Mystery shopping review of the provision of basic bank accounts

Transcription

1 Mystery shopping review of the provision of basic bank accounts Summary Results: December 2010 A report for the Financial Inclusion Taskforce Provided by: Andy Glazier, Martin Marine and Alexandra Walmsley Consensus Research Priory House Cloisters Business Centre 8 Battersea Park Road London SW8 4BG Tel: +44 (0) Fax: +44 (0) mail@consensus-research.com 1

2 SUMMARY RESULTS 1. Introduction In November and December 2010, Consensus Research International carried out a mystery shopping review of the provision of Basic Bank Accounts (BBAs), on behalf of the Financial Inclusion Taskforce. The purpose of the review was to identify whether providers of BBAs were complying with the Industry Guidance (see Annex A). The exercise revisited the 2007 exercise conducted by the former Banking Code Standards Board (now the Lending Code Standards Board) 1. BBAs were developed jointly by Government and the banking industry to address the problem of financial exclusion. The following 16 providers in the UK offer BBAs: Bank of Ireland (Northern Ireland), Bank of Scotland, Barclays, Clydesdale, Co-operative Bank, First Trust Bank, Halifax, HSBC, Lloyds TSB, Nationwide Building Society, NatWest, Northern Bank, Santander, The Royal Bank of Scotland, Ulster Bank and Yorkshire Bank. A BBA allows the account holder to receive money and pay bills. It can be a first step towards opening a current account later on. With a BBA the account holder can: have wages, benefits, State pension or tax credits paid directly into the account; pay in sterling cheques for free; take money out at cash machines in the UK with a cash card; take money out at the Post Office; pay bills by Direct Debit. Some banks provide the account holder with a debit card. In 2009, the original goal of halving the population without access to a bank account was met. 2 Given that a substantial proportion of the population could benefit from a BBA, it is important to understand whether providers are fulfilling their duty and identifying applicants for whom a BBA would be appropriate. In terms of the Industry Guidance, BBA providers are required to assess whether an applicant s needs are suited to a BBA and if they are, to explain the account and offer one, unless the applicant has a history of fraud or is an undisclosed bankrupt (Barclays and Cooperative are two providers who do offer BBAs to undischarged bankrupts) Review 2.1. Scope of the research The research consisted of mystery shopping visits conducted with all 16 BBA providers in November and December The research achieved 881 completed mystery shops that were distributed across the United Kingdom. Mystery shoppers acted out different scenarios when enquiring about bank accounts (see Annex B). For each scenario tested, a basic bank account was the most appropriate product. Mystery shopper visits to BBA providers were equally split between morning and afternoon hours (excluding noon to two pm). In analysis, the number of mystery shops per provider was weighted to reflect provider size using the 2009 bank group current account market share. See Annex C for further details sampling and weighting. Consensus Research International, an independent external research agency, managed the project while FACTS International Ltd, an independent external agency, carried out the mystery shopping fieldwork. 1 Found at and

3 The mystery shopping exercise assessed whether: Bank staff recognised that a BBA was appropriate Appropriate literature was readily available for the mystery shoppers BBAs were offered or described Mystery shoppers were told credit scoring would be required Implications of credit scoring were explained Identification was requested Bank staff explained what types of documents would be acceptable forms of identification Bank staff explained what checks might be carried out and how long would it take to open an account 2.2. Key findings Bank staff communication and interaction with mystery shoppers Most mystery shoppers (80%) waited less than 5 minutes before they were attended to by the bank staff. In 27% of visits, bank staff spent up to five minutes with the shopper, in 43% of visits this was six to ten minutes, in 19% of visits it was 11 to 15 minutes, and in 6% of visits this was 16 to 20 minutes. In 4% of visits, bank staff spent between 21 to 35 minutes in discussions with the shopper. Most discussions (65%) took place at the information counter, while 14% were conducted at a separate desk or cubicle and 8% in an office. These variations are likely to be due to differing branch set-ups between providers. In 89% of visits, bank staff were reported to have listened and taken full account of the mystery shopper s situation. In 72% of visits, shoppers were asked clarification questions; 84% of these were asked questions about their identification. The other questions asked by bank staff concerned employment status (54%), living arrangements (47%), age (39%), how long they had been in the UK (23%), how much money they had (17%), whether they had any CCJs (10%) and whether they had registered bankruptcy (6%). The variations in the type of further questions were often closely linked to the nature of the individual scenarios. Following the initial discussion and additional questions, bank staff mentioned simple or basic account as appropriate in 77% of visits. They mentioned a current account as appropriate in 33% of visits; a savings account in 10% of visits; a passbook account in 2% of visits Offering a basic bank account In total, 84% of mystery shoppers were offered the BBA. 77% of all mystery shoppers were immediately offered a BBA following the presentation of their scenario to the BBA provider staff. If the Bank staff failed to mention a BBA, shoppers asked the following question, Do you have an account that would just allow me to do the basics, like receive money, and pay bills? After this prompt, a further 7% were provided with information on a simple or basic bank account. The BBA was presented as the most suitable account in 73% of the visits. In 20% of visits, the BBA was recommended as a suitable account among other financial products, for instance, a current or savings account. The BBA was presented as a less appealing alternative account in 2% of visits. In total, 16% of mystery shoppers were not offered the BBA; they were instead provided with information on an alternative account, such as a current account. 3

