Does financial inclusion helps promote cash savings
“Financial inclusion matters not only because it promotes growth, but because it helps ensure prosperity is widely shared. Access to financial services plays a critical role in lifting people out of poverty, and in helping governments deliver services to their people”- Sri Mulyani Indrawati Financial inclusion is when individuals and businesses can equally access affordable financial products and services which are suitable for their requirements, such as savings and insurance. Access to financial services is vital because it helps families and businesses stay on top of their finances and prepare with the future in mind for long-
term goals and unprecedented emergencies. The covid-19 pandemic and the soaring cost of living have magnified the importance of essential financial inclusion and financial services in the UK and internationally. According to the world bank, accountholders usually use financial services such as credit and insurance to set up and develop businesses, invest in education or health, and prepare for financial eventualities, which can positively affect their lives. Furthermore, according to the most recent figures, 13 million people in the UK have relatively low salaries, 10.7 million adults have financial resistance, and 24 million display one or more attributes of vulnerability. Consumers who fit within this demographic are more at risk of financial inclusion. In addition, one in four adults in the United Kingdom will go through economic segregation at least once in their lifetime; this is according to the Inclusion Foundation. Financial regulation is crucial in working towards financial inclusion; however financial regulation is not enough to combat economic segregation or the linked ‘poverty premium’ on its own (FCA). The government, regulators, industry, and consumer groups must join forces to tackle financial exclusion. Although in recent years, the government announced it would make a more substantial contribution to financial inclusion. They also discussed how to protect access to cash and published regulations on buy now, pay-later products, enabling legislation to allow credit unions to recommend a broader range of products and services. The government’s long-term strategy to protect cash in the future is to commit to legislating access to money to make sure UK’s cash infrastructure continues to be stable. The government also implemented legislative adjustments to support cashback without purchases from stores and other businesses under the Financial Services Act 2021. A No-Interest Scheme pilot was launched with Fair4Al Finance. The scheme aims to support the most financially defenceless consumers as they struggle to access inexpensive forms of credit. Financial products such as insurance help consumers in case of unexpected eventualities. However, one in ten adults in the UK has no insurance. Those with low income are the most likely not to be insured, and those that do have insurance pay higher premiums or pay more expensive monthly payments. Savings, pensions and investments are vital for preparing for the future, such as buying a house, retirement and emergencies. However, financial exclusion makes it difficult for people to have access to saving accounts, which can be for several reasons, such
as having low income and not feeling confident in having a savings account because they do not earn enough to have a savings and current account. Accessibility to cash during the pandemic Accessibility to cash, banking, and bank accounts is crucial for financial inclusion, as most people rely on this daily. These services facilitate paying for stuff and receiving income such as a salary, benefits, or pension. The government worked with regulators during the pandemic to ensure that firms still had access to vital banking services such as cash. There was also support for customers who rely heavily on cash, such as cash delivery offerings and carer cards to allow a trusted third party to carry out payments. How financial education affects financial capability? The Financial Lives survey conducted by the FCA is a ‘nationally representative survey’ of UK customers (Mills,2022). The data showed the link between education and financial capability and its relevance to financial inclusion. Moreover, one in five adults said they had low financial ability in 2020, which means they are not very confident or knowledgeable in managing their financial affairs or have little or no digital skills. Technology and its link to financial capability: In the UK, 9 million people do not know how to use the internet without assistance, and 11.7 million do not have the digital skills needed for daily life. One in six adults (16%) with low financial ability are in debt which might have been preventable if they were more digitally savvy. Resources that educate people on managing their finances and using the internet for online banking and other necessities should be more readily available for those who need them. Job centres should also help the financially vulnerable access these resources. Intellisaving: Intellisaving is a smart, innovative saving app which integrates multiple saving and ISA accounts to one platform. Intellisaving works hard to make its app inclusive so that as many people can benefit from managing their finances through the app. The platform also has a comparison feature for users to compare the best rates across different banks and building societies. Intellisaving also has several articles on its website designed to inform people on financial topics relevant to many other circumstances, from money-saving tips for parents to articles for those approaching or in retirement.
Financial exclusion means that many individuals cannot access financial products and may not have a financial product that suits their lifestyle needs. However, financial products need to be made more available so everyone can meet their basic financial needs, such as current and savings accounts. The government, regulators, industry, and consumer groups should work together to reach more people with financial products. As this is a global issue, it should be on the international agenda to find a strategy that makes it more financially exclusive for all, regardless of where they live and how much they earn. Tags Savings