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Improving financial inclusion in the UK

Author: Andrea Finney and Elaine Kempson
Institution: Personal Finance Research Centre (PFRC), University of Bristol
Type of case study: Research

About the research

The Family Resources Survey has been used by government departments and independent bodies, including the Financial Inclusion Taskforce, to track the number of people who live in a household where no-one has a bank account and to explore the types of people who are most likely to not have a bank account. Different personal and economic characteristics, such as being a lone parent or on a low income, have been associated with having no access to a bank account, however many these are inter-related in ways that makes it difficult to know what is most likely to be affecting people’s engagement with banking.

The Financial Inclusion Taskforce commissioned researchers from the Personal Finance Research Centre (PFRC) to carry out a regression analysis to identify the socio-demographic characteristics that are independently associated with being ‘unbanked’, that is not using or having access to a bank account.

In the report, Regression Analysis of the Unbanked using the 2006-07 Family Resources Survey, adults are considered to be ‘unbanked’ if no-one in their household has a bank account. While information about account holding was complete for the vast majority of households, the researchers were unable to classify a small proportion of households (two per cent) as banked or unbanked due to missing information (where respondents did not know or refused the answer the question). They completed an initial regression analysis to understand whether any characteristics distinguish adults who ‘did not state’ compared with the ‘unbanked’. Findings showed that the ‘did not state’ group were a distinctly different group of people compared with those who were unbanked and that the ‘did not state’ group should not be treated as ‘unbanked’ in future reporting.


The regression analysis used data from the Family Resources Survey for 2006-2007 and examined the influence of range of personal and socio-economic characteristics on being unbanked, including age, sex, household structure, ethnicity, employment and socio-economic status, housing tenure, being in receipt of income-replacement benefits and country of the UK. Since the researchers expected that ownership of a Post Office Card Account (POCA) might also be an important reason why many adults and households are unbanked, they also controlled for POCA-holding by including this in the set of predictor variables in each regression model.

Two separate analyses of adults (or households headed by adults) were run for those who are below state pension age (SPA) and those above SPA. This allowed the researchers to include in the analysis measures that typically do not apply to pensioners but that are highly relevant to non-pensioners, such as employment status other than retired and presence of dependent children, to be included in the analysis of those below SPA.

Findings for policy

Research findings showed that the POCA has a large effect upon account-holding both for non-pensioners and pensioners. The odds of being unbanked were almost 23 times higher among those with a POCA compared with those in households without a POCA. Independently of the influence of POCA-holding and all other measures included in the analysis, the likelihood of being unbanked fell sharply with increasing levels of household income. The odds were 12 times higher among people in households with the lowest incomes (less than £100 per week) compared with those with the highest incomes (£500 or more per week).

Among non-pensioners, the groups that most need to be targeted with initiatives to raise levels of banking inclusion include: people who are permanently sick or disabled, lone parents, Pakistani or Bangladeshi people and tenants (in both the social and private rented sector). There is also a greater need in Northern Ireland than elsewhere in the UK.

The groups of pensioners that would need to be the focus of initiatives to raise levels of banking inclusion again include tenants but also lower-income home owners. As with non-pensioners there is a greater need for intervention in Northern Ireland than elsewhere in the UK.

Impact of the research

The Personal Finance Research Centre (PFRC) at the University of Bristol carried out this research to measure the level and nature of financial exclusion in the UK, to shape UK financial inclusion policy and to inform research and policy internationally.

Finney and Kempson’s report Regression Analysis of the Unbanked using the 2006-07 Family Resources Survey informed UK central government policy changes in how the numbers of unbanked were calculated. Previous Taskforce reports included the ‘did not state’ category – household that didn’t state whether they had a bank account or not – in the ‘unbanked’ statistics. As the research conducted by the Personal Finance Research Centre confirmed that those that ‘did not state’ are distinctly different from the unbanked the Financial Inclusion Taskforce decided to exclude this group from their definition of the ‘unbanked’. (HM Treasury, 2009)

The research demonstrated that a shared government-banking industry target for reducing the number of unbanked had been met; between 2002 and 2009 the number of adults living in households without access to a bank account fell from two million to 890,000 (Financial Inclusion Taskforce, 2010).

Read the report:

Finney, A., Kempson, E. (2009) ‘Regression Analysis of the Unbanked using the 2006-07 Family Resources Survey’, London: HM Treasury. Available online from

The report is part of wider project summarised in the following REF 2014 impact case study: