research on budgeting behaviour and the scope for a budget...
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Research on budgeting behaviour and the
scope for a Budget Account
A research report for: HM Treasury
Provided by: GfK NOP Social Research
Date: September 2010
Your contacts:
Amrita Sood, Director
Polly Hollings, Associate Director
Phone:+44 207 890 9774 / 9763
e-Mail: [email protected] / [email protected]
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Table of Contents
1 Executive Summary ...............................................................................3
2 Introduction ...........................................................................................6
2.1 Background ...................................................................................... 6
2.2 Objectives ........................................................................................ 7
2.3 Method ............................................................................................ 8
2.4 Research process .............................................................................. 8
2.5 Sample ............................................................................................. 8
3 Research findings ..................................................................................9
4 Current financial management ..............................................................9
4.1 Financial budgeters ......................................................................... 10
4.2 Financial jugglers ............................................................................ 11
5 Ideal financial management ............................................................... 12
5.1 Budgeting ....................................................................................... 12
5.2 Access and notifications .................................................................. 13
6 Budget account appeal and drivers .................................................... 14
6.1 Reassurance ................................................................................... 15
6.2 Convenience ................................................................................... 16
6.3 Associated benefits ......................................................................... 16
6.4 Strength of appeal .......................................................................... 18
7 Functionality ....................................................................................... 20
7.1 Money paid into account ................................................................. 21
7.2 Money set aside for bills .................................................................. 21
7.3 Automatic bill payments .................................................................. 23
7.4 Rest of the money .......................................................................... 24
8 Channels for account set-up and management .................................. 26
8.1 Account set up ................................................................................ 26
8.2 Ongoing account management ........................................................ 27
9 Budget account fee ............................................................................. 27
10 Conclusions and recommendations .................................................... 29
11 Appendix ............................................................................................. 32
11.1 Sample ........................................................................................... 32
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Executive Summary
GfK NOP was commissioned by HM Treasury to undertake qualitative research to inform the
design of a Budgeting Account. The key aims of the research were to:
Explore budgeting behaviour and attitudes among the financially excluded and those who
may benefit from a budgeting account.
Inform the design of a practical, marketable and commercially viable product.
The research took place across the country and included:
16 x case study depth interviews with those who were currently unbanked including those
with and without a POCA.
8 x case study depth interviews with those who were recently banked (had become
banked within the last 5 years).
2 x focus groups with those who had been banked for five or more years.
The findings of the research are summarised below.
Curr
ent
financi
al m
anagem
ent
Two financial mindsets emerged across the research:
o Financial budgeters: those who have a structure in place for how and
when their money is spent. These participants seek control over their
money, often due to previous experiences of severe debt or financial
concerns. Financial budgeters all use a number of budgeting strategies
and monitor their financial situation on a frequent basis.
o Financial jugglers: those who have a less structured approach to
managing finances. These participants often feel that they do not
manage their money well and tend to use fewer budgeting strategies
when compared to financial budgeters. This means that they often
juggle their finances and are often short of money towards the end of
the week or month.
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Ideal financi
al m
anagem
ent
When thinking about how they could better manage their finances participants
mentioned ways to improve budgeting, access to their money and notifications of
their financial situation.
o Budgeting: participants suggested that a system that provided a
structured way for paying and setting money aside for bills would be
useful. In particular participants mentioned the benefits of setting
money aside and knowing that any money left was disposable income
that they could spend.
o Access to money: banked participants noted that ideally, they would like
to be able to withdraw money from any ATM without a charge.
Unbanked participants who currently withdrew money at the post office
counter noted that they would prefer, and find it easier, to withdraw
money at an ATM, particularly citing the convenience of 24-hour access
to money.
o Notifications: banked participants noted that their budgeting would be
improved if they received notification from their bank to advise them
when their account balance dropped below an agreed sum. Key to this
was the ability to avoid becoming overdrawn.
Budget
acc
ount
appeal and d
rivers
Across the research there was high appeal for the budget account. The majority
of participants envisaged that the budget account would replace their existing
account. Budget account appeal was strongest for those who were unbanked
with a POCA.
Budget account appeal was limited or low for: those who had a fluctuating
income and worried about regular payments; those operating within a deeply
embedded cash culture; and those who had a preference for a bank account.
Appeal was driven by reassurance and convenience.
o Reassurance was particularly appealing to financial jugglers for whom
the budget account provided a budgeting structure to ensure money was
available to pay bills.
o Convenience was particularly appealing to financial budgeters who were
keen to make payment of bills easier and more time efficient.
Additional benefits of the budget account included: the ability to create personal
savings; saving money on bills via automatic payments; and improving credit
rating.
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Funct
ionalit
y
Participants envisaged that wages/ benefits would be paid directly into the
budget account but also wanted to be able to pay in cash and cheques.
It was suggested that they would agree with the account provider the amount of
money that would be set aside. They envisaged using this function for core
priority bills – the number of these differed across participants but typically
included rent, council tax, electricity and gas.
Participants were keen to involve an element of saving via the budget account
either by setting money aside in a specific „savings pot‟ or, by over-paying on bill
payments.
Participants queried the level of flexibility that would be available for accessing
money set aside for bills. Some sought clarification that this would be easily
accessible, and were unlikely to consider a budget account without this
reassurance. However, others – often financial jugglers – felt that limited or
time-sensitive access would be preferable to ensure that money was safeguarded
for bills.
For many unbanked participants automatic payments were not perceptually
aligned with direct debits; they were seen as a different way of making bill
payments. This meant that unbanked participants did not cite barriers to using
these, such as fear of debt, which are often raised in relation to direct debits.
Participants wanted access to left over money via ATMs.
Channels
for
acc
ount
set-
up a
nd
managem
ent
When thinking about setting up a budget account participants envisaged this
would involve an element of face-to-face interaction. Financial budgeters were
most likely to comment that they would feel comfortable in setting up an account
and identifying amounts of money to be set aside for bills. However, financial
jugglers were more likely to note that they would require help in deciding these
amounts and in generating a budget. These participants suggested that the
account set up process involve an element of advice.
It was suggested that notifications of when bills had been paid and warnings for
when there were insufficient funds in the budget account be provided via mobile
phone text or email.
Participants sought easy ways to monitor their budget account including: mobile
phone text updates; postal statements; mini-statements from ATMs; an online
tool.
Budget
acc
ount
fee
The majority of participants who were interested in a budget account felt that a
small fee would be acceptable.
Whilst there was little consistency regarding the amount or structure of the fee
most mentioned a regular account fee (weekly or monthly).
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1 Introduction
1.1 Background
GfK NOP was commissioned by HM Treasury to undertake qualitative research to inform the
design of a Budgeting Account. Promoting financial inclusion continues to be a priority for the
Government, and it has taken responsibility for developing a strategic policy response for this
whilst working with key stakeholders from the financial services industry, third sector and
elsewhere. The key priorities are to support individuals to:
Manage money effectively, securely and confidently on a daily basis;
Plan for the future and cope with financial pressure by helping families to protect against
fluctuations in income and expenditure and enabling them to take advantage of long-term
opportunities;
Deal effectively with financial distress should unexpected events lead to serious financial
difficulty.
A Budgeting Account would be targeted at poorer households and support with budgeting and
the responsibility of bill paying. Specifically it could ring fence a proportion of income each
week to be used to pay bills by direct debit on a monthly or quarterly basis. This would
enable people to take advantage of savings gained by paying for bills in this way. It should be
noted that this could remove the flexibility offered by budgeting in cash and using „jam jar
financial buffers‟.