4 Presentation of BBA features The features of the BBA most often described to shoppers related to payments in and out of the account. Table 1 shows that in 81% visits where a BBA was offered, bank staff explained that the BBA would allow the shopper to have their wages, benefits, state pension or tax credits paid directly into the account; in 76% of these visits, shoppers were informed that they would have ATM access; in 58% of these visits, shoppers were told the account would allow them to pay bills by Direct Debit. Table 1 Features of the BBA explained to mystery shoppers % of visits where bank staff explained this feature of a BBA Mystery shoppers would have their wages, benefits, State pension or tax credits paid directly into the account Mystery shoppers would be able to take money out at cash machines in the UK with a cash card Mystery shoppers would be able to pay bills by Direct Debit Mystery shoppers would be able to conduct account business at the bank counter Mystery shoppers would be able to cash cheques for free Mystery shoppers would be able to open the account without depositing a minimum amount Mystery shoppers would be able to take money out at the Post Office Base: Mystery shoppers offered the BBA (747) 80% of mystery shoppers offered the BBA were provided with brochures or leaflets on the BBA by the bank staff. 51% of the mystery shoppers offered the BBA observed brochures or leaflets for the BBA displayed in the bank branch, while 13% witnessed advertising posters for the basic or simple account in the branch The application process 36% of those offered a BBA were advised on how long it would take to open a BBA. Of these, 91% were advised that this account opening would take up to two weeks, 7% were informed that the account processing would take up to 3 weeks and 1% were told that it would take up to 4 weeks. 4

5 Information on the cooling-off period of the BBA was presented to 9% of all the mystery shoppers offered the BBA. This proportion may have been higher had mystery shoppers continued with the application process Identification and verification Each BBA provider has its own list of acceptable identification documents. Banks accept certain items of identification as standard, for example: passport (with visas if appropriate) or an EU Identity Card; full UK Driving Licence; benefits book (or an original letter from a Benefits Agency). If a customer does not have these standard forms of identification, then non-standard forms can be used. For example, armed forces ID card, old-style driving licence, student identification, utility bill, benefits letter, council rent book. In this review, 87% of mystery shoppers were informed they would be required to provide identification to facilitate the account opening. Shoppers with non-standard non-eu ID (a non-eu passport) were more likely to be informed about the need for ID to process the BBA (96% versus 87% for all). Where mystery shoppers were informed of identification and verification, the most prevalent form mentioned was a passport (93%). The new-style driver s licence with photograph was mentioned by 75% of the bank staff as appropriate ID; 11% of staff said the old-style driver s licence (without a photograph) would be appropriate identification if supplemented by another document from an approved source. A utility bill was mentioned by 69% of staff. On the whole, providers were more likely to inform those shoppers without standard ID (such as a passport or driving license) on alternative identification that could be presented. A letter from a Government department or local council confirming right to benefits was mentioned as acceptable ID to 37% of mystery shoppers who did not have ID, and to 48% of mystery shoppers who had some identification (but not a passport or driving license). When providers presented information on alternative forms of identification, they were more likely to have done so for the appropriate scenarios. Mystery shoppers with standard ID (9%) were less likely to have been offered alternative forms of ID than those mystery shoppers without ID (15%) or mystery shoppers with non-standard ID (16%). Those who said they were recently released from prison and did not have any IDV were asked whether they had a driver s licence (90%). Part-time workers with a history of credit problems, and elderly shoppers, who did not have any of the standard identification were likely to be informed of utility bills as appropriate (83% and 80% respectively). Unemployed school leavers were least likely to be informed that utility bills could be used as identification (in 41% of visits). The least frequently cited means of identification and verification were a letter from a government department or local council confirming benefit rights (in 35% of visits). A Job Centre Plus letter with NI number on the letter was mentioned in 14% of visits, and identity information from a workplace or educational institution was mentioned in 6% of visits. Bank staff informed 9% of all mystery shoppers that the bank would accept certified copies of their identification documents. Although not a requirement of the Industry guidance, 29% of shoppers were provided with a leaflet on the valid forms of identification required by the bank. This proportion is in line with previous reviews. Elderly shoppers without a passport or driver s licence were more likely to have been given printed literature on ID (43% versus 29% for all). Table 2 pulls together all the key results by the types of ID the mystery shoppers had with them and shows that bank staff were consistent in dealing with the shoppers regardless of the forms of ID that were presented. Shoppers with non-standard (non-eu) ID were more 5

