The Power of Financial Inclusion

At Equifax, our purpose is clear: To help people live their financial best. The origins of the business was to enable people access to credit and the ethos of those humble beginnings are still relevant today. However, there are more than 1.2m people in the UK without access to a basic bank account, illegal money lending is increasing and there is a gap in the market to make products not only more accessible but also affordable. Our recent financial health report, Making Ends Meet, highlighted the £19bn of unclaimed benefits with lack of awareness and complexity of eligibility, as well as data sharing regulation, limiting unification of benefits for those for whom a top-up on their low income would enable better resilience. 

At a recent Centre for Social Justice event, Economic Secretary to the Treasury Andrew Griffith MP talked about some of the government initiatives that have attempted to drive better financial resilience in adults - Help to Save to help low earners get into a savings habit and auto-enrolment for pensions. The opportunity to manage money more effectively in the digital age was also highlighted. With tools like round-up and banking apps now nudging consumers to meet small and sustainable savings goals even low earners are being empowered to make small steps. However, digitalisation is not a silver bullet. It does not suit everyone including our most vulnerable consumers, and access to cash and basic money management principles is key. 

We are proud to partner with Money and Pensions Service, signposting tens of thousands of indebted consumers a month to access support with managing their finances through their MoneyHelper tool, providing trusted advice through tools, calculators and learning content. However, debt advice is currently at record levels and although previous initiatives like Multiply have been successful in reaching a small number of consumers, we have yet to see anything on scale to help UK-wide consumers weather the current storm. 

But the truth is, good financial habits start young. Core curriculum subjects like maths and English are the foundations of good financial literacy and although financial education is now on the national curriculum for all English secondary schools (and woven through the primary maths curriculum) only one in four children leave school with delivery in this area. Although further embedding into core curricular may help, the confidence of educators is more likely to make an impact here. There is more to be done by the financial sector and related credit services industry to support education of our future consumers and make products and services more accessible and transparent. Our partnership with Speakers for Schools launched in 2023 saw more than 300 16-18 year olds take part in a financial education workshop to boost their skills and confidence in money management as part of our pilot scheme and over the next few years, we will reach more than 1,000 young people each academic year. At global level, we also recognise the importance of credit file literacy and understanding the principles of decision-based lending. We are currently developing our credit-education programme which will launch later this year in local communities all over the world. Unregulated markets in the UK such as buy-now-pay-later are not currently sharing data with credit bureaus meaning consumers may never build a robust data-rich credit file or be able to demonstrate creditworthiness for lower-cost credit lines leaving them paying over the odds. However, an understanding of credit files and educated consent to share data may help to make this process more transparent and include more consumers in main-stream lending.

The UK credit market is diverse from historic mutuals and credit unions to tech startups but greater awareness of the range of services will help the most financially vulnerable consumers get the right provider and product at the right price. When conventional credit access is off-limits and affordability dwindling, many turn to short-term, high-cost credit or even illegal money lenders. The Centre for Social Justice estimates more than 1m adults in the UK have borrowed from a loan shark. Many consumers believe their lender is a ‘friend’ and only a fraction of victims actually report this crime. The government has invested in this area significantly in recent years helping to write off more than £90m of alleged debt but the most financially vulnerable are still falling through the cracks. Together with our debt collection agency and partners such as The Centre for Social Justice, we will be driving awareness and building skills as part of our vulnerability training. Better awareness of alternative providers such as credit unions will make this sector more sustainable and open up more affordable and sustainable options to more consumers.