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Need a bank account? Its yours...

Yesterday the Times (UK) reported how there are leaked plans by the UK government to force banks to provide basic bank accounts to anybody that wants to open one. The Times article describes a basic bank account in this way:

Basic bank accounts allow individuals to pay in wages, benefits and a pension and provide a cash card to withdraw money. The accounts are aimed at adults on a low income or those with poor credit histories who would not otherwise be approved for a standard bank account with credit facilities.

As I discussed in Banking the Unbanked, the UK is way ahead of even the most progressive US states when it comes to the availability and use of bank accounts to the poorest or most unfavorable (to the banks) customers. I referred to a figure from the UK Treasury indicating that 0.89 million individuals live in a household without access to a bank account, which equates to about 1.5% of the population. Since the aim of the proposed legislation is to provide access to banking to adults (not toddlers), my percentage calculation is probably significantly skewed. The Times article still states a very different number:

In 2003, the Government and the banking industry established the Financial Inclusion Task Force to improve access to banking facilities. Around 8 million adults have basic bank accounts and between 2003 and 2007, the number of adults without access to an account fell from 3.57 million to 1.75 million, according to the British Bankers Association.

Whatever the numbers really are, legislation to include access to all adults with adequate identification, independent of financial background, have not been well accepted by the banking industry. Although many banks offer basic bank accounts, some still have restrictions around who may hold one. And commentators have said:

[...]that the increased costs associated with providing bank
accounts for all could lead to an end of free banking. Michelle Slade, of, the financial website, said: "Banks will inevitably face higher costs if this legislation is passed, with the cost recovered through standard banking customers. The change could be another nail in the coffin for free banking, with banks looking to regain the additional cost potentially through the introduction of monthly fees."

This is just resistance to change in my opinion, or a growing conservatism in the UK (although this could be a naturally sceptical Times readership). Quite frankly, the number of restrictions placed on basic bank accounts (you can put money in, only draw it through an ATM card, no check/cheque book, no overdraft, no interest), means that the costs to the banks seems to be outweighed by having a little more free money in the coffers.

If there ever was a low margin, low risk place to focus on improving business processes for maximum efficiency, the processes around these bank accounts have to be a good testing ground. As banking is gradually seen as a human right, along the lines of telephone, television and the Internet, oh and even health care (finally), the US banking system may need to start gearing up its lobbyists to prevent another terrible form of socialism seeping into US society (if you didn't hear the sarcasm in that, sorry - my inner-Brit escaped for a moment).

Or maybe the banks could spend the money they save on lobbyists and do the right thing for all banking customers, and "customers to be" -- fix the processes that cost so much per transaction that even pathetically basic bank accounts have to carry ridiculous charges.


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