Response from the Association of British Credit Unions Limited (ABCUL)

Transcription

1 Department for Business, Innovation and Skills Post Office Banking A consultation on developing the banking and financial services available at the Post Office Response from the Association of British Credit Unions Limited (ABCUL) Contact details Mark Lyonette Chief Executive mark.lyonette@abcul.org Tel: Or Abbie Shelton Policy and Communications Manager abbie.shelton@abcul.org Tel:

2 Executive Summary The Post Office plays a central role in service provision in a whole host of areas providing great benefit to communities across the country the network of more than 11,000 branches provides a focal point for community services and attracts the business of a diverse group. In retail financial services, the extensive network outstrips the combined branch networks of the high-street banks and building societies. At the root of the Post Office s mission is the Universal Service Obligation but currently a core section of the Post Office s customer group goes underserved and uncatered-for. The Post Office Card Account (POCA) provides a facility for the withdrawal of benefit, pension and tax credit payments but is otherwise non-functional and very little has been done to extend appropriate, inclusive and functional services to these people despite a). POCA customers being some of the least-well served by financial services in society and b). POCA customers making up 20% of visits to Post Office branches each week and spending as much as 2 billion in the network each year. It is incumbent upon the Post Office as a state-subsidised public service that the expansion of its financial services does not simply replicate and compete with the mainstream in a commercial fashion but rather prioritises the social goal of advancing financial services to an under-served group to which the network has unprecedented access. Furthermore, whilst sustainability may be a concern, the high-cost credit market is a profitable and lucrative area of business the OFT has recently estimated its size at 35 billion; in 2005, the Competition Commission estimated the Home Credit market alone at 1.3 billion generating 700 million in turnover. The Post Offices partnership with the Bank of Ireland, whilst providing a profitable venture for both parties, ignores the needs of the financially excluded many of whom routinely visit to access their POCA. Each week 6.5 million visits are made to the Post Office network with a view to withdrawing funds from the POCA and it has been calculated that those under 65 who hold a POCA are 28 times more likely to be unbanked. These same people those in receipt of state benefits and tax credits are those most likely to use high-cost credit and those without bank accounts are those least likely to hold any other financial product. Meanwhile, the Post Office product range is such that it will not make personal loans of less that 2,000 evidence shows that sums between 300 and 600 are the primary amounts sought by those using high-cost credit and it does not provide a transactional account at all. Credit unions are central to Government s efforts to tackle financial exclusion the Department for Work and Pensions Financial Inclusion Growth Fund has provided nearly 100 million to extend the reach of affordable credit to those without access. Around 90% of this has been provided through credit unions. DWP calculate that the Growth Fund has saved people 86 million in interest payments compared with the same amount loaned from, leading home credit company, Provident Financial.

3 In partnership with the Co-operative Bank, ABCUL and our members have developed the Credit Union Current Account (CUCA) which provides greater flexibility, higher-level customer service and a lack of the disproportionate penalty charges which prove one of the greatest barriers to people on low incomes engaging with basic and current bank accounts making proper use of basic and current accounts. CUCA is encouraging many people to use transactional banking properly for the first time, as they have confidence in the credit union and its charges. Credit unions are keen to be involved in the national roll out of the FSA s Moneymadeclear money guidance program acting as delivery partners during the pathfinder exercise in the North West and North East of England and over half of ABCUL members are keen to offer the Saving Gateway Account according to a survey conducted in April Whilst the Post Office holds a strong position in relation to the financially excluded, credit unions are operating sustainably to serve them. Credit unions provide inclusive financial services in the communities they serve, including appropriate products for people on low-incomes. Credit unions actively engage with the Government to advance efforts to tackle financial exclusion. But they struggle, from a restricted number of locations and with limited resources, to reach the majority of their m arket meanwhile the Post Office sees the very people credit unions are trying to reach coming through their doors each and every week. A large-scale collaboration between the Post Office and the credit union sector has the potential to transform the financial well-being of millions, to make appropriate credit and transactional banking services available to those currently without affordable options and to ensure that the Post Office fulfils its obligations to the POCA customer base. A small, one-off investment of around million in a central credit union back-office system would transform the availability of inclusive financial services. Internationally, the best developed credit union sectors are those with the greatest centralised integration behind-the-scenes. Such a system in Britain has been an endorsed recommendation by UK Government since the Credit Union Taskforce reported in Despite this there has been little action from Government to realise this. The sector itself has grown since 2000 and worked towards this goal. It invested over 5m in the development of the Credit Union Current Account platform which gives some element of centralisation. With such a system in place, the Post Office would be in a position to link into any credit union centrally. This would allow any participating credit union s services to be made available through any Post Office branch. This shared branching has already been a great success in Pollok, Glasgow, where the credit union has taken over the running of the Post Office. Transactions in the Post Office and for the credit union have both increased since the partnership was launched in In addition, we feel that there are reasonable grounds to assume that the significant cash float on the POCA (perhaps more than 1billion nightly), waiting to be withdrawn, could be better used in being lent to those who are in serious need of affordable lending options. Freeing this for use by credit unions or indeed any other lender offering affordable small sum credit via the new central, back-office facility could greatly increase the availability of affordable credit in the economy. There is an undeniable logic in the monies paid by Government in benefit payments being made to work for that same constituency rather than improving the banks balance sheet.

