The Current Account: The Latest Headlines From Across The Banking Sector - June

2022-07-06 |  Ben Dineen

Welcome to The Current Account! We hope you enjoy our latest round-up of the top news stories from the industry.

Headlines from the banking sector this month

In this month’s edition, we’re focusing on the tightening regulations for Buy-Now-Pay-Later products, as well as the reduced access to cash.

Regulations tightening on BNPL products

PEN Point Of View:

One of the most important aspects of the lending process is ensuring that lending is right and affordable for customers. Affordability checks are being rolled out on a regular basis as BNPL products are launched by banks, and the incoming regulation will ensure this becomes the norm across all lenders. BNPL specialists have enjoyed success as they filled a gap in the market for interest-free and manageable credit, all within easy access. But organisations haven’t had regulatory hurdles to cross; nor have they had to deal in a more normalised credit and interest rate environment. Prioritising positive customer outcomes should be at the forefront of this implementation, and a customer’s ability to afford the loan in question is a key part of this. A lack of regulation could result in significant numbers of people spiralling into unmanageable debt.

Access to cash 

  • Contactless card transactions have overtaken cash as the most popular way to make payments. But as the cost-of-living crisis continues, many households are turning to ‘cash stuffing’ to manage their outgoings. The thinking behind this decision lies in the idea that handling cash can make people more aware of their expenditure, especially when budgets are tight. However, many customers are seeing their access to cash disappear thanks to two primary factors:
  1. Banks are continuing to close branches – 2021 saw a total of 730 branch closures. This trend has continued in 2022, with a further 536 branches either being closed or scheduled for closure this year. In addition to this, several banks, including HSBC and Santander, are reducing their opening hours
  2. The number of ATMs across the UK has also fallen by 20% between July 2018 and February 2022
  • Thanks to the shrinking branch and ATM network and the increase of self-serve points, the government has become concerned about the impact this will have to vulnerable customers, especially those in rural areas. The FCA are in the process of updating their original guidelines for banks on branch and ATM closures and will ask firms to undertake a more detailed impact assessment that changes to services have on customers. Nationwide has been quick to respond to this and has pledged that it will not leave any town or city that it is already based in without a branch until at least 2024

PEN Point Of View:

While banks are benefiting from the shift to digital, many customers, especially those with fairly simple financial requirements, are turning to cash during times of economic pressure. Customers who are handling cash feel that this gives them greater control over their outgoings. This behaviour isn’t a new phenomenon by any means, and the shrinking traditional mechanisms for accessing cash (branches and ATMs) is accentuating this pattern. The Government has rightly recognised the impact these shrinking mechanisms have on customers, including those who are vulnerable and we expect the authorities to consider steps to protect customers which will have operational implications for institutions.

And in case you missed it…

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