6 likely to be informed about the need for ID (96% versus 87% for all) and more likely to be informed that they may need to be credit checked (20% versus 14% for all) Table 2 Identification presented/explained to mystery shoppers: by types of identification (percentages) Offered the BBA % Informed about need for ID % Informed about certified copies % Given materials on ID % Informed that they may need to be credit checked % Summary statistic for all Mystery shoppers with standard ID Mystery shoppers without ID Mystery shoppers any non-standard ID* Mystery shoppers non-standard ID Mystery shoppers non-standard (non- EU) ID Base: All mystery shoppers (881), Mystery shoppers with standard ID (392), Mystery shoppers without ID (232), Mystery shoppers any non-standard ID (257), Mystery shoppers non-standard ID (186), Mystery shoppers non-standard (non-eu) ID (71) [ ] figures in square brackets are based on fewer than 50 observations. * Mystery shoppers any non-standard ID combines both mystery shoppers non-standard ID and mystery shoppers non-standard (non-eu) ID Identification and verification On occasion, a provider may need to credit check an applicant to verify identification. In 14% of visits, mystery shoppers were informed they might need to be credit checked. Of the ten scenarios tested, the mystery shoppers most likely to have had credit checking mentioned to them were those aged living in temporary accommodation (in 24% of visits), part-time workers with a history of credit problems (in 20% of visits), and migrant workers with a non-eu passport (in 20% of visits). Migrant workers with a non-eu passport were more likely to have been told about possible credit checking than migrant workers with an EU passport (20% for the non-eu migrant worker versus 8% for the EU migrant workers). Those who were unemployed stay-at-home parents with non-standard ID, were informed they would need to be credit checked in 15% of the shops. All other scenarios scored 14% (the average) or lower and the mystery shoppers who presented a scenario of unemployed school leaver with standard ID were the least likely to be have credit checking mentioned (2%). 6

7 Of those who might need to be credit checked, 33% were provided explanations on the credit-scoring process, and 41% were provided with an explanation of the possible effects on credit rating. 3. Conclusion The 2010 review has shown that applicants who want a basic bank account can usually obtain one. This reflects an improvement overall compared with previous reviews. However, it is important to note that one in six applicants are misdirected to an account which may not suit their needs. Providers sometimes need to credit check applicants in order to verify identification. The review has shown that around 60% of those who might need to be credit checked are not told how this could affect their credit score. Where credit checks are required, it is evident that some providers need to do more to ensure bank staff are able to provide sufficient advice on credit checks. Providers were consistent in enquiring about identification and verification. The review demonstrated that identification and verification was prioritised by bank staff. Among the bank staff asking questions to clarify the mystery shoppers situation, 84% asked questions on identification and 87% of all mystery shoppers were informed they would be required to provide identification to facilitate the account opening. The review showed that when providers presented information on alternative forms of identification, they were more likely to have done so for the appropriate scenarios, with mystery shoppers without ID or with nonstandard ID provided more alternatives than those mystery shoppers with standard ID. Providers did not explain all the key features of the BBA to the shoppers. The review identified that of the five key BBA features, three features were mentioned in more than half the visits. The features more likely to be mentioned by providers were having wages, benefits, State pension or tax credits paid directly into accounts (81%), taking money out at cash machines in the UK with a cash card (76%), and the ability to pay bill by Direct Debit (58%). The other key BBA features, paying in cheques free (27%) and taking out money at the Post Office (16%) were less likely to be mentioned. The information on the key BBA features is also highlighted in the brochures and leaflets on the BBA provided by providers. Brochures and leaflets on the BBA were shared with shoppers in 80% of visits where the BBA was offered, however in 20% of visits shoppers did not receive the BBA brochure or leaflet and were also not likely to have been informed on some of the key BBA features. 7

