At the Scottish Financial Enterprise: Extending Financial Inclusion event in Glasgow this afternoon, CEO of the Financial Conduct Authority (FCA) Nikhil Rathi delivered a speech on how the regulator plans to implement policies to include the financially excluded in the current cost of living crisis, calling it “a new enlightenment” for financial inclusion.
Rathi highlighted that the FCA plans to work within its power to make the lives of those impacted by the cost of living crisis more manageable, focusing on issues surrounding financial education, technology, commercial incentives, and diversity that are currently rife in the sector.
In the speech, Rathi touched on numerous developments in the banking sector that are generating more challenges for the financially excluded, such as limited availability of cash and ineligibility for credit products.
He stated: “We’ve capped the cost of payday lending, and following recommendations we made 3 years ago, we stand ready to regulate the buy now pay later sector to make sure consumers can continue to benefit from innovation and maintain access to affordable credit, whilst being treated fairly. In the meantime, we secured changes to potentially unfair and unclear terms in the contracts of Clearpay, Klarna, Laybuy, and Openpay.”
He announced that Scotland is making strides to improve numeracy in the country for everyone to make financial decisions more manageable. Rathi also noted increased research will be going into AI technology, which can be used to aid the financially excluded by monitoring digital identities and discerning where support needs to be implemented.
Pointing to regulatory action that the FCA as taken, Rathi outlined the Consumer Duty: “Under the Consumer Duty, a sweeping reform we introduced in July, firms who reject customers have to explain alternatives and provide access to appropriate products. We do not want to see a reduction in products or services that are in the interests of customers, or reduced access to them. If firms are considering withdrawing a product or service, our guidance says that they should consider the impact on the customers affected, in particular those with characteristics of vulnerability.”
He furthered that the FCA has instructed insurers to cancel loyalty premiums and capped the price of high-cost short-term credit to save consumers with low financial resilience £150 million per year, and have prioritised ensuring that savings accounts have good value interest rates.
Rathi concluded: “We recognise we have a wide remit and a range of powers. But we do not have all the levers – some of them sit with governments – in Westminster and in the devolved nations. Others sit with industry and consumers themselves. But if we pull these levers in the same direction, together, we can make a significant impact.”