This research explored needs and requirements of potential customers in relation to this
Budgeting Account.
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1.2 Objectives
The two key objectives for the research were to:
1. Explore budgeting behaviour and attitudes among the financially excluded and
those who may benefit from a Budgeting Account.
Detailed exploration of how people manage their money and budgeting strategies
o Channels currently used for paying bills, and channel preference
o Strategies for meeting bill payments – cost and time
o How and when bills are prioritised
Exploration of barriers experienced when managing finances including:
o What makes it difficult for unbanked people to manage finances and ensure
outgoings are covered, and to what extent banking functions such as direct
debit would alleviate problems.
o How banked people use banking functions to manage finances and ensure
outgoings are covered; which functions they use, which they avoid using and
why.
2. Inform design of a practical, marketable and commercially viable product.
Investigation of attitudes towards a Budgeting Account
o Advantages and disadvantages of a Budgeting Account
o Envisaged changes in managing finances with a Budgeting Account
o What would make a Budgeting Account more attractive.
Exploration of ways in which a Budgeting Account would work
o Channel preferences for accessing a Budgeting Account
o What functionality people would like with the Budgeting Account including:
Online budgeting tools
Flexibility for changing deduction dates
Card-based access
Surplus funds available by card
Weekly or daily availability of surplus funds or funds available on
demand
Exploration of market demand for a Budgeting Account
o Propensity to take-up a Budgeting Account
o What other benefits people would like to be offered
Retailer discounts
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Lower rates with utility providers
Generation of a credit record they could borrow against
o Willingness to pay a regular fee for an account
1.3 Method
The research was carried out using a mixed-method qualitative approach.
1.3.1 Case study depth interviews: unbanked and recently banked
Case study depth interviews were carried out with those who had become banked within the
last 5 years, and those who were currently unbanked. The case study depth interviews took
place on a one-to-one basis and lasted 1.5 hours. These took place face-to-face and usually
in a central venue that was familiar and convenient to participants. The case study depth
interviews enabled researchers to gather a detailed understanding of how participants manage
their finances and to fully explore their views of a Budget Account.
1.3.2 Focus groups: 5+ years banked
Focus groups were carried out with people who had been banked for five or more years. Each
focus group lasted for 2 hours and included between 6 and 8 participants. Focus groups gave
participants the opportunity to discuss their budgeting behaviours, and share and debate their
views of the Budget Account.
1.4 Research process
Each case study depth interview and focus group enabled participants to describe their
behaviours and views towards a Budget Account in an open forum. Participants were
encouraged to provide spontaneous views towards a Budget Account and related functionality
before being prompted on specific ways in which a Budget Account might work in practice.
This approach meant that the research was able to go beyond an assessment of general
appeal of functionality, and explore to what extent participants felt a Budget Account could
best meet their needs.
Show cards were used to describe to participants how a budget account would work. This
involved explanation of the following components:
Regular deductions would be made from income to be set aside for bill payments (i.e.
weekly or fortnightly)
This money would then be used to directly pay bills on a regular basis (i.e. monthly)
The show cards are provided below:
1.5 Sample
A full break down of the sample is provided in the appendix.
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Participant type Method Participant numbers
Unbanked participants Case study depth interviews 9 with a POCA
7 without a POCA
Recently banked participants Case study depth interviews 8
5+ years banked participants Focus groups 2 focus groups
A) Location
Locations were spread across the UK and incorporated a mix of urban and semi-rural/ rural
areas:
Manchester
Leeds
Bristol
Aberdeen
Aberystwyth
2 Research findings
The following chapters detail the findings of the research examining the appeal of the budget
account. These research findings draw on comparisons and findings from previous research
carried out by GfK NOP on behalf of HM Treasury exploring motivations and barriers to
becoming banked1. Where this is cited it is referred to as „previous HMT research‟.
3 Current financial management
Chapter summary
Two financial mindsets emerged across the research:
o Financial budgeters: those who had a structure in place for how and when their
money was spent. These participants sought control over their money, often due
to previous experiences of severe debt or financial concerns. Financial budgeters
all used a number of budgeting strategies and monitoring their financial situation
on a frequent basis.
o Financial jugglers: those who had a less structured approach to managing
finances. These participants often felt that they did not manage their money well
and tended to use fewer budgeting strategies when compared to financial
budgeters. This meant that they often juggled their finances and were often short
of money towards the end of the week or month.
The research explored ways in which participants currently managed their finances.
Behaviours cited by participants largely reflected those reported in the previous HMT research.
1http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/d/fitf_research_banked_fullreport.pdf
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However, in developing findings from the previous HMT research, and exploring in further
detail the way in which participants‟ managed their money; two financial mindsets and related
behaviours emerged:
Financial budgeters
Financial jugglers
These mindsets were not dependent on whether an individual was banked or unbanked or
whether they were employed or unemployed. These mindsets describe a set of attitudes and
behaviours in relation to finances which were observable regardless of whether or not the
individual was currently banked or employed.
3.1 Financial budgeters
„Financial budgeters‟ are those who have a structure in place for how and when their money is
spent. These participants know the exact cost of their routine outgoings, and have set days of
the week or month when specific bills are paid, or expenses such as supermarket shops are
paid for.
Financial budgeters seek control over their money and participants described current or past
circumstances that have resulted in a desire for financial control. Current circumstances
include the presence of children, and the associated importance of ensuring there was enough
money to buy essentials.
“I have to manage my money more now than before. I‟m a bit more careful, with kids
you‟ve got to be able to manage” (Female, recently banked, Bristol)
Past circumstances included experience of severe debt such as bankruptcy which had resulted
in a fear of debt and a desire to control their finances.
Financial budgeters all have some budgeting strategies in place. Front-loading bills, micro-
budgeting and monitoring are all common behaviours used by banked and unbanked
budgeters:
Front-loading bills: Those without a bank account front-load bills by paying them as soon
as they receive wages or benefits. This typically involves paying bills face-to-face at the
Post Office, Council or local pay point.
“I usually go and get everything the day I get my money so I know then it‟s been spent
on what it should be” (Male, unbanked, Leeds)
A number of participants with a bank account described a similar process where they
withdraw money from their bank account and immediately pay bills face-to-face. Those
who do use the full functionality of their bank account choose a direct debit date soon
after their money is paid into their bank account. Front-loading was considered a
budgeting strategy for ensuring that there is enough money to pay bills.
“I‟ll get paid and then have the money going out so I know what I‟ve got left after that”
(Male, 5+ years banked, Manchester)
“I try to have most things come out [on direct debit] when I get paid so it‟s all done.”
(Female, 5+ years banked, Manchester)
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Micro-budgeting: Those who use micro-budgeting described how their daily budgets are
set and each penny accounted for. These participants knew exactly how much money
was spent on bills and consumables and any changes to these (for example, increased
cost in food items) have a large impact on how they manage their money.
Monitoring: Monitoring is a strategy employed by financial budgeters who are keen to
check how much money they have, to ensure that they do not spend too much money, or
fail to keep enough money aside to last the period of time until they next receive benefits
or wages. For those without a bank account, monitoring tends to involve keeping a close
eye on how much money is in their purse, or setting money aside at home. For those
with an account, monitoring involves checking their bank balance.