8 Annex A Industry Guidance for FSA Banking Conduct of Business Sourcebook The Industry Guidance for FSA Banking Conduct of Business Sourcebook, provides examples of minimum standards for the way in which banks, Building Societies and other banking service providers treat their customers. I. If a customer wants to know about current account options and the Basic Bank Account provider assesses that a basic account is likely to be appropriate, then the provider should inform the customer that it offers a basic account and how it can be opened. Customers for whom a basic account might be appropriate include those: Who express an interest in opening a money transmission (current) account which does not allow them to go overdrawn; Whose main source of income appears to be state benefit; Who are content to accept the limited money transmission functionality of a basic account (e.g. no cheque book). II. If a customer asks to open a Basic Bank Account and meets the provider s qualifying criteria for one, the provider should allow the customer to open one. This does not preclude other products being explained where it is appropriate. However, if the customer has a history of fraud or is an undischarged bankrupt a provider is not bound to open an account. If the customer already holds a suitable account with the bank, a provider is not bound to open a Basic Bank Account. III. Wherever possible, firms should verify identification in branch for Basic Bank Account applications. Customers should be told why this information is needed, what types of documents are acceptable and what checks may be carried out. IV. If a firm operates a central account-opening service, it should offer the option for certified copies of identification documents to be sent to the central unit rather than original documents. This helps to avoid customers being asked to send away important documents in order for firms to satisfy identification requirements under Money Laundering rules. Where a firm has an arrangement with a third party, such as a housing association, to open basic bank accounts on the firm s behalf, the same approach to verifying identification should apply wherever possible. V. If a firm needs to undertake a full credit check (rather than an enquiry) to verify identification and complete a customer s application for a basic account the firm should explain the implications of the check to the customer, including whether it could affect the customer s future ability to apply for credit. VI. If a customer s application for a basic bank account is declined firms should explain the main reason why if asked by the customer to do so. However, if suspicion of fraud or money laundering is the reason for declining an application the firm is not obliged to inform the customer. 8

9 Annex B Scenarios The following scenarios were used for assessment in the review of the provision of Basic Bank Accounts. Scenario one: recent school leaver, unemployed, with identification You have recently left school and are looking for a job. You want to have an account ready to have your wages/benefit paid into and you have a birth certificate as identification. You do not want to have the temptation to get credit until you have been working for a while and are more confident with your money. Scenario two: in debt, has no identification You want a separate, simple account to manage your day-to-day finances whilst experiencing some financial difficulties with fees and charges on your main current account. You do not have CCJs or bankruptcy registered against you but you do have debts that you are just about managing to control. You require an account without credit facilities and you do NOT want a chequebook or other credit facility having previously found them difficult to manage. Scenario three: year old, temporary housing, has non-standard identification You are a year old, living in temporary accommodation wanting a simple account to receive benefit payments and withdraw cash. You must take with you real non-standard ID e.g. employment ID card, trade union membership card, video club membership card, public library card, non-utility bill (catalogue, mobile phone etc.), formal letter addressed to yourself. You are living in temporary accommodation. You can say you are staying with a friend or relative, as you have recently left your husband/wife/partner and you are just sorting yourself out. Say that you are going to the Job Centre, Benefits Centre or local Citizens Advice Bureau to sort out what benefits you can claim. However, you need a simple account so that you can receive payments and withdraw cash. You do not want to do anything else. Scenario four: elderly person, has no standard identification You are an elderly person wanting a simple account to receive benefit payments and withdraw cash. You are in receipt of state benefits e.g. Disability Allowance, State and/or Private Pension, Income Support, Widow/ Widower s Allowance. You must appear to be over 60 years old. You must not take any ID with you. You do not have to be 60 years old, but you must look about this age. You are seeking advice on what ID would be allowable in your circumstances. Say that you do not drive, you do not have a passport and that you do not have a mortgage anymore. You just need a simple account so that you can receive pension payments and withdraw cash. You do not want to do anything else. Scenario five: stay-at-home parent, unemployed, has non-standard identification You are a stay at home mother or father, recently separated (not legally separated, but presenting an unstable background/ situation) from an abusive partner, living temporarily in a hostel, not working, wanting a simple account to receive future benefit payments and withdraw cash. You would prefer not to discuss your situation over the counter as you do not want others to listen in. You must take with you with real standard ID e.g. driving licence, passport, an armed forces identity card, PAYE payslip, Council Tax bill, utility (gas, electric, telephone, water) bill. You can say you are staying in a hostel, as you have recently left your partner and you are just sorting yourself out. Say that you are going to the Job Centre, Benefits Centre or local Citizens Advice Bureau to sort out what benefits you can claim. However, you need a simple account so that you can receive payments and withdraw cash. You do not want to do anything else. 9