4 We project that the effect of this infrastructure and Post Office collaboration would be the following: Increase CU membership from 750,000 to 2,000,000 over 5 years Deliver of 1,000,000 new Growth Fund loans over 5 years 1 Save 240,000,000 for consumers in reduced cost of credit 2 Increase the number of Saving Gateway accounts opened by credit unions by 800,000 3 CUs would become a major provider of money guidance and wider financial capability initiatives We call on Government to hold the Post Office to account despite gestures towards supporting financial inclusion it remains without appropriate products for at least 20% of those coming through its doors every week. These people are the very same people who are underserved by mainstream banks. If the Government is to continue to subsidise the post office then it must require it to use those funds to serve these people not simply support a competing offering to mainstream banks. This focus on the development of low income financial services is also less likely to damage the existing relationships the banks have with the post office for using their accounts. A back-office, central service facility for credit unions could open the door to a great expansion of credit union services namely affordable credit and the Credit Union Current Account and finally provide for the loyal Post Office customers who remain uncatered for at its counters. The aim of using the extensive Post Office network to extend financial services to communities throughout Britain is a laudable one, which has the potential to have a large impact both upon the sustainability of the Post Office network and on financial inclusion. If the needs of people ignored and forgotten by mainstream financial services were not taken fully into account in policy proposals coming out of this consultation this would be a massive missed opportunity, the results of which would be felt by families and communities for many years to come. The availability of credit union services through the Post Office network is a win-win-win-win situation: A win for credit unions in their aim to make affordable financial services available in the communities they serve; A win for the Post Office network looking for new products to deliver through its trusted and valued brand and high profile network; A win for the Government in its fight against financial exclusion; and, A win for the consumer in providing the appropriate and affordable financial servi ces that they are currently denied Capital requirements for this will be dependent on other sources of funding being available or the release of Post Office Card Account float Based on a saving of 240 per loan compared with 179% APR for a home credit loan of 500 over 6 months Based on a 50% market share of Saving Gateway accounts assuming a 20% overall take up rate.