“I like to go to the cash machine, see what‟s there and then I know” (Female, 5+ years
banked, Manchester)
“I check every couple of days to make sure the direct debits have been paid, there‟s still
enough money in there and I haven‟t gone crazy” (Female, 5+ years, Bristol)
“I‟ve got to be constantly checking to make sure the direct debits come off” (Female,
recently banked, Aberdeen)
Participants cited a number of ways of checking their balance including paper statements,
mini-statements from ATMs, requesting a statement face-to-face at the bank, and using
online banking.
3.2 Financial jugglers
„Financial jugglers‟ are those who have a less structured approach to managing finances when
compared to financial budgeters. By their own admission, financial jugglers felt that they did
not manage their finances very well and often struggled to implement and maintain budgeting
strategies.
“I wouldn‟t say I was best at managing money over the last couple of years” (Male,
recently banked, Leeds)
“I‟m not particularly good with arranging my finances because my ex wife did it all. I‟m
getting better at it.” (Male, recently banked, Bristol)
Payment of bills and household essentials tends to be more ad-hoc than for the financial
budgeters, and bill routines are far less ingrained. When compared to financial budgeters,
financial jugglers do less front-loading of bills or micro-budgeting, and tend to hope that there
is enough money to pay bills when needed. They also place less emphasis on monitoring their
financial situation.
“Last month I forgot [to check there was enough money for the phone company direct
debit], it went clean out of my head so I ended up with a £35 bank charge and the
phone company charged me £15 for a returned direct debit…it‟s just £50 down the
drain” (Female, recently banked, Aberdeen)
Resultantly, they often described juggling bill payments and many described „robbing Peter to
pay Paul‟.
Some financial jugglers noted that they find it difficult to budget their money over a period of
time, meaning that if a number of bills needed to be paid within a short period of time,
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finances are squeezed, and money becomes a problem during this time until further wages/
benefits are received.
“Then [paying lump sum bills means] I‟m totally broke…before that week comes I stock
up on the milk and the baby food, then I just have to buy the odd little bit then”
(Female, unbanked, Manchester)
Others discussed how they prioritised bills to decide which were essential for payment. For all
participants rent, electricity and gas are priority bills. After these have been paid, participants
often juggle other bills until they can afford to pay them. Whilst both financial jugglers and
financial budgeters are keen to avoid debt, across the research financial jugglers were more
likely to cite borrowing money from friends and family or, in some cases from doorstep
lenders.
4 Ideal financial management
Chapter summary
When thinking about how they could better manage their finances participants mentioned
ways to improve budgeting, access to their money and notifications of their financial
situation.
Budgeting: participants suggested that a system that provided a structured way for paying
and setting money aside for bills would be useful. In particular participants mentioned the
benefits of setting money aside and knowing that any money left was disposable income
that they could spend.
Access to money: banked participants noted that ideally, they would like to be able to
withdraw money from any ATM without a charge. Unbanked participants who currently
withdrew money at the post office counter noted that they would prefer, and find it easier
to withdraw money at an ATM particularly citing the convenience of 24-hour access to
money.
Notifications: banked participants noted that their budgeting would be improved if they
received notification from their bank to advise them when their account balance dropped
below an agreed sum. Key to this was the ability to avoid becoming overdrawn.
Participants were asked to think about how they would ideally like to manage their finances
and what would make managing their money easier. Across the research, ways to facilitate
budgeting emerged as a strong theme. The views detailed in this chapter of the report were
spontaneous, and it is interesting to consider the strong parallel between participant ideas and
the premise of the budget account.
4.1 Budgeting
When thinking about what would help them better manage their finances most participants
including those who had been banked for five or more years, those who were recently banked
and those who were unbanked, focussed on factors that would help them to budget their
money. Ideas raised by participants tended to centre on structured ways to pay bills, and
thereby to clarify how much disposable income would be left over. Participants envisaged that
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an arrangement allowing them to do this would mean that they could ensure that their bills
were paid, and that they would have clarity on how much disposable income was left over.
In considering how this type of arrangement would work, some participants envisaged that
bills would be automatically paid as soon as money was paid into their account.
“Everything would be paid as soon as it goes in and then you know what you‟ve got left”
(Male, unbanked, Bristol)
For banked participants (those who had been banked for five or more years and those who
were recently banked), this system was considered the same as front-loading direct debits – a
budgeting technique that many used themselves. However, a couple of recently banked
participants suggested that smaller amounts of money could be paid by direct debit on a
weekly basis to reflect the frequency of their benefit payments.
Participants felt that the key benefit of this type of arrangement is that they would know how
much disposable income they had to spend, without needing to worry about paying bills.
“It would be easier…then I know everything is getting paid…and it‟s gone, so I can‟t spend
it.” (Female, recently banked, Manchester)
One participant recalled a budget account that he had previously held with Lloyds bank. He
felt that this account had been very useful and was something that he would find useful
nowadays. The participant had closed the budget account, which he had held with his wife,
when they had divorced.
“When I got paid they would take money for the bills…and what was left in the current
account was or whatever…I thought that was a really good thing because once your
wages went in and you knew that was going to bills...and whatever was left you knew
was yours.” (Male, recently banked, Bristol)
Finally, a small number of participants noted that ideally they would like to be able to have
savings; a couple of participants suggested an account where savings were automatically
taken out of the money paid into their account to ensure that they set a small amount of
money aside on a regular basis.
4.2 Access and notifications
Banked participants and those who had been banked in the past were less likely to mention
ways in which access to money and notifications of their account balance could help them to
manage their finances when compared to those who were unbanked and had little previous
banking experience.
However, those who had been banked for five or more years felt that access to their money
would be easier if there were no charges at ATMs.
These participants noted that accessing money at ATMs was easier when compared to
accessing money at the Post Office; for these people, ideally they would like to be able to
access their money at an ATM although it should be noted that desire for this functionality did
not necessarily go hand-in-hand with the desire for a bank account.
“Do you know how jealous I am of people at the hole in the wall, I think „I wish I could do
that‟ ” (Female, unbanked, Manchester)
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Those who had been banked for five or more years and those who had recently become
banked noted that, in an ideal world, they would like to receive a notification from their bank
when the amount in their bank account balance dropped below an agreed sum. It was
suggested that this information be provided by mobile phone text message. It was envisaged
that this type of notification would help them manage their money, and avoid becoming
overdrawn and receiving bank charges for this.
5 Budget account appeal and drivers
Chapter summary
For most unbanked participants and some banked participants there was high appeal for
the budget account. The majority of participants envisaged that the budget account
would replace their existing account. Budget account appeal was strongest for those who
were unbanked with a POCA.
Budget account appeal was limited or low for: those who had a fluctuating income and
worried about regular payments; those operating within a deeply embedded cash culture;
and those who had a preference for a bank account.
Appeal was driven by reassurance and convenience.
o Reassurance was particularly appealing to financial jugglers for whom the budget
account provided a budgeting structure to ensure money was available to pay
bills.
o Convenience was particularly appealing to financial budgeters who were keen to
make payment of bills easier and more time efficient.
Additional benefits of the budget account included: the ability to create personal savings;
saving money on bills via automatic payments; and improving credit rating.
Following spontaneous discussion of suggestions around an „ideal‟ way to manage finances,
described in section 4, participants were presented with a budget account proposition for their
response. Across the research there was high appeal for the budget account.
“If that was in place and set up right now, I‟d actually go for that right now!” (Male,
unbanked, Leeds)
However, many participants were also keen to know more about the functionality and how the
budget account would work in practice.
