Struggling to open a basic bank account? It could soon become much easier

If you've struggled to open a bank account because you're on a low income, don't have standard ID or don't have a fixed address, things could soon improve.

The Financial Conduct Authority (FCA) has told banks they need to do a much better job of offering basic bank accounts after finding that many people who could benefit from them aren't being told they exist.

A mystery shopping exercise found that some customers were overlooked altogether, while others were directed towards online applications that weren't suitable for their circumstances.

What is a basic bank account?

A basic bank account is designed for people who may not be able to open a standard current account.

It gives you access to everyday banking without the risk of running up debt through an overdraft.

With a basic bank account, you can:

• receive your wages, pension or benefits
• pay bills by direct debit or standing order
• make card payments
• withdraw cash
• manage your money online or through an app, where available

Unlike many standard current accounts, basic bank accounts don't offer an overdraft, cheque book or other forms of credit. They also don't charge monthly account fees.

For many people, they're an essential stepping stone into everyday banking.

What did the FCA find?

The regulator carried out 298 mystery shopping visits and phone calls across nine of the UK's biggest banks and building societies.

The results were concerning.

Around one in three experiences involving basic bank accounts were rated as poor or very poor.

In many cases, staff failed to tell customers that a basic bank account was available, even when it was the most suitable option.

The FCA found this was particularly common for people:

• experiencing financial hardship
• without standard forms of identification
• without a fixed address
• in other vulnerable circumstances

Instead of being offered the right account, some customers were encouraged to apply online, even when that wasn't practical or appropriate.

Who was included in the research?

The mystery shopping exercise looked at two common situations:

• Someone experiencing financial hardship who did not have standard identification.
• Someone who had previously been made bankrupt but did have standard ID.

Both scenarios involved customers who could be considered vulnerable and who may need additional support when opening an account.

Which banks have to offer basic bank accounts?

Nine major banking groups are legally required to provide basic bank accounts:

• Barclays
• The Co-operative Bank
• HSBC UK
• Lloyds Banking Group (including Halifax and Bank of Scotland)
• Nationwide Building Society
• NatWest Group (including NatWest, Royal Bank of Scotland and Ulster Bank)
• Santander UK
• TSB
• Virgin Money UK (now part of Nationwide Building Society)

What happens next?

Following the FCA's findings, the banks and building societies have agreed to improve how they help customers open basic accounts.

Working with UK Finance, they have committed to:

• Help customers open the right account the first time, with clear information and fewer barriers.
• Make it easier for people without standard ID or a fixed address to open an account.
• Identify vulnerable customers earlier and offer alternatives to online-only application processes where needed.

Why this matters

Having a bank account is something many of us take for granted, but without one it can be much harder to receive wages or benefits, pay bills and manage everyday finances.

The FCA says more than 97% of UK adults now have a current account, but its latest research shows there's still work to do to make sure nobody is left behind.

Emad Aladhal, director of retail banking at the FCA, said:   

“Progress has been made with over 97% of UK adults having a current account, but our latest work shows that all too often banking firms’ engagement with customers still needs improvement. Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out.”