5 Introduction We welcome the opportunity to respond to this consultation. ABCUL represents around 70% of credit unions in England, Scotland and Wales who in turn represent around 85% of credit union membership. ABCUL is the main trade association for credit unions in Britain. As not-for-profit, financial co-operatives owned and controlled by their members, credit unions provide safe-savings and affordable loans facilities to defined groups of members and pride themselves on an inclusive approach. Increasingly credit unions offer more sophisticated products such as current accounts, ISAs, Child Trust Funds and mortgages. In June 2009, the 325 credit unions belonging to ABCUL were managing around 450 million of members savings on behalf of over 550,000 people, and had approximately 370 million out on loan. FSA unaudited figures at June 2009 put the total adult credit union membership in Britain at 704,000 with 556 million in share deposits and 451 million out on loan. In addition, there are around 100,000 young people saving in credit unions. 4 Credit unions in Northern Ireland, although not affiliated to ABCUL, are extremely strong the latest official, aggregate figures from 2008 show that 400,100 credit union members held 775 million in deposits and had 500 million in loans. Total net assets stood at 918 million. 26% of the Northern Irish population belongs to a credit union. 5 The Credit Unions Act 1979 sets down in statute the objects of a credit union; these are four-fold: The promotion of thrift among members; The creation of sources of credit for the benefit of members at a fair and reasonable rate of interest; The use and control of their members savings for their mutual benefit; and The training and education of members in the wise use of money and in the management of their financial affairs. Credit unions in Britain are small, co-operative financial institutions often extending financial services to those unfairly excluded from the financial services the majority take for granted. They are owned and controlled by a restricted membership and are operated for the sole benefit of this membership. The Credit Union Act 1979 sets down these operating principles in law. The central, local and devolved governments of the UK have consistently supported credit union expansion and development in recognition of the benefit that they provide. Credit unions and Financial Inclusion Because credit unions only exist to meet the needs of their members and pride themselves on providing inclusive financial services in the communities they serve, they have consistently been placed centre stage in Government s Financial Inclusion Strategy and Action Plan. 4 5 Figures taken from FSA Unaudited Quarterly Returns June 2009 DETINI Registry of Credit Unions and Industrial and Provident Societies, Annual Report 2008/09

6 Credit unions are tasked with extending the reach of affordable credit and are supported in doing so by the Financial Inclusion Growth Fund, which provides capital for on -lending through credit unions and community development finance institutions (CDFIs) the vast majority through credit unions. This fund is administered by the Department for Work and Pensions (DWP) and, after the addition of million in last year s budget, has provided almost 100 million to extend the reach of affordable credit. Over 200,000 loans have been made. The DWP estimate that growth fund loans to date have saved low-income borrowers approximately 86 million in interest as compared with loans of the same value taken from leading doorstep lender, Provident Financial. On an average loan of 433 there would be a 161 saving in interest. In addition to this, ABCUL and two of our member credit unions are delivery partners for the FSA s Moneymadeclear money guidance pathfinder. This provides people with impartial money guidance to improve consumer confidence and decision making. Both the Government and the Conservative financial services white papers have pledged their support to rolling this service out nationally and ABCUL is committed to promoting further engagement of credit unions with the service. Credit unions are also keen to offer Saving Gateway accounts to their members, when this new matched savings scheme for people on lower incomes is launched later in Consultation Questions Question 1 What do you value about the Post Office s existing financial banking and payment services and what determines whether you use them? N/A Question 2 Do the products or services offered by Post Banks around the world provide any opportunities for the development of banking or financial services at the Post Office in the UK? It is important to recognise that different countries have different financial characteristics, attitude to credit etc. Many of the European countries with post banks are comparatively credit averse. Any solution envisaged for Britain should recognise that different landscape and provide the services needed by a wide range of consumers not just those in the mainstream. Question 3 Do you agree that these are the right values for banking at the Post Office, i.e. universal, accessible, trusted and sustainable? Yes. We agree that these are the values that should form the foundation of the expansion of Post Office s financial services. We do not, however, believe that somehow expanding the services offered via the Bank of Ireland or indeed forming some other mainstream partnership would fulfil these priorities. Universal For financial services to be universal they should be open to and appropriate for the needs of everyone. 6.5 million people use the Post Office each week to withdraw funds from POCA this represents