Appeal for the budget account was prompted by two key drivers:
Reassurance
Convenience
These were strong drivers for both financial budgeters and financial jugglers. The appeal of
the budget account was reinforced for financial budgeters by a sense of familiarity around the
way that finances could be managed via a budget account, as it appeared to reflect and
support their current behaviour. The appeal of the budget account was reinforced for financial
jugglers as it appeared to provide a structure for budgeting that they currently lack. These
dimensions are explored below:
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5.1 Reassurance
Across the research, the appeal for the budget account was strongly driven by reassurance in
two respects:
1. Money would be set aside for bills to ensure there were adequate funds to pay these.
Both the current research and the previous HMT research revealed that participants
experience considerable worry and anxiety around finances, particularly in relation to covering
bill payments. Participants felt that the budget account could help alleviate this anxiety by
setting money aside automatically.
“This will help you budget. That‟s what you need to do when you‟re on a low income.
You can‟t go out spending money you haven‟t got” (Female, recently banked, Bristol)
2. The remaining balance would clarify the amount of disposable income available enabling
people to spend within their means.
“They‟re putting it aside so they‟ve already taken it out for your bills haven‟t they? So
that‟s good, and you know what‟s left, that‟s yours then.” (Female, recently banked,
Bristol)
“That‟s the best way, to have one [pot] that I can‟t touch and to have the other [pot] to
touch as and when I need it.” (Male, recently banked, Bristol)
For financial jugglers, the budget account provided a budgeting structure which was
something that they currently did not have, or found difficult to personally implement and
maintain. In this sense, the budgeting account would provide a structure is lacking at the
moment.
“It does sound good because it‟s giving you a way to budget…when I receive money I
know its going directly to certain companies that I‟ve prioritised” (Male, unbanked,
Leeds)
“I think it‟s a good idea because I‟m not very good at managing my money” (Male, 5+
years banked, Manchester)
Participants envisaged that having a budgeting structure in place would be reassuring as they
would know that money was set aside to ensure that bills were paid.
For financial jugglers, the budgeting structure that they would get access to through their
budget account would mean that they could accrue bill money on a weekly or fortnightly basis.
This was a desirable alternative to their current approach, which involved having to find a one-
off chunk of money to pay the bill every few weeks, a source of anxiety for many.
“It‟s budgeting it so it‟s not one big chunk [of money] out in one big hit” (Female,
unbanked, POCA, London)
“So there‟s a small amount coming out each week rather than a big amount. It would
be better for me because then I‟d know exactly how much a week is coming out of my
money” (Female, unbanked, POCA Aberystwyth)
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Financial jugglers felt that a budget account would introduce an element of control to the
way that they managed their finances. These participants were very keen for money to be
automatically set aside for bills and felt that this would reduce the anxiety and stress they felt
in trying to ensure there was enough left over for bills.
“That‟s what I should really do but I always find that the money goes on something
else! Then I end up paying it off in one big lump and I think, oh, I‟m skint!...That‟s a
good idea because you‟re spreading your money out more…instead of paying everything
in one big lump…so basically each week you‟re going to have the same money and you
know where you‟re up to.” (Female, unbanked, Manchester)
“That would be the best way, for them to take it straight out and put it somewhere
else” (Male, recently banked, Bristol)
Overall reassurance was a particularly important driver for financial jugglers who noted that
they currently struggle to manage their finances and desired a budgeting structure that would
provide reassurance that bill payments would be made.
For financial budgeters, the budget account offered familiarity and reflected the way they
manage their money on a cash basis. This reinforced the appeal of the budget account;
participants felt comfortable in replicating their budgeting strategies in an account. In this
sense, the budget account would support their current budgeting behaviour.
“It principle that‟s doing what I would have to do myself anyway, but it takes away the
control over it…that to me is ideal” (Female, unbanked, POCA, London)
“That is what I‟m doing at the moment” (Male, unbanked, Bristol)
5.2 Convenience
Appeal of the budget account was also driven by convenience. This was strongly related to
automatic bill payments that negated the need for participants to pay bills face-to-face.
This was particularly salient for financial budgeters who have budgeting strategies in place
to manage bill payments, but were keen to make the process of paying the bills easier, and
more time efficient. They felt that a budget account would take responsibility for making the
bill payments, and reduce the stress and time they personally spent making sure that bills
were paid at the right place, on the right days.
Convenience was also appealing for financial jugglers although reassurance and the
provision of a budgeting structure held greater appeal to these participants.
5.3 Associated benefits
Whilst reassurance and convenience were the key drivers for budget account appeal,
participants did cite some additional associated benefits to a budget account. These were not
considered strong enough drivers in themselves to encourage someone to open a budget
account, but were considered to be potential positive consequences of having a budget
account.
5.3.1 Personal savings
Across the research, participants described different strategies for saving money. These
ranged from keeping ten pounds in their bank account each month, to asking friends or family
members to keep money in a safe place on their behalf. Some participants were saving
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money for a specific occasion such as a family birthday or Christmas. Others liked to have a
financial buffer set aside in case an unexpected expense arose.
“I just try and squirrel away money here and there. I‟ve got a friend who quite often I‟ll
give money to…because if you‟ve got it in the bank or in the house you‟ll use it.”
(Female, recently banked, Aberdeen)
“I always try and leave something in the house because you never know what can
happen” (Male, unbanked, Leeds)
Across the research, most participants noted that as part of a budget account they would like
the option to create a specific „savings‟ pot where they could set aside an agreed amount of
money on a regular basis. Participants envisaged that this would be a more assured way of
saving money compared to ad hoc strategies that they currently use.
5.3.2 Bill savings
A small number of participants spontaneously mentioned being able to make savings on utility
bills by using automatic payments from a budget account. These participants tended to have
been banked in the past, or had noticed that they were paying a charge for using a payment
arrangement other than direct debit.
“I hate getting charged the £4 paper charge from Sky…you can‟t do direct debit from
the Post Office can you” (Female, unbanked, POCA, Aberystwyth)
“It‟s a good idea and it help me manage my money and it could be doing me a favour,
instead of having meters I could pay by bills and get a discount” (Female, recently
banked, Manchester)
These participants felt that saving on their bills would be a benefit of having a budget account,
although the reassurance and convenience described in sections 5.1 and 5.2 were cited as the
main drivers that would lead to participants actually opening a budget account. These
participants noted that they were wary of using direct debits functions via a high street bank
account as they strongly saw this as a route to debt. In particular participants mentioned
direct debit payments resulting in becoming overdrawn and receiving overdrawn charges.
Automatic payments via a budget account were perceptually viewed as different to direct
debits (see section 7.3) although participants who were aware of bills savings via direct debit
expected that these would be made available to them.
It should be noted that many unbanked participants were not aware of financial savings that
could be made by using direct debits to pay utility bills.
A couple of participants (unbanked and recently banked) noted that they could potentially
save money on purchases made by buying things online. These participants envisaged that a
budget account would provide a card that could be used to make online purchases.
“It‟s handy because you can often get bargains online that you can‟t get in the store”
(Female, recently banked, Aberdeen)
It should be noted that awareness of bills savings via direct debit was not dependent on
whether an individual was a financial budgeter or a financial juggler.
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5.3.3 Credit rating
A further couple of participants queried whether a budget account would improve their credit
rating. These participants had experienced debt in the past – in one case, a bankruptcy –
they were keen to improve their credit rating and hoped that a budget account would enable
them to do this.
