This piece has been written in collaboration with James Nurse, Fraud Analyst at Pockit.
When was the last time you purchased something online because you didn’t have the time to visit the store, or because it was a real bargain?
Defining Financial Exclusion
As convenient as it is, there are 1.5 million people in the UK who still don’t have access to basic financial services, including online banking and paying with debit cards. They fall under the category of the financially excluded or unbanked, and can’t even benefit from an account where they can safely accumulate and access their savings. Financial exclusion affects people of all backgrounds, from nationals living on benefits to professional migrants coming from abroad, and is not always directly linked to financial stability.
Opening a bank account in the UK is a difficult feat for anyone coming from abroad. When you arrive as a foreigner and visit a high-street bank branch for the first time you’ll probably discover three things: many people, many questions and many obstacles. And even if you queue up for hours and say ‘yes’ to every question, there’s no guarantee you’ll be able to open an account. Having a current passport, a valid proof of address and a job is a good start, but it’s typically not enough. For all these to count, you need to be on the records in the first place. No trace, no account; it’s as if you’ve never existed.
The Unlikely Unbanked: Andrei's Story
Andrei knows the story too well. Born in Romania, he arrived in the UK only a year ago after living in Los Angeles, where he worked at HBO.
‘I’d just arrived from the States and needed to get a bank account set up straight away. But there was no chance’, he explains.
He lives in a London apartment where all sorts of garments, neatly piled up and still with their tags attached, wait to be tried on. Fashion retailers keep sending new products his way, hoping to see them featured on his fashion blog. Andrei looks impeccable in his ankle-grazing chinos, boat shoes and slim-fit T-shirt – he definitely looks the part.
A blogger, wardrobe stylist and photographer, Andrei understands fashion and enjoys putting outfits together, spotting new trends and writing about them, so it only made sense for him to make a business out of his hobby. Watching him sip his tea from a china cup, you would not picture him as financially excluded. Yet he was.
'It was so frustrating. I just needed to get my finances in order and I couldn’t', he says when we ask him about his beginnings in England.
While chatting about it to a friend, he learned that there were now alternatives to the big high-street banks: smaller modern-day companies that were not bound by old-school bureaucracy but offered the same sort of service.
‘Essentially, a place to put your money safely, and get to it when you need to. That’s all I wanted.’
But why is this happening? When you open an account in the UK, the bank runs an identity and anti-money laundering check on you, also known as KYC & AML. With these checks, the financial company verifies whether you have a known history of illegal financial behaviour and that you are who you say you are. However, if you are not found on the credit reference agency database, you are considered not to exist. If you do not exist, you are denied access to the financial system: this is the hurdle which many new entrants to the country face. Given the UK’s healthy and diverse immigrant population, this poses a significant problem for the qualified workers which make up 45%(1) of the immigrant workforce and are being denied financial services.
“If you don’t have a bank account, it’s like you don’t exist in this world. You can’t have a credit card, not even a debit card, you can’t buy online and of course you can’t apply for a loan. You are barred from using any type of financial services”, explains Andrei.
FinTech companies are changing this by providing higher quality services at lower prices, and using modern and inclusive methods to verify a customer’s identity. Pockit is one of UK’s FinTech startups embodying this ethos by offering an account you can have salary paid into or put cash into it at 28,000 locations in the UK. You also get a MasterCard and an app, which allows you to spend online and on the high street whilst you manage your money on the go.
‘Pockit came out on top for me because most of the banking that I wanted to do was free with them and getting an account and card was only 99p. All of a sudden my problem had gone away’, says Andrei.
The Enabler: Onfido
Pockit is able to provide this service to its customers and overcome the identity verification hurdles that come with a bank account by offering a low-risk product that keeps the features their customers value. They use Onfido to carry out remote identity verification to verify that their users are who they say they are, without needing to meet them face to face. Upon verifying the person’s identity, they can easily run the international watchlist checks to provide assurance that they are not supporting money laundering or terrorist financing.
“We want to make sure all transactions made through Pockit are of a legal nature. Since we operate remotely, verifying everyone’s identity is crucial, and it’s also important that we can do it as quickly and seamlessly as possible - if the experience of registering online turns out to be cumbersome for the customer, that’s a customer we may lose”, says James. “We use Onfido to run our identity verification - they use automated processes so it’s super fast, but still efficient. Our conversions have actually improved from 62% to 77% since we integrated with them.”
Onfido deliver next-generation KYC & AML, helping businesses across the world verify anyone, anywhere, and offering their clients the option to integrate their services through an API.
Pockit has 70,000 customers and their card can be used anywhere MasterCard is accepted, both online and on the high street. They already offer online and offline card payment to everyone, but there’s still a long way to go.
“Our final objective is to be able to offer fully-rounded financial services to everyone. That means accounts with no hidden fees, mini overdrafts, money transfers, everything”, explains James. “We want to make financial exclusion a thing of the past and provide a service to those who need it the most.”
The FinTech Revolution
But Pockit are not the only ones fighting financial exclusion. Other financial inclusion advocates include CrowdCube, a platform that allows SMEs to get funding from both individuals and institutions and JustGiving, a crowdfunding platform that allows people to fundraise for charitable causes and uses alternative methods to verify a user’s identity rather than solely depend on credit data.
Since FinTech companies wish to remain compliant and prevent fraud, they use KYC & AML providers such as Onfido, who are able to verify users’ identities regardless of their credit file and therefore minimise financial exclusion.
“Believe me”, says Andrei. “Without Pockit, a year or so ago I was really struggling to get things off the ground. It may sound cheesy but Pockit was a lifeline.”