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Banking with benefits: exploring the need for basic banking

8 September 2016

Citizens Advice sees thousands of people each year who have problems opening and operating bank accounts and Post Office Card Accounts.  In the past year we helped nearly 13,000 people open an account or sort out a problem such as incorrectly applied fees. More generally, the number of ‘unbanked’ individuals - that is people without access to a transactional banking account - has been steadily falling, from 4.38 million in 2002/03 to 1.5 million in 2012/13.  Most unbanked individuals have previously held transactional bank accounts but have had these closed or closed them due to poor experiences.  Historically, a majority of the unbanked have relied on a Post Office Card Account to receive income.   

This report [ 340 kb] follows a time of change in the basic banking market, with changes both to the Post Office Card Account and to basic bank accounts offered by high street banks.  Changes to basic bank accounts mean that these are likely to better meet the needs of consumers.  Meanwhile the contract for the Post Office Card Account - an account which takes deposits of benefits and state pensions which can be withdrawn at the Post Office - has been extended to 2021. Many Citizens Advice clients use basic banking products and we are investigating whether these changes are meeting the needs of consumers.  In this report, we summarise the changes to basic banking here but focus on the Post Office Card Account and the needs of its users. A future report will examine revised basic bank accounts in their first year.

This report finds that working age POCA holders value these accounts and use them as an important way of managing their money.  As these consumers move over to Universal Credit it is likely that they will face new challenges with managing their money, such as budgeting on a monthly basis. When asked what account features would help them, POCA holders suggested features such as access to direct debits and standing orders and text alerts for low balances. Many of these features are offered in basic bank accounts. In addition to account features, however, many POCA holders felt that they would need face to face support to help them manage their money in new ways. As well as ensuring that POCA holders receive the support they need, it is important that basic bank accounts meet the needs of people with low and variable incomes and that the future of the POCA is considered in light of new basic bank accounts.