7 approximately 20% of all customer visits each week. 6 These people are 28 times more likely than non- POCA holders to be otherwise unbanked. 7 Those on benefits and without a bank account are the key demographic who use Home Credit 8 and other forms of damaging high-cost credit whilst being the least able to afford the extra cost. Often these are the very same people who use credit unions and who the government are keen for credit unions to serve. 9 The Bank of Ireland product range does not provide the functional current account with added flexibility that credit unions have developed in the Credit Union Current Account, nor does it provide the smallsum, short-term loans that are demanded by the POCA demographic. 10 A partnership with the credit union sector, rather than expanding the partnership with the Bank of Ireland or introducing further, mainstream products, is the best means of providing universal financial services through the Post Office. It is incumbent upon the Post Office as a state-subsidised public service that the expansion of its financial services does not simply replicate and compete with the mainstream in a commercial fashion but rather prioritises the social goal of advancing financial services to an under-served group to which the network has unprecedented access. Accessible Currently the Post Office has a mainstream financial product range provided by the Bank of Ireland, provides free ATM machines at many of its locations and has agreements in place with the vast majority of the high-street banks. These initiatives maximise access for those for whom these products are appropriate given the unrivalled extensiveness of the Post Office network. Without a product offering for those on a low-income, however, the exclusion from access to mainstream finance remains a barrier despite a network representing one of the strongest assets of the Post Office and providing a unique opportunity to reach deprived urban and isolated rural communities. The Commission for Rural Communities (CRC) has shown how pockets of isolated and financially excluded individuals exist across rural areas and with the Post Office s rural presence being the most prominent financial service in most out-of-town areas without appropriate products through the Post Office, those in rural areas are less even likely than urban communities to have alternatives. 11 The credit products provided by the Post Office in particular personal loans are not available through the branch network but primarily online or over the phone. Quite apart from the fact that the minimum personal loan is 2,000 when those on low-incomes often require only a few hundred Post Comm Annual report 2008/09 Regression Analysis of the Unbanked, PFRC, Bristol University June 2009 Home Credit Inquiry Competition Commission 2006 Who Uses Credit Unions Personal Finance Research Centre, average Home Credit loan. 440 average Growth Fund loan. Rural Money Matters: A support guide to rural financial inclusion, Commission for Rural Communities, 2009

8 pounds the lack of face-to-face branch access is a missed opportunity for reaching out to those who cannot access the internet or who may prefer or need a personal approach. This is the case for many of those without access to affordable credit. The Post Office is not making fullest use of its branch network. Trusted We agree that providing trusted services is a central value to the Post Office and the strength of the Post Office brand is another of its best assets. However, we do not feel that trust as opposed to product features, comparative product value or convenience is the main consideration for most of the included, mainstreamed financial service users. Many studies into the financially excluded, on the other hand, demonstrate the value of trust for those who might have little or no prior experience of financial services or have had negative experiences in the past. As a recent Consumer Focus report has shown, the trust that the Post Office has in its brand already should be used to extend appropriate services to those who are wary of mainstream financial services. 12 The goal of providing simple, transparent, good-value, catch-less products to reinforce and build upon this trusted base is a laudable goal a partnership with credit unions would provide this. Credit unions provide affordable loan products which compete with high-cost alternatives on the basis of drastically lower and more transparent costs which are simple to understand and therefore offer good value. The CUCA, similarly, provides a much greater degree of flexibility based on a transparent fee which circumvents the need to have punitive and prohibitive penalty charges for going over-drawn or requiring a period of grace features which, research has shown, are highly valued by those on a lowincome who have difficulty managing money due to extremely tight family budgets or who may have had negative experiences of bank account charges. 13 Sustainable The Bank of Ireland financial services partnership provides the Post Office with around a third of its operating profit and consequently there is an obvious rationale for expanding its services as a priority over expanding services to the financially excluded who are notoriously hard to serve. However, we see no reason why this has to be the case. Credit unions offering quality, inclusive financial services to a wide range of people can operate sustainably and make a big impact on their local communities. Credit unions have doubled in size over the past eight years and have done so in competition with firms who insist that you must charge astronomical APR or charge disproportionately punitive penalty charges to do so Opportunity Knocks Consumer Focus, January 2010 The Credit Union Current Account Liverpool John Moores University, 2008