“If there was a way it could improve credit rating then that would be good.” (Male,
unbanked, Leeds)
5.4 Strength of appeal
Across the research there was high appeal for a budget account. Those who expressed an
interest in a budget account envisaged that it would be their sole account and would replace
the account (bank or POCA) that they currently use. Only a couple of participants noted that
they would use their budget account in addition to their current account. One of these
participants had a POCA and one had a bank account. Both of these participants envisaged
that they would use a budget account as a joint account with their partner specifically to
manage bills.
Whilst appealing factors differed by financial mindset (as discussed above), current financial
management circumstances also affected an individual‟s interest in a budget account:
Unbanked without a POCA. There was mixed appeal within this group. Those who
operated within an deeply embedded cash culture were less likely to look favourably at the
idea of a budget account.
Unbanked with a POCA. Most participants with a POCA showed interest in a budget
account and envisaged that they would be likely to open one if given the opportunity in
the future. Only a couple of participants within this group rejected the idea of a budget
account. These participants aspired to a bank account, credit and other financial
products.
Banked. Again there was mixed appeal within this group. Whilst some participants felt
that a budget account would help manage their finances others felt that it did not offer
them anything different to their current bank account.
Instances of limited or low appeal are discussed further below.
5.4.1 Limited appeal
The budget account had limited appeal for those with a fluctuating income. Across the
research a couple of participants felt that they were in this position. These participants were
unable to guarantee a fixed income into a budget account and therefore queried the extent to
which they would be able to use the functionalities offered with a budget account. In
particular, they felt that they would not be able to guarantee sufficient funds to be set aside
regular bill payments.
“If money specifically set aside before my next JSA payment comes in it wouldn‟t give
me that little bit of flexibility that I need to juggle sometimes. Quite like the idea but
with the way my current personal circumstances are it wouldn‟t quite work – it wouldn‟t
give me the flexibility” (Male, recently banked, London)
“My general position is that standing orders are good, on the proviso that money is
constantly going into the account.” (Male, unbanked, Leeds)
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These participants were used to juggling finances to make ends meet – especially on weeks
when their income was lower than usual – and felt that the budget account would not provide
sufficient flexibility to allow this. It should be noted that the budget account was presented to
participants as an account from which bill payments were made on a regular basis. For those
with a fluctuating income, the regularity of payments was of key concern suggesting that a
more flexible arrangement would be better suited to these participants.
5.4.2 Low appeal
The budget account had low appeal for two groups of people:
Those with a deeply embedded preference for cash.
Those with a preference for a bank account.
Across the research four participants cited a preference for managing their finances via cash,
and 11 participants noted a preference for managing finances via a bank account2. Both of
these groups felt that the budget account would not provide any specific benefits to them, and
would not improve the way in which they managed their finances.
A) Preference for cash
A small number of unbanked participants resisted the idea of a budget account noting that
they felt more comfortable managing their finances in cash. These participants had typically
been operating with cash for a long period of time and were deeply embedded in a cash
culture. For example, one participant had been operating with cash for more than forty years
as he had always been paid cash in hand by the same employer. Using cash was an
entrenched behaviour for this participant and he could not identify any compelling reason why
managing via a budget account would be beneficial. Other participants cited similar rationale,
and noted that they had successfully managed their finances with cash and resultantly saw no
benefit to changing this.
“I still prefer cash. I know where I am with cash” (Female, recently banked, Aberdeen)
Cash was also preferred by those who had had a negative experience with a bank account in
the past. These experiences often involved severe debt or bankruptcy, which had resulted in
a mistrust of banking and a fear of debt. These negative experiences were often backed up
by negative reports and stories of debt from friends and family, and the recent news reports
concerning the recession had furthered concerns regarding banking.
“I think I would start fretting…I can take away that worry by doing it myself.” (Male,
unbanked, Bristol)
B) Preference for bank account
Some of those who had been banked for five years or more felt that a budget account did not
offer them anything different or beneficial over and above a bank account. These participants
were comfortable in managing their finances via a bank account, and did not require the
budgeting functionalities offered by the budget account. Some felt that a budget account
2 In interpreting these numbers it is important to note that this research was qualitative in nature, and by definition included a small sample size for in-depth study. These numbers should therefore not be seen as in any way representative of the population as a whole, or of the unbanked population. They are provided in order to give an indicative feel for the perceived relevance of a budget account among the sample interviewed.
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would add a layer of complexity to how they currently managed their finances by adding an
“unnecessary middle man” (Female, 5+ years banked, Manchester).
Preference for a bank account was also cited by a couple of unbanked participants who
aspired to becoming banked in the future. These participants had been banked in the past,
and hoped to become banked in the future as and when they became more financially stable.
These participants aspired to using direct debits, a debit card and overdraft, and they
preferred these features over and above those offered by a budget account.
“A bank is the best place…you get all your direct debits, you know that‟s going in and
what‟s going out” (Female, unbanked, Manchester)
6 Functionality
Chapter summary
Participants envisaged that wages/ benefits would be paid directly into the budget account
but also wanted to be able to pay in cash and cheques.
Participants suggested that they would agree with the account provider the amount of
money that would be set aside. They envisaged using this function for core priority bills –
the number of these differed across participants but typically included rent, council tax,
electricity and gas.
Participants were keen to involve an element of saving via the budget account either by
setting money aside in a specific „savings pot‟ or, by over-paying on bill payments.
Participants queried the level of flexibility that would be available for accessing money set
aside for bills. Some sought clarification that this would be easily accessible, and were
unlikely to consider a budget account without this reassurance. However, others – often
financial jugglers – felt that limited or time-sensitive access would be preferable to ensure
that money was safeguarded for bills.
For many unbanked participants automatic payments were not perceptually aligned with
direct debits; they were seen as a different way of making bill payments. This meant that
unbanked participants did not cite barriers to using these, such as fear of debt, which are
often raised in relation to direct debits.
Participant wanted access to left over money via ATMs.
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This chapter explores participants‟ attitudes towards the budget account functionality and is
divided into the four key elements of the budget account:
Money paid into the account
Money set aside for bills
Automatic bill payment
Rest of the money
Attitudes and preferences for functionality within each of these elements of the budget
account are detailed below.
6.1 Money paid into account
Participants sought flexibility in how money could be paid into a budget account. In addition
to being able to have wages and/ or benefits paid in directly, participants also wanted to be
able to pay in cash and cheques. Paying in cash was of particular importance, as participants
noted that if they did not have enough money set aside for bills one month, they would want
to be able to top up their balance using cash.
6.2 Money set aside for bills
As discussed in chapter 6, setting money aside to ensure that there are funds for bill
payments was a strong driver for participants, as they envisaged that this would make
budgeting and managing finances easier.
“I only have meters because I‟m rubbish with bills so if they were taking it for me then
that would be better” (Female, recently banked, Manchester)
The number of bills that participants envisaged setting money aside for varied from person to
person. Most participants suggested setting money aside for core priority bills which usually
included one or more of the following: rent; council tax; electricity; and gas. Participants did
not envisage that they would need to set money aside for food and other consumables such
as cigarettes. They felt that these would be paid for out of the „money left over‟ and tended
to be items that were paid for on an ad-hoc basis as opposed to on a regular calendar date.
