A new approach to banking: Extending the use of jam jar accounts in the UK
Bank accounts play a key role in enabling better access to affordable goods and services, other essential financial products like low cost loans and insurance, and even employment.
We estimate that more than nine million people in the UK are still missing out on some of the benefits of banking.Many individuals on low incomes, even some with bank accounts, still choose tomaintain control of their finances by managing in cash, limiting their access to affordable goods andservices including other essential financial products. Many more incur high levels of penalty charges each month due to bounced payments or unauthorised overdrafts.
No single banking product will ever meet the needs of everyone that is not currently benefiting from banking. However, consumer research indicates that a significant proportion would benefit from jam jar accounts that:
- Allow customers to split their account balance into’jam jars’for spending, saving and billpayment;
- Support customers to improve their budgeting and bill payment behaviour through low balance
alerts and automated transfers of funds between Jam Jars; and
- Give customers access to trained’money managers’that can provide budgeting advice andreferrals to specialist consumer services (e.g. debt advice or Citizens Advice Bureaux) wherenecessary
Social Finance believes that there would be considerable value to supporting the take-up of jam jar accounts in the UK, which could offer consumers some of the transparency and convenience they value in cash budgeting, combined with improved security and functionality to help them manage their
money with greater confidence.