Topic 3 Continued Flashcards
What are some of the consequences of not having a bank account
• Restricted access to financial services, including some savings accounts that require a current account.
• Inability to pay for personal loans, credit cards, hire purchase, or insurance policies that require direct debit payments.
• Loss of discounts offered by utility companies for direct debit payments.
• Some employers require bank accounts to pay wages and salaries
How did changes in government benefit payments in 2003 create challenges for those without bank accounts
• Before 2003, claimants without bank accounts received fortnightly cheques, which they could cash at the Post Office.
• From 2003, benefits were paid directly into bank accounts via automatic credit transfer, creating issues for claimants without bank accounts
What solution did the government implement for claimants without bank accounts?
A:
• Introduced the “universal banking” policy, requiring banks and building societies to offer basic bank accounts with limited features:
• No overdraft or cheque book.
• Some accounts not accessible online or usable for direct debit payments
Q: What is a Post Office Card Account, and how does it differ from a basic bank account?
A:
• Operates like a basic bank account but allows access through local post offices.
• Beneficiaries could withdraw cash without needing a traditional bank or building society account
What happened to Post Office Card Accounts in April 2022?
A:
• These accounts were discontinued.
• Claimants were advised to close their accounts and switch to alternative methods, such as opening basic bank accounts
What is the purpose of basic bank accounts?
A:
• To reduce financial exclusion by providing more people with access to banking services.
• Allows those without full access to financial accounts to participate in essential transactions such as receiving benefits or making payments.
What trend is observed over the years in financial exclusion
The percentage of low-income households without access to financial accounts decreases steadily
What do consumer rights campaigners believe is a key reason for the lack of basic bank account access?
A: Many providers fail to publicize basic bank accounts
Why are basic bank accounts not well-promoted according to campaigners?
A: Providers find them costly to operate and see no compensating profits from cross-selling other products
What policy actions have governments taken to combat financial exclusion?
A: Governments have introduced multiple initiatives aimed at promoting both social inclusion and financial inclusion
Can you name a specific initiative to address financial exclusion?
A: MoneyHelper
How is MoneyHelper funded, and what does it aim to do?
A: It is funded by a levy on financial services firms and pension schemes and aims to provide clear financial advice and information to help people manage their money
Why is financial inclusion important?
A: It helps prevent social and financial exclusion, enabling low-income households to participate in the broader economy and access essential financial services
What is a major consequence of financial exclusion?
A: Individuals face difficulties managing money and accessing financial products, which can perpetuate poverty and inequality
What initiatives has the government encouraged banks and providers to adopt to combat financial exclusion
- Offering targeted financial products: Low-cost, low-deposit products designed to be simple, straightforward, and accessible to financially excluded individuals.
- Providing accessible product information: Making information available in different languages, Braille, or formats suitable for those with visual impairments.
- Promoting financial education: Educating people on financial products to help them understand their benefits and encourage their use
What is NatWest’s contribution to financial education
• MoneySense Programme: Offers free, interactive resources for 5–18-year-olds online, covering guides, videos, and more, tailored to school-aged children
What initiative has Barclays introduced?
A:
• Life Skills Programme: Provides free downloadable resource packs online, focusing on personal finance and career-related skills
How has the internet helped reduce financial exclusion
- Enables people who are housebound or have limited mobility to access financial services.
- Provides tools like screen readers and voice synthesizers for people with disabilities.
- Supports those who work unsocial hours by allowing access outside of normal business times.
- Reduces intimidation by letting users research financial products at home without interacting with sales staff
What broader government policy supports the role of the internet in financial inclusion?
A: Policies aimed at making broadband accessible to the majority of the population
Why are low-cost and low-deposit products essential for financial inclusion?
A: They lower entry barriers, making financial products more accessible to the economically disadvantaged
How does financial education contribute to inclusion?
A: It equips individuals with knowledge, enabling them to make informed decisions and utilize appropriate financial products
How can political decisions relating to financial services impact individuals’ personal finances?
especially when they influence regulations related to financial services
Why do many economists argue for minimal regulation in a market close to a ‘perfect market’?
Economists believe that minimal regulation is necessary if a market operates like a ‘perfect market,’ where competition and consumer choice naturally prevent excessive pricing and malpractice
What is a ‘perfect market’?
is one where large numbers of competing manufacturers and retailers prevent any single entity from charging excessive prices, as consumers can find similar products more cheaply elsewhere