9 A back-office system would provide the economies of scale necessary to bring this successful model to a far greater number of people and would allow the Post Office to be the vehicle for this. Furthermore, the OFT estimates that the high-cost credit market is worth 35 billion 14 and the Home Credit market alone stood at 1.3 billion generating 700 million in turnover in The cost-efficiency savings of centralising processes in addition to the great potential opened by a collaboration with the Post Office would provide a sustainable, profitable base from which to expand into a large and profitable market. Further exploration is needed into the potential for a). investment in back -office centralisation for credit unions as a precursor to a full-service partnership between credit unions and the Post Office and b). latent resources within the POCA system to be released to the Post Office and credit unions to expand access to affordable credit to those most in need and provide a sustainable addition to the Post Office product range. Question 4 Do you think these are the right areas and products to focus on? Whilst we acknowledge that a commitment is expressed to provide access to credit union accounts we do not believe that this goes far enough. A fundamental strength of the credit union model is that it can provide both sides of the financial service safe savings and affordable credit. Providing access to the full complement of credit union services would be the simplest way of providing access, support and inclusion to those that most need it. Furthermore, legislative reforms of the Credit Unions Act are currently being taken forward via a Legislative Reform Order. One of the key aspects of this is to allow credit unions to serve corporate bodies including companies and community groups this provides a further dimension to the offering credit unions can provide for Post Office customers and to the people that could be attracted into Post Offices. Question 5 What new financial services would you like to see available at your local Post Office? Full access to credit union services see answer to Question 6 Question 6 The Government already offers and supports substantial credit services for people on low incomes, such as Social Fund loans and credit unions; what other range of services could the Post Office offer to support those on low incomes and address financial exclusion, and how could these best be made to work together? The Government has provided significant support to the credit union sector in recent years. The most notable initiative has been the DWP s Financial Inclusion Growth Fund which has considerably extended the reach of affordable credit for those in most need Home Credit Inquiry Competition Commission 2006

10 As the main trade association for the British credit union movement, ABCUL is appreciative of the Government s commitment and support for our activity without which many vulnerable individuals would be worse off. Notwithstanding past and current support, however, certain contextual factors demand that further action be taken to explore ways in which the activity of credit unions can be expanded further, namely: 1. The banking crisis and recession has damaged the level of credit, particularly non standard offerings, available in the economy and increased the number of individuals redundant, dependent on benefits, in personal financial crisis and subsequently vulnerable to financial exclusion. 2. There is an appetite within society for an alternative banking structure which does not actively and recklessly contribute to economic meltdown but exists simply to serve people s needs ; ethically and sustainably. 3. Government has committed itself to promoting a diverse financial services industry the Financial Services white paper Reforming Financial Markets made this very clear. Financial Services Secretary, Lord Myners has said: The Government are a strong supporter of the mutual sector. They welcome the important contribution that the sector makes in providing choice and diversity in financial services and fostering financial inclusion and social cohesion The Post Office represents a unique vehicle for creating a real alternative banking service and has equally unique access to those consistently excluded from the fair and equitable financial services; appropriate to their needs and affordable. 5. That credit unions provide a true alternative model to the mainstream which is responsive to the needs of its member-customers rather than speculative shareholders a model proven internationally. 17 Credit unions have continued to attract savings and make loans throughout the economic crisis. The Post Office and the financially excluded The Post Office is a visible, extensive and trusted organisation. It provides a valued service to people across the country providing access where others do not. A key product in its range is the Post Office Card Account (POCA) which Post Office Limited and the sub-postmasters who make up a large proportion of POL s component parts fought to keep in 2008 when the future of the contract was threatened. 20% of weekly customer visits to the Post Office are derived from POCA holders withdrawing cash and 2 billion is spent in the Post Office by these very people. Despite this, the POCA is non-functional, cash-withdrawal-only product that cannot be used for any other purpose. Furthermore, the Post Office s financial services range does not address the other needs of POCA customers in particular small-sum, short-term credit. The personal loan products available through the Bank of Ireland are available online only, at a minimum amount of 2,000 and to those with earnings excluding benefits of 8,000 per year Hansard citation: HL Deb, 10 July 2009, c884 In 2008, 53,689 Credit Unions in 97 countries had 185,800,237 members and nearly $1.2 trillion in assets:

