The Financial Conduct Authority (FCA) found that a third of customer experiences regarding basic bank accounts were poor or very poor, according to a mystery shopping exercise. The regulator reported that some of the UK’s largest banks failed vulnerable customers, including homeless individuals, by pushing them toward unsuitable online applications instead of essential basic accounts.
Why are basic bank accounts critical for vulnerable customers?
Basic bank accounts provide a financial lifeline for people who cannot open mainstream accounts due to bad credit, bankruptcy, or a lack of a fixed address. These accounts are free and do not include overdraft facilities, but they allow users to receive wages and benefits and make payments via debit cards and standing orders.
According to the FCA, more than four million people in the UK currently rely on these accounts to avoid being excluded from the banking system. They are specifically designed for those with official debt recovery plans or those working with charities to verify their identity.
How did the FCA mystery shopping exercise perform?
The FCA conducted 298 interactions across telephone lines and physical branches to test how banks handle basic account requests. The results showed a significant gap in service quality: only 28% of cases were rated as good or very good, while 38% were rated as fair.
The remaining 34% of experiences were categorized as poor (20%) or very poor (14%). The regulator noted that a primary failure was the refusal to offer these accounts to people without a fixed address, despite the accounts being designed for that specific purpose.
Service Quality Breakdown
| Rating | Percentage of Interactions |
|---|---|
| Good or Very Good | 28% |
| Fair | 38% |
| Poor | 20% |
| Very Poor | 14% |
What happens when banks push customers toward online-only apps?
The FCA found that some banks directed vulnerable customers toward online applications for accounts that did not meet their specific needs. For a person experiencing homelessness or severe financial hardship, a digital-first application process can act as a barrier to entry, effectively blocking access to the free basic accounts they are legally entitled to access.
When a customer is pushed to an app but lacks a permanent address or a stable device, they are often left without any banking facility at all.
Which banks provide these essential services?
The FCA identifies a specific list of providers that offer these basic accounts to ensure the UK population has access to essential banking. These include:
- Barclays
- The Co-operative Bank
- HSBC
- Lloyds Banking Group (including Halifax and Bank of Scotland)
- Nationwide Building Society
- NatWest (including RBS and Ulster Bank)
- Santander
- TSB
- Virgin Money
Frequently Asked Questions
Who is eligible for a basic bank account?
Anyone who cannot open a mainstream account, including those with bad credit, people who are bankrupt, or individuals with no fixed address, are eligible.
Do basic bank accounts cost money?
No, these accounts are free to hold, though they do not offer overdraft facilities.
Can I receive my salary in a basic account?
Yes, according to the FCA, these accounts allow for the acceptance of wages and benefits, as well as the use of debit cards and standing orders.
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