Mastercard: Build back fairer by helping banking’s underserved
By Kelly Devine, President, UK & Ireland, Mastercard
Last month’s Kalifa Review prompted headlines about fintech’s role in providing jobs and trade opportunities for the UK. What did not get covered at such length was that these were just two of the three “prizes” the Review called out. The third was inclusion, with the highly-anticipated report asserting that helping citizens to “access better and cheaper financial services”, in a sustainable way, would aid the Government in achieving its goal to “build back better”.
All three of the identified ‘prizes’ were well received, but in my opinion this third aspect of inclusion is the most important. The industry has known for years that poverty fuels the digital divide which in turn excludes those on lower incomes from accessing often the most suitable, and affordable, financial products.
These are the people who can least afford to miss out. The Financial Conduct Authority estimates the financially underserved could be £500 better off each year if the relevant information and the right solutions were available to them, with younger groups and the unemployed hardest hit.
It is quite a staggering figure but 1.9m UK households still have no access to broadband and 11.7m lack basic digital skills, and it’s this digital divide that is causing the them to be underserved.
As you might imagine, this burden is not shared equally. For households with an income under £11,500 per year, nearly half lack broadband access in their home. That proportion drops to just over one in ten when you move up in income bracket to households receiving £25,000 or more per year.
Society’s accelerated digital shift under the pandemic has uncovered what this truly means. A large proportion of our population couldn’t take part in elements of daily life we all take for granted. They were not able to work from home or access education tools, they weren’t able to shop and pay for goods online. With cash use dropping 50% as ecommerce use shot up by 80%, they were effectively cut off from a significant proportion of modern, digital life.
In the midst of the greatest economic downturn the country has known, those without online connectivity are not only cut off from digital financial services, they are excluded from online financial advice and money management tools at the time they need it most.
As Mastercard research has shown, this means 27% of the UK population do not know how to access financial guidance online and so 19.4m Britons were unprepared for the economic downturn. The Resolution Foundation points out that one in the three UK households has no savings to fall back on.
Working for inclusion
By supporting Fintech in the UK and beyond we can accelerate the inclusion of people. The very nature of the Fintech community’s creativity and innovation and their adoption of API, Open Banking and data-led solutions is leading to more inclusive products and services coming to market. The equation is quite simple: knowledge through data, plus basic skills through guidance, equals better financial behaviours and outcomes.
Others in the ecosystem are also well positioned to help and have already made significant inroads in helping bridge the divide. At Mastercard, together with our partners at Good Things Foundation we are looking to lead the way. Through our Nobody in the Dark campaign, we have already engaged one and a half million people to give them guidance, both online and face-to-face, about managing debt and taking control of their finances. We’ve also equipped some of the UK’s most excluded people with the devices and data they need to access services online.
Via the Inclusion Foundation the Fintech and financial services sector has also come together support the 1.23m unbanked in the UK and the 13m underserved by helping them to find payment methods that suit their needs.
Meanwhile, the Emerging Payment Association’s Project Inclusion has convened like-minded members to shine a spotlight on the problems of exclusion, and more importantly the increasing availability of fintech-generated solutions. In the past year, it has studied the impact of the pandemic on the demand for inclusive products and is currently addressing access to affordable credit.
For Mastercard, our involvement in these initiatives is an extension of our global commitment to better serve the underbanked who are not able to enjoy the benefits of digital financial services and can find themselves paying a premium as a result.
New normal has to be fairer
Right now, everyone across the UK is dreaming of the day when we can start hugging loved ones again or share a meal with friends as lockdown restrictions begin to lift. But despite this desire for a return to normality, most people are agreed that they want the country to build a different ‘normal’ – a fairer society where nobody is left behind.
For the Fintech and financial services industry, this means we must keep working on improving digital inclusion. The Kalifa Report offers us some clear calls to action, with a very welcome focus on inclusion – but this important message must now be backed up by strong actions from Government, the financial services community and beyond.