The Personal Finance Research Centre's research has had a major impact on government thinking, shaping government policies that have halved the number of people without a bank account. The research has also led to funding for access to credit union accounts and affordable loans for one million people on low-incomes.

Discovering the real causes of exclusion

Previously, financial exclusion was thought to be a geographical phenomenon related mainly to the location of bank and building society branches.

In their report, 'Kept Out or Opted Out?', published in 1999, PFRC established financial exclusion as a more complex issue.

The PFRC research described for the first time the number and type of households that were excluded from mainstream financial services and also showed that households particularly at risk of exclusion were most likely to include those on low incomes, social tenants, single parents, and some minority ethnic groups.

Significantly, PFRC also identified the costs and other consequences of exclusion for those who made little or no use of mainstream financial services.

“We were able to show that households that operate solely on a cash budget are unable to make savings via direct debits on utility bills and are more vulnerable to loss or theft,” says Elaine Kempson, Emeritus Professor at the University of Bristol. “They’re also far more likely to use the sub-prime credit market and be forced into paying interest many times that of a standard personal loan.”

Tackling the ‘poverty premium’

Seeking a solution to these issues, PFRC decided to build on its initial research by looking at ways of improving access to banking, credit, insurance and savings and so reduce the ‘poverty premium’ paid by low-income households.

This major research programme, which took place between 1998 and 2011, pioneered a number of novel research methodologies, including ‘community select committees’ that engage in two-way dialogue with representatives from the financial services industry and civil society organisations.

This work has subsequently shaped UK financial inclusion policy, resulting directly in the introduction of basic bank accounts and the successful achievement of a shared government-banking industry target to halve the number of adults in households without a bank account (from two million to 890,000).

Research by PFRC also helped to get approval for funding to extend affordable credit union loans and savings products to more low-income people.

In June 2012, the Department of Work and Pensions (DWP) announced that it was using the findings of a PFRC evaluation as a basis for a three year £38 million investment in credit unions. Based on estimates produced in the PFRC evaluation, this credit union expansion could save consumers around £1 billion in loan interest payments.

Long term international impact

PFRC’s work has had such an impact on financial access issues that it is also informing research and policy internationally, notably in India and Australia.

In 2008, PFRC was also the scientific lead and expert partner on a European Commission study to identify the most effective policy measures to prevent financial exclusion.

As a direct result of this project, the European Commission launched a public consultation on ensuring access to basic bank accounts in Member States. Following the consultation, the Commission also adopted a recommendation on access to a basic payment account and more recently, in May 2013, a proposal for a Directive on access to a basic payment account.

Over 15 years on from the first publication of its research into financial access, PFRC’s findings and subsequent reports continue to have a major impact – helping governments around the world to shape new policies and provide a fairer deal for those suffering financial exclusion.