However, there was no discernable pattern regarding how many or which bills participants
envisaged they would manage via a budget account. This decision was individualised, and
often depended on how bills were currently budgeted for, paid and prioritised. During the
research participants were asked to complete an exercise asking them to think about their
regular expenditures and consider which of these they would transfer to a budget account.
An example is given below.
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Money set aside for bills: Financial budgeter example
This participant was a single parent with one child living at home. She was unbanked with a
POCA and her source of income was benefits. After considering her regular expenditures she
felt that the expenditures she would transfer to a budget account were: water rates
(including rent); BT telephone and internet connection; television licence and Sky television.
She felt that this would make managing and budgeting for these bills easier. She currently
paid for gas and electricity by card. Whilst she felt that she would like to be able to set
money aside for these in a budget account, she envisaged that instead of using an automatic
payment, she would be able to withdraw money from the budget account to continue using
her cards. She felt very comfortable and familiar with using gas and electric card and topped
these up when she did her routine food shop. She did not see any benefit to changing this
current arrangement. She did not think that setting money aside for food and cigarettes was
necessary as she would budget for these with the money left over once bill money had been
subtracted. Similarly, she felt that she would budget for mobile phone credit with her
disposable income and noted that currently she only topped up her mobile phone if there
was any spare cash left at the end of the month.
Participants envisaged that they would agree with the account provider how much money to
set aside each week or fortnight for each bill. Budget account set up is further detailed in
chapter 9. Many noted that they would choose to slightly over-pay bills where possible by
rounding up required amounts by fifty pence or a few pounds. They felt that this would be a
way for them to save money and create a financial buffer.
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In addition to putting money aside for bills, participants were keen to set money aside as
savings for emergencies or occasions such as holidays, a large purchase or family events.
“Maybe £5 a month into savings deducted, at least then you are trying to save a little bit”
(Female, unbanked, POCA, Aberystwyth)
“In my head I think I‟d love to be able to save for a holiday and it doesn‟t happen…but if
it was taken for me…I‟ve got it, and it would happen” (Female, 5+ years banked, Bristol)
When it came to setting money aside for bills, participants were keen to know what conditions
would be in place for changing bill amounts, bill payment dates or accessing money that had
already been set aside for bills. Whilst participants were keen to budget for bills via a budget
account, they were concerned that this arrangement would lack flexibility. Their key concern
was regarding access to bill money. Those on very low incomes, with no or little financial
support from family or friends, often worried about how they would cope in a financial
emergency. They sought reassurance that they would be able to access the bill money if an
unexpected and urgent expense arose.
“I would also want the ability to be able to override in an emergency” (Female, 5+
years banked, Bristol)
For some participants access to this money was important, and they felt that they would be
less favourable towards a budget account if they were not provided with reassurances that
they could access this money in an emergency. However, some participants noted the
positive features of not having access to this money. These participants tended to be
financial jugglers who welcomed a system that ensured money was ring-fenced and
“untouchable”. Some participants suggested that a notification period should be put in place
for accessing bill money. These participants admitted that they had previously spent saved
money and regretted this, so would appreciate a cooling off period before having access to
saved money.
6.3 Automatic bill payments
As discussed in chapter 6, the convenience of automatic bill payments was a strong driver for
participants who sought simpler and easier ways to manage and pay bills.
Across the research there was a great deal of discussion regarding the differences between
automatic payments and direct debits. Some participants – particularly those who had been
banked for five or more years – felt that automatic payments were no different to direct
debits. A couple of unbanked participants, who had not been banked in the past had a vague
knowledge of direct debits and standing orders, although were unable to comment on
similarities or differences with automatic payments.
The previous HMT research found that many people had a fear of direct debits and associated
them with risk of getting into debt. In particular, previous HMT research found that people
were concerned that direct debits would come out of their bank accounts when there were
insufficient funds which would result in charges for using an overdraft. These fears were also
raised in this research.
“You might be £1 short and then you get charged £24” (Male, recently banked, Bristol)
However, for many, direct debits were not perceptually aligned with automatic payments.
Automatic payments were seen as different; participants felt that automatic payments offered
a greater degree of control over payment of bills. With direct debits, participants felt that the
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company was in control of the arrangement, as they approached the bank account for bill
money. However, with automatic payments participants felt that they themselves and the
account provider were in control, and approached the company to pay the bill on an agreed
date.
“There‟s no one going into your account and taking anything. It‟s the ...[provider]...
itself that are splitting your money up” (Male, 5+ years banked, Manchester)
Further to this, participants felt more reassured about automatic payments because the
money was budgeted and set aside to pay these without risk of these payments leading to
debt.
Whilst participants were reassured that a budget account would ensure sufficient funds were
set aside to make bill payments, during the research they were asked to consider what would
happen if on occasion they had insufficient funds. Participants generated a number of ideas
for arrangements they envisaged could be put in place if this situation arose. Firstly,
participants noted that there would be two ways in which they could find out about lack of
funds to pay for a bill:
1. Receive the bill themselves and check their account to ensure adequate funds.
2. Receive a warning from the account provider to let them know that there are insufficient
funds. Participants suggested that this could be communicated by mobile phone text
message or email, and would need to be conveyed a few days before the bill was due.
Once aware of the situation participants suggested that they could transfer money from the
disposable income element of their budget account to the bill, pay the required cash directly in
to their account or ask for surplus funds from other bill „pots‟ to be transferred to the relevant
bill. A couple of participants suggested that they be given the opportunity to identify priority
bills that should be paid first, if there was a month when insufficient funds were available.
They envisaged that these priority bills would be agreed when the budget account was set up.
“I‟d want to prioritise them, my rent, my council tax, my TV licence, gas, electric, they
come first. My phone which is effect a little bit of a luxury if that‟s something falls by
the wayside this month so be it. So long as they were prioritised would be quite
comfortable with that” (Male, recently banked, Leeds)
Across the research it was clear that an important element of automatic payments was
providing people with confirmation that bills had been paid. Participants envisaged that they
would be able to check this via account statements, but some suggested receiving notification
via mobile phone text message or email.
6.4 Rest of the money
Participants responded favourably towards the idea that a budget account would allow them
to be aware of exactly how much money they had left after setting money aside for bills.
They felt that this would help them to budget and manage their disposable income. Access to
this disposable income was considered key..
All participants voiced a preference for accessing money at an ATM. For those who had been
banked for five or more years, and those recently banked, ATM access was considered a basic
requirement for having an account.
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“This would be replacing my bank account so I would want all the same facilities as I
was getting my current account.” (Female, 5+ years banked, Bristol)
For those who were currently unbanked, the idea of accessing money at an ATM was very
appealing.
“I‟d like to be able…to use the ATM machines because if you don‟t get to the Post Office
at a certain time you‟ve got to wait until the next day and then you could have no
money for one day” (Female, unbanked, POCA, Aberystwyth)
Across the research it was clear that ATM access, and resultantly 24-hour access to
disposable income was considered a key element of the budget account. Participants
envisaged and suggested that ATM access be 24-hour and felt that this would be convenient
and a positive difference to how money could currently be accessed with a POCA. In
addition to this, some participants said that they would like to be able to use a card to make
purchases in shops and online. This mirrors findings from the previous HMT research, which
found that the ability to make card payments would be beneficial for those wishing to make
micro-transactions, and those with security concerns related to carrying cash.
Participants were asked to comment on the idea of pre-payment cards. These were
positively received by unbanked participants who envisaged they could be used to make
purchases in shops instead of using cash.
