We have reviewed how retail banks provide information about Basic Bank Accounts (BBAs). We found examples of good practice and areas for improvement.
BBAs are designed for people who may otherwise be unable to open a standard bank account. They are key to increasing access to financial services. Giving customers the right information at the right time is a critical part of this process.
In our review, we looked at 5 of the 9 banks that provide BBAs. We found examples of good practice, where staff provided customers with clear information and took account of customers’ individual circumstances. We also found areas for improvement where we believe information on the availability of BBAs could be more prominent, and customers’ first engagement with bank staff could be improved.
The review also suggests that firms can improve how they deal with non-standard proof of identity and their approach to identifying vulnerable customers.
Background
The design of BBAs is intended to improve financial inclusion. Specifically BBAs:
- are generally ’fee free’ (but charges for transactions in a foreign currency are allowed)
- cannot have an overdraft facility
- do not require customers to ’pass’ a credit check to be offered the account
- have specific eligibility criteria defined within the Payment Account Regulations (PARs)
The Understanding the financial lives of UK adults survey[1] (part of the Financial Lives survey) indicated that over 1m people in the UK do not have a bank account and over 60% of those individuals were unaware of BBAs.
We wanted to understand the approach being taken by firms in this key access and vulnerability area. We did this by gaining evidence of the ability of bank staff to identify eligible customers and provide information about BBAs, in line with the Payment Account Regulations 2015 (PARs) and requirements in our Handbook.
What we did
We undertook a mystery shopping exercise to explore the experience of a customer eligible for a BBA. Our mystery shoppers contacted the banks, both in branch and over the phone. They explained their ’personal’ circumstances and asked about opening an account. The mystery shoppers’ backstories were designed so that on proper exploration it would have been apparent that they were eligible for a BBA.
Our review examined retail banks’ responses to initial account opening enquiries. We consider this stage to be very important for potential BBA customers. If customers receive inadequate information at this stage, then there is a significant risk that they will fall out of the account opening process. During the exercise, we found some good practice, but we also found practices which could make it more difficult for eligible individuals to open a BBA.
Our expectations
Under the PARs, banks who are designated providers of BBAs must:
- offer a BBA to any consumer who applies and meets the eligibility criteria
- open or refuse to open a BBA without undue delay, or no later than 10 business days from receipt of the completed application
- make available to consumers, free of charge, accessible information and assistance about:
- the specific features of the payment account with basic features they offer
- the associated fees and conditions of use
The eligibility criteria for BBAs are set out in the PARs.
Banks are required to comply with all relevant rules in respect of Anti-Money Laundering (AML) and Financial Crime. This means that they must take steps to verify the identity of applicants. Banks compile their own list of acceptable identity documents, and these may vary between firms. That said, our guidance is clear in SYSC 6.3.7(5)[2]: ’A firm should ensure that the systems and controls include…
'(5) appropriate measures to ensure that procedures for identification of new customers do not unreasonably deny access to its services to potential customers who cannot reasonably be expected to produce detailed evidence of identity.'
What we looked at
To assess customer outcomes, we explored the initial interaction between customers and banks to find out:
- if frontline staff could identify customers potentially eligible for a BBA and tell them it exists
- what information a potentially eligible customer was given about BBAs
- how customers demonstrating potential vulnerability were treated by staff
- if frontline staff could support customers with non-standard identification
What we found
During interviews with bank staff most showed a good understanding of the importance of BBAs.
However, during mystery shopping BBAs were not routinely presented at the first point of contact with the banks in our survey:
- Often staff did not identify potential eligibility or give any information on BBAs. This was despite our mystery shopper disclosing their circumstances early in the interaction.
- Banks relied on the later stages of the account opening process to disclose the availability of BBAs.
- Frontline staff frequently failed to identify suitable identification and/or encouraged our mystery shoppers to get unrequired additional proof of identity (such as passports, which would have incurred expense).
- When our mystery shoppers gave stories that indicated they may be vulnerable customers, we saw numerous examples where frontline staff did not tailor their approach to reflect the information they were given.
Identifying potential eligibility for a BBA
Good practice
We saw some good examples of customers being informed about BBAs and offered assurance that there was an account available to them suitable to their circumstances.
Potential areas for improvement
We saw more examples where frontline staff did not provide information on BBAs. Good practice would see frontline staff presenting customers who are potentially eligible for a BBA with that account option at point of first contact, once it has been identified that the individual either does not meet the criteria for a standard bank account, or that they do meet the criteria for a BBA.
Many banks do not expect staff in initial encounters to identify eligible customers during an initial enquiry - relying on the later stages of the account opening process instead - and some banks require a customer to fail a credit check before a BBA is offered. We believe these approaches may discourage (often vulnerable) individuals from applying for a potentially suitable bank account due to lack of information at the first point of enquiry.
Information received by eligible customers
Good practice
Some of our mystery shoppers received appropriate information on BBAs from staff in branches or over the phone. This information detailed features of BBAs and an explanation of how account opening would work.
Potential areas for improvement
Many other shoppers received little or no information. Even in those banks where frontline staff are expected to provide information across all accounts, we did not see consistent provision of information on BBAs.
Treatment of a customer showing potential traits of vulnerability
Good practice
A number of the banks within this review stated that BBAs are a key part of their vulnerability policy. In our mystery shopping exercise, some frontline staff asked questions to clarify the customer's circumstances and to better understand their needs.
Potential areas for improvement
Overall the ability of staff to identify and support customers who may be vulnerable could be improved. Often staff did not respond when our mystery shoppers repeatedly made statements that indicated potential vulnerability, or incorrectly indicated that the shopper’s ’circumstances’ prevented them from becoming a BBA holder with that bank.
Applying the bank’s identification and verification policy
Good practice
All banks outline a range of acceptable proof of identity on their websites. In most cases, there is a telephone number for customers to call if they are having difficulty providing proof of identity.
During some interactions, bank staff provided lots of detail on acceptable proof of identity.
Potential areas for improvement
Our mystery shoppers experienced some inconsistency in their interactions with frontline staff. Often staff only referred to common documents such as passports and utility bills. Some staff did not identify that mystery shoppers were holding acceptable proof of identity.
Next steps
We encourage all firms to create a customer journey which is inclusive of all customers and their needs.
Specifically:
- consider how best to support consumers who find that they are inadvertently excluded from participating in financial services, and to help prevent that exclusion from continuing
- consider how the current structure of customer journeys on BBAs helps or impedes participation
The FCA has recently consulted on guidance for vulnerable customers. We encourage firms to take account of and respond to the final guidance once published.
Basic bank accounts will remain a key area of focus for the FCA and we encourage all firms who provide these accounts to consider our findings and how they may apply to their business.