UK banks vow to improve access to basic bank accounts

Nine of the UK's largest banks and building societies have committed to improving access to basic bank accounts after a Financial Conduct Authority review found widespread poor practice in how they were offered.

These accounts are legally required from the nine institutions and are intended for people who may not qualify for a standard current account. They provide core banking services without fees or an overdraft, making them an important route into the financial system for people in financial difficulty or with more complex circumstances.

The regulator's mystery shopping exercise found that customers who could benefit were not consistently informed about basic bank accounts, particularly people facing financial hardship, those without standard identification, and those with no fixed address.

In many cases, staff did not mention the accounts at all. The review also found that some firms directed vulnerable customers to online-only application routes that did not suit their needs.

The exercise covered 298 interactions across branches and telephone channels. It tested two scenarios: one involving a person in financial hardship with non-standard identification, and another involving someone who had been through bankruptcy but had standard identification.

Across those interactions, 28% were rated good or very good, and 38% were rated fair. The remaining third fell below that standard, with 20% rated poor and 14% very poor.

Improvement plans

In response, the banks and building societies have agreed to individual improvement plans. The FCA also worked with UK Finance to secure a collective commitment to ensure customers are offered the right account at the first attempt, with clearer communication and fewer obstacles.

The agreement also covers better access for customers without standard identification or a fixed address. It includes earlier identification of vulnerability and alternative options where a digital-only process is not suitable.

The nine institutions covered by the legal requirement are Barclays, The Co-operative Bank, HSBC, Lloyds Banking Group, Nationwide Building Society, NatWest Group, Santander, TSB and Virgin Money, which now operates as a Nationwide brand.

The issue matters because basic bank accounts remain a key option for people excluded from mainstream banking. According to the FCA's Financial Lives survey, more than 97% of UK adults had a current account, but 0.9 million remained unbanked and 4.3 million held a basic bank account.

The same survey found that in the two years to May 2024, 10% of the 1.3 million adults who recalled applying for a basic bank account said they had been declined. That suggests barriers remain for some consumers despite the broad reach of current account provision.

"Progress has been made, with over 97% of UK adults having a current account, but our latest work shows that banking firms still too often need to improve how they engage with customers. Bank accounts are important for financial inclusion, and this is about ensuring that people who could benefit from basic bank accounts are not missing out," said Emad Aladhal, Director of Retail Banking at the FCA.

"That is why the biggest banks have now committed to improving how they are offered, and we will be holding them to account to make sure change happens."

UK Finance said the industry accepts that outcomes have been inconsistent and that more needs to be done for customers facing barriers to opening an account.

"A basic bank account can be an important first step towards financial independence and, while most customers who hold one have positive experiences, we recognise that more can be done to ensure consistently good outcomes for everyone. That is why UK Finance and our members are committed to raising industry standards and expanding access," said Peter Tyler, Director of Personal Banking at UK Finance.

"The recently expanded Breaking the Cycle initiative is a key part of this work, providing practical support to those facing barriers to accessing essential banking services, such as individuals without a fixed address."

The findings underline a gap between formal access to banking and practical access for people in vulnerable situations. They also suggest that branch and telephone interactions still play a central role for customers who cannot easily complete a standard online application.

The FCA will now monitor whether the agreed changes improve customer experience in practice.