At the Scottish Financial Enterprise: Extending Financial Inclusion event in Glasgow this afternoon, CEO of the Financial Conduct Authority (FCA), Nikhil Rathi, discussed the regulator’s plans to implement policies aimed at including the financially excluded during the ongoing cost of living crisis, referring to this initiative as “a new enlightenment” for financial inclusion.
Rathi emphasized the FCA’s commitment to improving the lives of those affected by the cost of living crisis by focusing on financial education, technology, commercial incentives, and diversity prevalent in the sector. He highlighted several developments in banking that are exacerbating challenges for the financially excluded, including limited access to cash and barriers to credit products.
“We’ve capped the cost of payday lending, and in response to recommendations made three years ago, we are prepared to regulate the buy now pay later sector. This ensures consumers can continue to benefit from innovation while maintaining access to affordable credit and fair treatment. In the meantime, we have succeeded in modifying potentially unfair and unclear terms in agreements with Clearpay, Klarna, Laybuy, and Openpay,” he stated.
Rathi also noted that Scotland is making progress in enhancing financial numeracy to facilitate better decision-making. Additionally, he mentioned that more research will focus on AI technology to support those financially excluded by monitoring digital identities and identifying areas where assistance is needed.
Referring to the regulatory actions taken by the FCA, Rathi outlined the Consumer Duty: “Under the Consumer Duty, a comprehensive reform introduced in July, firms that refuse service to customers are required to explain alternatives and ensure access to appropriate products. We want to prevent any reduction in products or services that are beneficial to customers, or restricted access to them. If firms plan to withdraw a product or service, they must consider the impact on affected customers, especially those who are vulnerable.”
He further noted that the FCA has directed insurers to eliminate loyalty premiums and has capped high-cost short-term credit pricing, saving consumers with low financial resilience £150 million annually. The FCA has also prioritized ensuring that savings accounts offer competitive interest rates.
In conclusion, Rathi stated, “We recognize we have a broad remit and an array of powers. However, we do not possess all the necessary levers – some are held by governments in Westminster and the devolved nations, while others rest with the industry and consumers. By working together and pulling these levers in the same direction, we can create a significant impact.”