current account = unable to borrow products and money or purchase insurance

Unemployed > hard to get a job without a current account

In some European countries > there are restrictions on the use of cash to prevent money laundering

For example = in 2023 the maximum limit for cash payment in Greece was €500 and higher amounts must be made by bank transfer

Question 8

The digitally excluded

Answer 8

Unable to use a bank account effectively. Several impacts to this:

• Older people (likely to use cash)
• Physical asset (cash is a physical asset, some may have more confidence in cash then electronic)
• Anonymity (cash movement can’t be tracked)
• rising living cost (more consumers will turn to cash as a way of managing their spending)
  can’t overspend

Question 9

Improving financial inclusion and financial capability

Answer 9

Providing basic bank account as the government have a duty to protect consumers and ensure that markets are working fairly

Question 10

Financial literacy courses

Answer 10

Can be improved through education and training
People can take lessons online and learn about money and product and how to manage their money/income to avoid debt and budgeting

Can make better financial decisions

Question 11

Basic accounts

Answer 11

Can have your income or benefit paid into the account
Can make payments and withdraw cash and set up regular payments
Can’t use a chequebook and cannot apply for a overdraft

No monthly fee
Can set up standing order and direct debits

Question 12

Digital banking

Answer 12

= can increase financial inclusion
Especially In developing countries where poverty is high

Many people live in remote villages and someone having a mobile phone phone in the village, people can rent it to others for a small charge to allow them to do their Banking

Reduces the risk of losing cash through theft