11 The Post Office provides no suitable credit product for these individuals and no transactional bank account. Evidence of the credit union member demographic, the growth fund loan demographic, and the Home Credit demographic show strong correlation in particular with those in low-paid work, on benefits or living in social housing. See table below: Home Credit 18 Credit Union Membership 19 Growth Fund Loan Recipient 20 58% Social grade D or E 62% less than 400 per week 33% used high-cost credit 44% household income 32% less than 200 per week 10% incapacity benefit > 13,000 74% social housing 17% without bank accounts 68% social housing 45% unemployed 72% unemployed 69% women 67% women 75% women There is a strong overlap between the demographic of people using Home Credit, credit unions and the Growth Fund and that of the POCA customers in receipt of the various types of state income support. They are low-paid or out of work, they are mothers, they live in social housing and they are, more often than not, without access to a bank account or affordable credit. POCA customers under 65 are 28 times more likely to be otherwise unbanked and those over 65 are 19 times more likely. 21 Credit unions are currently lending out approximately 451 million, the home credit industry alone was lending out 1.3 billion in Whilst credit unions, in partnership with the government, work to extend affordable and appropriate financial services to the financially excluded, the Post Office hosts the very same people 6.5 million times a week as they withdraw their funds from POCA. Furthermore, it is reasonable to assume that the POCA system relies on large amounts of liquid cash in store ready to be withdrawn sitting idle in bank accounts we feel that this resource could be put to better social use than enriching the shareholders of that bank in which it resides. A partnership between the credit union movement and the Post Office making all credit union services available through all Post Office branches and the release for use of the resource behind the POCA could transform the availability of credit union services: affordable credit and safe savings. It would provide an abundant, accessible and universal source of affordable credit through the same outlet which provides payment of state pensions and benefits directly to the people who need it most Home Credit Inquiry Competition Commission 2006 Who Uses Credit Unions Personal Finance Research Centre, 2006 DWP Growth Fund Statistics Regression Analysis of the Unbanked, PFRC, Bristol University June 2009

12 How could this be achieved? A one-off investment in a credit union back-office, shared services facility would bring economies of scale to credit union operations and ensure greater consistency of service between credit unions. The need for this was recognised by Government in 1999 when the Policy Action Team 14 report recommended that banks should pay for a central services organisation for credit unions. At the time, the Economic Secretary to the Treasury, Melanie Johnson MP, said: - "Credit unions offer people access to cheap small loans, but their impact in Britain so far is much less than in other countries. We will encourage their growth through a new central services organisation which can support new and existing credit unions, and changes to their regulatory arrangements. In the two years immediately following this report, work towards a CSO continued with great intensity. Twenty-two revisions of a seventy page business plan document were produced. A working group of banks, government, ABCUL and other stakeholders contributed to the plan. The key banking partners were Royal Bank of Scotland (RBS) and The Co-operative Bank. The Government was keen that the banks found the 20m being asked for in the plan as part of their responsibility for failing to serve a wider market. However despite all of this momentum the CSO failed for a number of reasons; The banks were being asked to fund this at the same time as they were being asked to fund the Post Office Universal Bank Account to the tune of 180m. Discussions with the banks regarding changes to the governance of this new entity ensured that agreement could not be reached. And perhaps most importantly credit unions consulted in the process of developing the plan were very sceptical about this entity. They were determinedly committed to their existing model. The credit union sector has taken on the challenge of its continued development over the past 10 years. Its sustained growth, legislative and regulatory reform and proven ability to deliver to Government projects has put the movement in a place where it is ready for centralised, back -office services. The movement has invested 5 million of its own funds in developing the CUCA. Now a back-office is a requirement to deliver the step-change in credit union capacity that will provide true, inclusive, community finance for all. This long held ambition of the credit union sector would also enable a linkup between credit unions and the Post Office network, allowing credit union members to pay into savings and loan accounts and withdraw cash at any Post Office. The partnership would allow for credit union loans and the Credit Union Current Account to be expanded greatly. With such a system in place, the Post Office would be in a position to link into any credit union centrally. This would allow any participating credit union s services to be made available through any Post Office branch. This shared branching has already been a great success in Pollok, Glasgow, where the credit union has taken over the running of the Post Office. Transactions in the Post Office and for the credit union have both increased since the partnership was launched in 2009.