“Instead of having cash in your purse you could just have that…that‟s a good idea”
(Female, unbanked, Manchester)
However, banked participants voiced a preference for a debit card as something that they
already used with their bank account.
Across the research, the idea of having an overdraft attached to the budget account was
spontaneously mentioned by participants. In line with previous HMT research, nearly all
unbanked participants were wary of overdrafts and sought reassurances that an overdraft
would not be provided with a budget account.
“No debt at all should be allowed to occur on the account as otherwise all you‟re going
to do is get deeper, deeper, and deeper [into debt].” (Male, unbanked, Leeds)
For these participants, overdrafts were strongly associated with debt and were often cited as
the cause of debt in the past. This concern was also raised by some recently banked
participants, and some who had been banked for five or more years.
“I haven‟t got an overdraft. I‟m still a little bit of paranoia about leaving money in the
bank in case someone takes out a standing order” (Male, recently banked, Bristol)
“I budget as it is without having to worry about going into an overdraft and worry about
how I go about paying it back” (Female, 5+ years banked, Bristol)
However, some banked participants were reliant on their overdraft and would find it difficult to
use a budget account if it did not also provide an overdraft.
“You have to [use the overdraft] because the money that you get doesn‟t go that far.”
(Female, 5+ years banked, Manchester)
These participants saw their overdraft as a “safety net”. One participant described how
important her ten pound overdraft was, and how she found that she often needed to “live in
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the ten pounds” to make ends meet each month. These participants were reluctant to
consider giving up their overdraft.
7 Channels for account set-up and management
Chapter summary
When thinking about setting up a budget account participants envisaged this would
involve an element of face-to-face interaction. Financial budgeters were most likely to
comment that they would feel comfortable in setting up an account and identify amounts
of money to be set aside for bills. However, financial jugglers were more likely to note
that they would require help in deciding these amounts and in generating a budget.
These participants suggested that the account set up process involve an element of
advice.
It was suggested that notifications of when bills had been paid and warnings for when
there were insufficient funds in the budget account be provided via mobile phone text or
email.
Participants sought easy ways to monitor their budget account including: mobile phone
text updates; postal statements; mini-statements from ATMs; online tool.
When considering how they would best like to communicate with the account provider
regarding a budget account, participants tended to talk about two key types of
communication:
1. Account set up
2. Ongoing account management
Preferences for channels differed across these and are discussed below.
7.1 Account set up
Most participants envisaged that setting up a budget account would involve a face-to-face
interaction. For some, this was viewed as a short meeting to confirm the functions and bill
payments with the account provider. These participants envisaged that in advance of this
meeting they would complete a document detailing how much they wanted to be set aside for
bills and when bills should be automatically paid. Across the research, financial budgeters
were most likely to envisage and feel comfortable with this process for setting up a budget
account. They felt that they had a good understanding of how much would need to be set
aside for different bills.
Other participants – typically financial jugglers – envisaged that they would receive some
advice when deciding how much money to set aside for bills, and felt that they would require
this. As discussed earlier, financial jugglers found it difficult to budget and resultantly sought
reassurance that they were setting the correct amounts of money aside for different bills.
“I would want to see an advisor and chat to them and I would want reassuring that the
amount that I‟ve told them is realistic” (Female, 5+ years banked, Bristol).
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7.2 Ongoing account management
7.2.1 Amendments
Participants envisaged that they would make any amendments required such as change of bill
date or change of amount set aside for bill money, either face-to-face or by telephone. It
was agreed that discussing finances was a sensitive and private matter.
“I wouldn‟t want to be stood there discussing my account with wee Jeannie from next
door stood there doing her shopping!” (Female, recently banked, Aberdeen)
7.2.2 Notifications
Participants felt that receiving notifications to confirm that bills had been paid was important in
providing reassurance. It was suggested that these could be provided by mobile phone text
message or email.
Text message and email were also suggested as preferred channels for warnings that there
were insufficient funds in the budget account.
7.2.3 Monitoring
The previous HMT research found that monitoring finances was important to participants.
This research found that in particular, financial budgeters currently monitor their finances
on a frequent basis.
Easy and simple monitoring of a budget account was seen as very important by all
participants. Some participants suggested that they be sent a record of their balance on a
frequent basis. Suggestions included weekly updates by text message, monthly postal
statements, mini-statements from an ATM and 24-hour access to an online balance.
“[Online] would be good because you can sit there and go through it in your own time.”
(Male, recently banked, Bristol)
Participants noted that detailed balances should be made available by post and online. They
envisaged that this would detail exactly how much was set aside for each bill, and how much
disposable income was available. Some likened this to a “weekly calendar online tool” where
they could track how much was going in and out of their budget account. These participants
liked the idea of monitoring their money, and being able to see an overview of how their
money was being budgeted and spent.
“It‟s like a budgeting calculator. It‟s quite handy you can physically see what going out”
(Male, recently banked, Leeds)
8 Budget account fee
Chapter summary
The majority of participants who were interested in a budget account felt that a small fee
would be acceptable.
Whilst there was little consistency regarding the amount of structure of the fee most
mentioned a regular account fee (weekly or monthly).
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Participants were asked for their views on paying for a budget account. Whilst initially most
participants were reluctant to consider a budget account fee, after consideration of the
benefits that a budget account offered, the majority of participants felt that a small fee would
be acceptable. The more appealing participants found the account, the more likely they were
to consider paying a fee.
“Even if I was working, for someone to come along and sort all my money into pots I‟d
happily pay them!” (Male, recently banked, Bristol)
A fee was also considered acceptable by those who currently paid a fee for their bank account.
Ideas for the structure and amount of fee varied across participants. There was little
consistency in suggestions, although most suggested the fee should be small. No participants
mentioned basing fees on differing levels of service.
The range of suggestions included:
£1 weekly fee
50p/ £2/ £5 monthly fee
£25 set up fee
£20 annual fee
£1 per cheque paid in to the account/ per automatic payment
The idea of a fee was rejected by the following participants;3
Those for whom the account had limited or low appeal. This included four participants
who preferred to manage their finances via cash, and two participants who felt that their
fluctuating income limited their ability to use a budget account which set aside money on
a regular basis.
Eleven banked participants who felt the budget account did not offer them any additional
benefits when compared to their bank account for which there was no fee.
Those who felt they were on a very low income, and could not afford to pay for a fee.
One unbanked participant suggested that the budget account fee be structured to take
into account peoples‟ incomes; this participant noted that he would be more likely to
consider paying a small fee if he were employed.
“As much free as possible on a low income” (Male, unbanked, Leeds)
“I‟m on my own with my son. There‟s only one wage coming in along with my working
tax credit and my child benefit, and I consider myself to be on a low income, so I would
not pay for an account.” (Female, 5+ years banked, Bristol)
3 please note that where numbers are provided it is important to note that this research was qualitative in nature, and
by definition included a small sample size for in-depth study. These numbers should therefore not be seen as
in any way representative of the population as a whole, or of the unbanked population. They are provided in
order to give an indicative feel for the perceived relevance of a budget account among the sample
interviewed)
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“If it cost me money there is no way I would take that account” (Male, unbanked, Bristol)
9 Conclusions and recommendations
Overall there is a genuine appetite for a budget account, with strongest appeal amongst
those who are currently unbanked but open to alternative ways of managing their finances
including:
Financial budgeters who seek a more convenient and less time-consuming way to
manage finances.