10 Scenario six: part-time worker, history of credit problems, has non-standard identification You are working part-time but you have a history of credit problems and money difficulties. You want a simple account to pay cash and Benefits into and be able to pay your bills by direct debit. You must take with you with real standard ID e.g. driving licence, passport, an armed forces identity card, PAYE payslip, Council Tax bill, utility(gas, electric, telephone, water) bill. You will not be expected to prove that you have had credit problems or money difficulties but that you want to sort yourself out. Scenario seven: migrant worker, EU passport You have recently arrived in the UK as a migrant worker. You need to have an account into which your wages can be paid. You have an EU-passport as identification and you are living in rented accommodation. You are not sure how long your job will last so you do not want to get into any debts and are happy to manage your affairs in cash. Scenario eight: migrant worker, non-eu passport You have recently arrived in the UK as a migrant worker. You need to have an account into which your wages can be paid. You have a non EU-passport as identification and you are living in rented accommodation. You are not sure how long your job will last so you do not want to get into any debts and are happy to manage your affairs in cash. Scenario nine; learning disabilities, no identification You have learning disabilities and are looking for a degree of independence with your money but want something very simple. You do not want credit and are happy to use cash. Scenario ten; recently released from prison, no identification You have recently been released from prison and you are living with friends until you sort yourself out. Say that you are going to the Job Centre, Benefits Centre or local Citizens Advice Bureau to sort out what benefits you can claim. You must not take any ID with you. You are seeking advice on what ID would be allowable in your circumstances. You need a simple account so that you can receive payments and withdraw cash. You do not want to do anything else. 10

11 Annex C The research achieved 881 completed mystery shops that were distributed across the United Kingdom (see Table 1). Table 1 Number of mystery shops by regions Regions Mystery shops Greater London 113 East of England 86 South East 90 South West 19 East Midlands 49 West Midlands 80 Yorkshire and the Humber 67 North East 51 North West 62 Scotland 92 Wales 50 Northern Ireland 122 Total 881 Mystery shoppers acted out different scenarios when enquiring about bank accounts. For each scenario tested, a basic bank account was the most appropriate product. Annex B summarises the scenarios tested in the review. Table 2 provides a summary description and the number of mystery shops conducted for each scenario. Table 2 Number of mystery shops by the ten scenarios Mystery shoppers Scenarios Mystery shops Scenario one: school leaver, unemployed, has ID 78 Scenario two: in debt, has financial difficulties, no ID 116 Scenario three: year old, temporary accommodation, real non-standard ID Scenario four: elderly person, no drivers licence, no passport Scenario five: stay-at-home parent, unemployed, non-standard ID Scenario six: part-time worker, history of credit problems, real non-standard ID

12 Scenario seven: migrant worker, EU passport 99 Scenario eight: migrant worker, non-eu passport 71 Scenario nine: learning disabilities, no ID 67 Scenario ten: recently released from prison, no ID 49 Total 881 Base: all respondents (881) Nine of the 16 providers were visited on at least 50 occasions. The mystery shops were weighted to reflect provider size using the 2009 bank group current account market share. Weighting involved increasing or decreasing the value of the data collected from each provider to reflect the real world scenario. Table 3 shows the differences between the unweighted (actual) mystery shops and the weighted (adjusted) mystery shops by BBA provider. Table 3 Mystery shops conducted by region; unweighted and weighted mystery shops BBA Providers reviewed Unweighted mystery shops Weighted mystery shops Lloyds TSB Barclays HSBC NatWest RBS Halifax Santander Nationwide Yorkshire Bank Co-operative Clydesdale Bank of Ireland 32 9 First Trust 31 9 Northern Bank 30 9 Ulster Bank Bank of Scotland Total Base: all respondents (881) 12