Challenger bank Monzo’s latest project? Banking the UK’s unbanked
Opening a bank account is a difficult thing to do at the best of times, and downright frustrating at the worst.
You need specific ID documents, like a passport, and a proof of address, such as a council tax or energy bill.
But, you don’t have these documents unless you own or rent a property. And to do that, you need a bank account.
What do you do then? Say, you’re a refugee in the UK, or a recent immigrant that has moved for work, or one of the UK’s 300,000 homeless population?
That’s why challenger bank Monzo has launched a new initiativeaimed at improving access to financial services for everyone.
Why Monzo wants to help the UK’s unbanked
Participating in society starts with a bank account. Otherwise, you can’t find a place to rent, get a mobile phone, or be paid officially for work.
To open a normal Monzoaccount you need a form of photo ID like a driving license. Then, you take six-second video of yourself to prove you are who you say you are. That’s it.
As part of its financial inclusion initiative, the bank is working to include more types of ID documents for its sign up process. If you’re a recent refugee for example, you might have a biometric residence permit, a government-issued card that proves your identity immigration status. You can use this instead of a passport to sign up.
Monzo is expanding this to include application registration cards, for refugees that have made asylum applications but haven’t received leave to stay yet. At the moment, its not permissible to use this documentation to sign up for a bank account, but Monzo is finding a way around this in the form of “basic” bank account.
Tristan Thomas, head of marketing and community at Monzo, explains that this is similar to its current account offering, but is restricted so that the level of risk is less for the bank. “It’s a limited version of the full current account, so you maybe can’t withdraw as much cash or you can’t get an overdraft. Overtime, they can build up to a full account if that’s what they want.”
The basic bank account project is about the first step for financial inclusion.
“It’s about getting people onto the ladder in the first place with an account number and a sort code, so they can get paid,” says Thomas.
Improving financial access across the board
The bank is looking to expand these services out to homeless people as well. It’s virtually impossible to get a bank account without a home address, which keeps the cycle of homelessness continuing.
Thomas says that Monzo is looking to offer these limited accounts by using a letter from a homeless shelter, or a benefits letter as an identification document instead of a passport.
But if its possible for Monzo to offer these services, why are other banks not doing it already?
Giving a refugee or a homeless person a basic bank account with low limits and no overdraft isn’t going to make money for a bank. But for Monzo, this goes back to its overall mission to have a positive impact on people’s lives.
“If we offer people better budgeting tools, they’re less likely to use any overdraft so we make less money. That’s find for us – we make these decisions every day to try and have a positive impact on society.”
It’s early days for Monzo’s financial inclusion initiatives but Thomas says the reaction so far has been great, with different organisations reaching out and wanting to spread the message.
“We’re hoping to get more people away from being unbanked and into the financial system because it’s the right thing to do.”