What role do basic bank accounts play in the UK?

For people who aren't eligible for a bank's/building society's current account (because of a poor credit rating, for example), there is the basic bank account.

They are similar to current accounts in many ways, but don't have as many features and are available to people who wouldn't normally have access to a bank's 'best' products.

What role do they play in the UK?

Well, since the Government introduced them, basic bank accounts have played a vital role in the banking industry in the UK.

Statistics released by the British Bankers' Association (BBA) revealed that in the final quarter of 2009, 129,000 post office-accessible basic bank accounts were opened in the UK - which highlights the scale of the demand for this type of bank account. It also suggests that without the option of a basic bank account, 129,000 people - in this quarter alone - might have failed to open a bank account, despite wanting to.

The statistics also showed that during the same quarter, 18,000 existing basic bank accounts were upgraded to alternative personal accounts with more features - which highlights how important basic bank accounts are as 'stepping-stones' to banking products with more features.

Looking back to 2006, research conducted by Millward Brown, on behalf of the British Bankers' Association , showed that 77% of active users of basic bank accounts felt they were more confident when it came to managing their money as a result of opening their account. The findings also revealed that 90% of basic bank account users were confident their account met their needs, and customers generally said the simplicity of the account was the main reason for opening one.

Ian Mullen, chief executive of the British Bankers' Association at the time of the research, commented: "Access to banking services is the lynch pin to financial inclusion and this research clearly shows that the features of the basic bank account closely match peoples' needs. As customers become more confident with their finances, a change to an account with fuller features may be appropriate."

Government targets

During 2010's Budget , the Chancellor announced that every adult in the UK would be granted access to a basic bank account . He said the initiative would lead to one million UK adults opening an account during the following five years.

At the time of that Budget, around eight million adults in the UK had a basic bank account, BBA figures revealed. And since the introduction of the Government's Financial Inclusion Task Force back in 2003, the number of UK adults without a bank account had dropped from 3.75 million to 1.75 million.

Speaking around the time of 2010's Budget, a spokesperson for the British Bankers' Association said: "Everybody can have a bank account if they want one, unless (and this is rare) the law says they can't. In recent years UK banks have worked with the Government to cut financial exclusion, halving the number of households without a bank account. Every month 40,000 more people open basic accounts."

What does the future hold?

Between 2006/2007 and 2007/2008, the number of adults without a bank account fell by 175,000. If, as the BBA pointed out in 2010, we continued to see this rate of decrease, the total number of adults without a bank account would halve again within five years.

Basic bank accounts, as you can see, have played a major part in the UK banking industry in recent years - giving people who wouldn't normally have access to banking products access to accounts suitable for their circumstances. If you want to join the many people who have already opened a basic bank account and open one of your own, you should speak to a banking adviser.

Tags: basic bank account, types of bank account, poor credit, UK, bank account UK, basic bank account UK

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