What Is Basic Banking?
Many of us take personal banking facilities for granted, and hardly give a second thought to the way we conduct our finances - having our salaries paid into our accounts, and using cash machines, cheques or debit cards to access our money, while direct debits and standing orders take care of our bills without us needing to remember to pay them.
However, this is not the whole story. Surprising as it may seem to people with easy access to financial services, there are still millions of people in this country who until recently were unable to get a bank account, and so were completely outside the financial system.
Credit Risks
The reasons that people can't access banking services are varied, but most stem from a lack of creditworthiness in the eyes of the banks. Low income, variable or seasonal income, previous debt problems, being retired or jobless - all these factors can conspire to make millions of people a perceived 'risk' to the banks, no matter how reliable and honest they may be in real life.
The government decided that this situation had to change, not least because billions of pounds of benefit payments and wages were having to be paid in cash rather than straight into a bank account, at great cost to both the taxpayer and small businesses.
Simple Accounts
The answer the government came up with in partnership with the banking industry was a new kind of account, known as a Basic Bank Account or Starter Account.
These new accounts were simple, no-frills bank accounts which allowed the electronic deposit of money such as benefit payments or wages, the payment of bills by direct debit, and the withdrawal of money either at a bank branch or through a cash machine.
As these accounts didn't offer an overdraft facility, a cheque guarantee card, or a debit card, there was no possibility of a debt being run up, and so they could safely be offered to a much wider range of people than normal accounts.
In fact, it is very rare to be refused a basic banking account, unless you are currently bankrupt or have a history of fraud or extreme bad debt.
The Benefits Of Basic Banking
The immediate benefit of these accounts is that the government and small businesses can save money by paying benefits and wages electronically, which is much more efficient than dealing in cash.
Secondly, customers can enjoy the convenience of banking which had previously been denied them.
Finally, basic accounts can act as a stepping stone to being able to access more advanced forms of financial services, leading to greater financial inclusion to the benefit of both the individual and the country as a whole.
