Financial Exclusion (Liaison Committee Report)

Lord Holmes of Richmond Excerpts

Wednesday 25th May 2022 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this debate and to follow the noble Baroness, Lady Tyler. I was also privileged to serve on the original committee. The noble Baroness said that it has been a while since the updated committee report. I am not saying that the first report on financial exclusion was done a long time ago, but I was a young man then. Things take time.

This afternoon, I shall focus on cash, debt, regulation and financial technology, hereafter referred to as fintech. As the noble Baroness, Lady Tyler, pointed out, it is positive that, in the upcoming financial services and markets Bill, we have the opportunity to see the Government’s commitment to the future of cash in the UK. Can the Minister tell me what is the Government’s intention for the acceptance of, as well as access to, cash? The difficulties around being able to access cash are one thing, but if there is no place to spend it, what is the purpose of cash? It loses its currency. So many places are going cashless. I do not single it out, but I saw earlier today that Center Parcs is cashless. As many families approach the Whitsun break, they will find that their cash has no currency there, as well as in many other venues around the country.

In last year’s Financial Services Bill, I was delighted that the Government accepted my amendment on cashback without a purchase. The purpose was largely to try to fill the gap where so many banks have stepped away, with closed branches and ATMs, to enable cash to get into the hands of consumers in the community. More than that, research published in December last year demonstrated that the vast majority of uses of cashback without a purchase had been for £20 and below. It serves a market that even ATMs had not really served prior to that point, so it was a very positive intervention.

As the noble Baroness, Lady Tyler, pointed out, it is critical for the Minister and for everybody to understand and appreciate that cash still matters. It matters materially to millions. They cannot just be shut out of economic and thus social activity or society itself. As the noble Baroness also pointed out, it would be helpful for the FCA, as the regulator, to adopt a key role when it comes to promoting and having regard to financial inclusion. Will the Government reconsider the role that the FCA can play in this space?

Similarly, so much of the regulatory approach looks to areas around enabling financial services, but it is also important to look at the whole question of debt. Does the Minister agree that it is high time that we regulated debt advice services, which are often not performing the purpose that we might imagine? Online particularly, they are taking money for debt advice off people who are already in financial dire straits. Whatever we may think about debt, its devastating impact cannot be overstated. Of those in debt, 400,000 contemplate suicide, and 100,000 attempt it.

I have always believed that financial technology—fintech—has a potentially transformational role to play when it comes to financial inclusion. In saying that, I declare my fintech and technology interests as set out in the register. For example, as we saw at the outset of the pandemic, Starling Bank, a new neobank, produced its Connected card to instantly, effectively and positively help those who were socially isolating at that stage and throughout the pandemic. Fintech offers the opportunity to reimagine risk and take a whole new view of credit, not to increase risk in lending activities but to reimagine and reassess it, crucially in real time, and to use that data positively to enable and financially include.

I believe that open banking and open finance can have an incredibly positive role for all consumers. They can bring people into financial inclusion if we get it right. To illustrate the problem briefly, let us imagine a payment app. It could be the best piece of financial technology ever created, yet if it is in the hands of somebody who does not have the digital skills to use that app, that payment is not being made. Similarly, if that app is in the hands of someone who does have the skills to use it but is in an area of low or no connectivity, that financial payment is not being made.

This underscores the multiple nature of what is required for financial inclusion and how it is inextricably linked with digital inclusion and financial education. A good example of where this comes together in a positive way is what GoHenry, an excellent fintech business, is doing in its tremendous work with financial education for young people through their teenage years.

The initial Select Committee report and the Liaison Committee’s follow-up report make the case clearly. There is much to be done if we are going to enable and deliver financial inclusion for everybody across the United Kingdom. It makes economic sense and it makes social and psychological sense because if we financially include, everybody benefits.