Scotland has one of highest rates of ‘unbanked’ people

People living in deprived areas are also more far likely to be “unbanked”, according to the latest report from the Financial Conduct Authority (FCA).

The issue of accessing to banking services has been in the spotlight following the row over elite financial institution Coutts closing of the account of former UKIP leader Nigel Farage.

But charities have highlighted how it is often the most vulnerable groups in society who are facing a struggle with financial exclusion because of not having proof of an address or a poor credit history.

According to the FCA report examining the financial lives of people in the UK in 2022, “unbanked” adults make up 2.1% of the UK population – which is defined as not having a current account with a bank, building society, credit union or e-money institution.

This adds up to around 1.1 million people, down from 1.3 million in 2017.

Groups most likely to be unbanked included Muslims at 10%, while the unemployed, those who are long term or temporarily sick, looking after the home, or carers and those with no educational qualifications each made up 7% of the total.

The report notes: “There were higher proportions of unbanked adults in southern Scotland (6%), outer London – west and north west (5%), Greater Manchester (4%), and the West Midlands (4%).

“There is also a strong link to deprivation, as 3.6% of adults in the most deprived areas of the UK are unbanked, compared with less than 0.6% in the least deprived areas.”

Around a quarter of those who are “unbanked” said they would like to have a current account, with just over half saying they did not want one and a further quarter saying they were unsure.

Matt Downie, chief executive at homeless charity Crisis, said that it could be almost impossible for people experiencing homelessness to access employment, apply for benefits or find somewhere to live without a bank account.

“This often leaves many people stuck in a cycle of homelessness that can be difficult to escape from,” he said. “Although all high street banks are legally required to provide accounts for everyone, their requests for proof of identification or an address can make it extremely challenging for people who are homeless.”

He added: “We know that a number of banks are working hard in partnership with homelessness organisations to improve access to bank accounts, including schemes that bypass the need for ID and fixed addresses.

“However we need all banks to follow suit with more urgency, so that people aren’t financially excluded and at greater risk of homelessness.”

Karolina Kaminska, integration service manager at the Scottish Refugee Council said having a bank account is a vital first step in becoming financially included and setting up a life in Scotland.

But she said many refugees faced barriers in accessing services, such as being able to provide the right documents to meet different criteria around identification and proof of address.

Other issues include language barriers, with banks not required to provide interpreters, and a lack of internet access or digital literacy with some banks now asking for applications to be started online.

“We know that banks can do better, as our integration advisors have seen examples of good practice over last few years,” she said.

“There is certainly a small number of banks that are clear champions in equality and financial inclusion but these are the exception rather than the rule.”

Sarah-Jayne Dunn, a spokesperson for Citizens Advice Scotland, said a poor credit history could lead to difficulties in opening a bank account, along with issue such as not having access to the internet.

“Problems in accessing bank accounts can impact on the receipt of benefits, and can also limit employment opportunities because many employers will only pay wages into a bank account.” she added.

“Access to a bank account also makes it easier for people to access affordable credit, housing, and lower utility payments – which leads to a healthier financial situation overall.”