13 Pollok Credit Union Case Study In 2009, Pollok Credit Union took over the running of its local Post Office branch when it became apparent that it was going to close. Since September the two have been re-housed together sharing staff and offering both organisations products under one-roof through a shared-branching model. In the 5 months to January 2010, the two organisations had seen the following: Credit Union 10% increase in credit union membership 30% increase in credit union transactions 30% increase in cash paid into the credit union Post Office 50% increase in Post Office transactions 150% increase in Post Office Bureau de Change transactions 120% increase in Post Office referrals for services Furthermore, through the sharing of staff, who are trained in systems and processes of both organisations, the ebb and flow of custom can be managed more soundly across the two businesses and there is a subsequent reduction in strain on resources. Although early days, the preliminary data from this innovative partnership illustrates the natural fit between credit union and post office services and the ability for the partnership to boost business for both. Internationally, the level of back-office collaboration and integration is proportionate to the extent of credit union market penetration. The chart (right) has been produced by the World Council of Credit Unions (WOCCU) and it shows the level of central integration on the horizontal axis vs. the market share on the vertical. As can be seen, there is a direct correlation between the development of cooperative financial services and the extent 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Switzerland Germany United States Canada Australia Spain India Italy Austria Finland France Netherlands

14 of central collaboration between them. We estimate that a relatively small investment of million in a centralised, back-office system allowing for expansion of credit unions and collaboration with the Post Office would have the following effects: Deliver of 1,000,000 new Growth Fund loans over 5 years 22 Save 240,000,000 for consumers in reduced cost of credit 23 Increase the number of Saving Gateway accounts opened by credit unions by 800, CUs would become a major provider of money guidance and wider financial capability initiatives The scale and capacity of credit unions to extend their inclusive financial services would be transformed to the great benefit of the financial well being of millions. Conclusion Whilst the Government has supported the expansion of services for the financially excluded for some time, it has neglected the primary vehicle to access and provide to these people. The Post Office, through the Post Office Card Account (POCA), sees at least 20% of its weekly custom come from the very individuals who are most at risk of financial exclusion. Credit unions, conversely, have developed a full service of suitable products for the financially excluded but can lack the scale and the visibility to reach many of those most in need. The lack of scale can be seen when comparing the 451 million lent out by the credit union sector in 2009 to the 1.3 billion lent by Home Credit companies in Through a small, one-off investment in a back-office system for credit unions, economies of scale could be achieved to bring greater consistency of products and services to all credit unions and would create the necessary central hub through which the Post Office could link into the credit union sector so that their services could be made available throughout the Post Office network. The effect of this would be to introduce a step change in the capability of credit unions to tackle financial exclusion transforming the availability of affordable credit and financial services appropriate to the needs of the excluded such as the CUCA. The expansion of mainstream financial products through the Post Office would only serve to entrench the current gulf in offering between the POCA and the rest of the Post Office s products Capital requirements for this will be dependent on other sources of funding being available or the release of Post Office Card Account float Based on a saving of 240 per loan compared with 179% APR for a home credit loan of 500 over 6 months Based on a 50% market share of Saving Gateway accounts assuming a 20% overall take up rate.

15 ABCUL has been in discussion with Post Office Ltd for some time in an effort to find a way to work together for the benefit of the Post Office network and credit unions (and their members and potential members). We call on the Government to do all it can to make these ambitions a reality and use this opportunity and the momentum that this valuable consultation has created to make sure that everyone in the country can have access to affordable local financial services. The availability of credit union services through the Post Office network is a win-win-win-win situation: A win for credit unions in their aim to make affordable financial services available in the communities they serve; A win for the Post Office network looking for new products to deliver through its trusted and valued brand and high profile network; A win for the Government in its fight against financial exclusion; and, A win for the consumer in providing the appropriate and affordable financial services that they are currently denied.