Financial jugglers who currently lack budgeting skills and struggle with finances.
The research indicates that these people were very likely to take-up a budget account. There
is also appeal among those who are recently banked and have been banked for five or more
years. Again, this includes a mix of financial budgeters and financial jugglers. Here, a budget
account is seen to offer more than a bank account.
There is low appeal among those who operate within a deeply embedded cash culture.
These people are resistant to any form of banking. Unable to identify any benefits of becoming
banked, these people are likely to be extremely difficult to move into a budget account, or any
other form of banking.
There is also low appeal among those who show a preference for their current bank account,
or those who aspire to a bank account. In particular these people access, or aspire to access
credit such as overdrafts and are unlikely to consider an account that does not offer this
function.
Finally, there is limited appeal for a budget account where an individual has a fluctuating
income. For these people there is concern about having the income to make regular
payments. However, the research indicates that these people may be interested in a budget
account that offers flexibility in payments to suit their fluctuating income.
The previous HMT research found that there is a general resistance to becoming banked.
Unbanked participants in this research were often reticent to consider becoming banked as
they associated being banked with debt and access to credit. For many, this acted as a core
barrier to becoming banked which suggests that participants would be less likely to look
favourably at a budget account should it be positioned within a high street bank.
Fear of debt, negative previous experience and a perceived lack of benefit meant that those
who had become banked had been prompted to do so via a third party. Policis research4 also
found that account opening is driven primarily by third party requirements (e.g. employers).
In stark contrast, there is little resistance to the idea of getting a budget account. It is clear
that the budget account is not perceptually aligned with a bank account which removes a
number of barriers preventing people from becoming banked. In particular, previous negative
experiences of banking do not seem to overly deter people from a budget account.
4 These conclusions draw on findings from research carried out by Policis: Realising banking inclusion: the
achievements and challenges (January 2011).
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Furthermore, it is clear that this differentiation between a bank account and a budget
account is central to the budget account appeal. The key areas of differentiation are:
This research indicates that people will be less likely to consider a budget account if it
were to be provided by a high street bank.
The budget account feels like a tailored account; ‘an account that will help me
manage my finances’. The previous HMT research found that unbanked people felt
that bank accounts were not aimed at them or were unlikely to benefit their current
circumstances. This view is reinforced by the Policis research which found that 26% of
those on the lowest incomes felt that banking had made little difference to their lives and
finances. However, it is clear that the budget account offers people something different
and beyond the functionality of a bank account. The research indicates that people find it
easy to identify how a budget account will benefit their personal financial management
including: the provision of a budgeting structure; reassurance that money is set aside to
pay bills; bills paid automatically. A key element of the tailored feel of the budget account
is that it reflects the short-term view of finances that people have. Where money is
received weekly or fortnightly, money is budgeted weekly or fortnightly and the budget
account supports this.
As people are able to identify the benefits of a budget account there is tolerance for a small
account fee.
An additional element of differentiation between a bank account and budget account is the
appeal of the account functionality. The previous HMT research found that bank account
functionalities (e.g. direct debits, ATM access) are not motivating factors to becoming banked.
However, by contrast the functionalities of the budget account are considered motivating. The
Policis research found that 53% of those on the lowest incomes with a bank account continue
to manage finances via cash and therefore use limited bank account functions. However, the
budget account functions are central to the appeal of the budget account. Of particular
interest is the appeal of automatic payments. Experiences of direct debits and related
penalty charges were explored in the Policis research. This found that around half of the
newly banked had been exposed to penalty fees, and one in three of these had incurred more
than five charges within the previous year. This supports our previous HMT research which
found that experiences of penalty charges often led to a fear of penalty fees which constituted
a key barrier to becoming banked. The research suggests that whilst direct debits often
strongly deter people from becoming banked, automatic payments are considered a
motivating factor to becoming banked. Direct debits and automatic payments are seen as
different functions and this differentiation is key to the budget account appeal. Whilst direct
debits are associated with penalty charges and debt, automatic payments are associated with
convenience; a convenient way for bills to be paid.
It is clear that the motivating benefits for the budget account are reassurance that finances
will be budgeted, and convenience in paying bills. Personal savings are also mentioned.
However, it is interesting to note that savings on bills is not cited as a key benefit of a
budget account. This is likely to be partly due to low awareness of potential bill savings but
also suggests that bill savings are not a top priority. This is supported by Policis research
which found that interest in saving on bills was low and unimportant as a motivator in
becoming banked. It also found that savings on utility payments were reduced as a result of
penalty charges resulting from direct debits and that those in the lowest income quintile
suffered a small net loss. This suggests that savings on bills is unlikely to motivate people to
take-up a budget account.
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The budget account will provide a budgeting structure and payment process that will help
people manage their finances. The research indicates that the budget account has the
potential to provide greater financial stability to people and help individuals develop their
budgeting, financial management skills and encourage take-up of personal savings. In the
long term this may increase financial confidence and management skills and help tackle the
„revolving door‟ issue identified by Policis where banked people become unbanked following
problems in managing finances via a bank account.
The research suggests that there are different requirements for a budget account set-up
process, and that a high importance is placed on ease of monitoring and managing the budget
account. People expect that the set-up process will involve an element of face-to-face
interaction:
For those more confident about their budgeting capabilities (typically financial
budgeters), there is an expectation that this interaction will double-check and confirm
when and how much money is budgeted and set aside for regular payments.
For those less confident about their budgeting capabilities (typically financial jugglers),
there is an expectation that this interaction will offer a more advisory role and help plan
and identify a budgeting structure.
It is clear that people desire easy access to information regarding the budget account and
strong preferences were indicated for: online management tool, text messages and ATM
statements.
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10 Appendix
10.1 Sample
Unbanked:
England
Manchester
England
Leeds
England
Bristol
Wales
Colwyn Bay
Scotland
Aberdeen
2 x with POCA
1 x without
POCA
2 x with POCA
1 x without
POCA
2 x with POCA
1 x without
POCA
2 x with POCA
1 x without
POCA
2 x with POCA
1 x without
POCA
Across the sample:
Annual household income of less than £25,000
8 x male and 8 x female, spread of ages 18+, included single headed households, lone
parents, disabled people, 3 x people from ethnic minority groups
Mix of those in receipt of benefits, unemployed, living in socially rented accommodation
Some banked in the past
Recently banked:
England
Manchester
England
Leeds
England
Bristol
Wales
Colwyn Bay
Scotland
Aberdeen
1 x recently
banked
1 x recently
banked
2 x recently
banked
2 x recently
banked
2 x recently
banked
Across the sample:
Annual household income of less than £25,000
8 x male and 8 x female, spread of ages 18+, included single headed households, lone parents, disabled people, 2 x people from ethnic minority groups
Mix of those in receipt of benefits, unemployed, living in socially rented accommodation
Some banked in the past, all have been unbanked for at least 18months/ 2 years before
becoming banked
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5+ years banked:
England
Manchester
England
Leeds
England
Bristol
Wales
Colwyn Bay
Scotland
Aberdeen
1 x group
Working
1 x group non-
working
Across the sample:
4 x annual household income of less than £15,000 and 4 x annual household income of £15,000-£25,000 per group
4 x male, 4 x female per group, 2 x 25-39 years, 2 x 30-45 years, 2 x 40-64 years, 2 x 65+ years per group
All banked for at least 5 years, mix of those on benefits and in socially rented
accommodation
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