With a GDP of £2.21 trillion last year, the United Kingdom is ranked as the sixth-largest economy in the world, according to Statista. Because the UK has secured one of the top spots on the global economic market, the quality of life and financial accessibility is relatively better compared to other highly developed nations. Even with the disruption of Brexit, the UK still had a robust gross domestic product of $2.64 trillion in 2017, as shown by data from the World Bank.

Although they rank above other nations in terms of social connections, job opportunities, personal security, education and skills, income and wealth, as well as overall wellbeing, there is a surprisingly large number of people who don’t have the same access to different financial services and products in the UK. Furthermore, this demographic often belong to vulnerable groups—excluding them from fairly-priced financial products and giving them a low socioeconomic status.

In this post, we’ll discuss what financial exclusion is and how it impacts the lives of the young and the old in the UK.

What is Financial Exclusion?

To put it simply, financial exclusion happens when certain groups of people are unable to gain access to quality financial services such as insurance, savings, bank accounts, credit, and various fintech products due in part to their classification as high-risk clients. Experiencing financial exclusion can make life incredibly difficult for those affected as they’ll find it harder to gain financial stability and remove themselves from the lower end of the economic scale.

Most people believe that financial exclusion is justified if a person isn’t able to maintain a good credit history. However, data shows that the reasons for financial exclusion are far-reaching. For one, people who have low income and are socially excluded are more likely to experience financial exclusion, seeing as their financial status makes them less desirable to banks and credit issuers. Another reason why financial exclusion exists is that banking and financial institutions don’t have the genuine desire to make their products more accessible to those affected.

Despite being a highly developed country, the BBC projects the number of citizens in poverty to grow to up to 150 million globally by 2021. This means that it’s highly likely that the Brits that contribute to this figure will be excluded from being able to use certain financial services to their benefit. Looking closer at these statistics, it appears that there are certain age groups who are more affected by financial exclusion in the UK such as the young and the very old.

How Financial Exclusion Affects Vulnerable Age Groups in the UK

The youth sector has always experienced financial difficulties due to a number of reasons. True enough, Brits between the ages of 18 to 24 have a tougher time finding stable jobs and the unemployment rates for this age group have always been high ⁠and continues to increase steadily. Ironically, this rise in youth unemployment rates in the UK is partly because of their lack of experience in today's demanding industries. As many young people are rendered economically inactive due to unemployment, financial institutions withhold many of their products and services ⁠— some of which can significantly help the youth find a stable footing and lead them towards financial security.

On the occasion that financial services like credit cards are made available to this age group, creditors don’t offer flexible terms to help young people repay their debt. A report by Citizens Advice Scotland points out that the average level of debt for young people has almost doubled since 2004 ⁠— and the rate is increasing twice as fast compared to other age groups. This issue isn’t limited to the UK, either. In the US, Petal Card reports that credit access is also incredibly difficult for young people, with financial products entailing multiple fees, high annual percentage rates (APRs), and even high required deposits. Indeed, it takes credit to build credit on the other side of the globe, too, and the barriers to entry can discourage young people from trying financial services altogether. Unsurprisingly, the situation worsens as we look at the figures for developing countries. For instance, only 12% of the young people in Africa have or are aware of the benefits of a savings account.

Additionally, young people in the UK have a higher chance of experiencing bankruptcy. Despite these dismal figures, young people in the UK are trying their best to be more proactive with their finances and taking measures to help them manage their money more efficiently, such as setting a budget or routinely checking their bank balance.

The older population also experiences financial exclusion despite being employed for much of their lifetime. A survey by Financial Conduct Authority reveals that Brits over the age of 50 are most at risk of a bleak financial future, with one in three UK retirees having to rely on just their state pension.

Financial exclusion in the senior population continues to rise as many cannot comprehend the digital shift to modern financial services. As more and more banks make their services available on the internet, the number of physical bank branches continue to close as well. Unfortunately, seniors are the most affected by this digital divide as 3.7 million people in the UK over the age of 65 have never even used the internet. Understandably, most citizens in this age group rely on cash for their daily transactions, while only 30% of them use online banking.

It’s imperative for financial institutions to make their products and services more accessible to the older generation and help them have an easier time during their later years. One way to help seniors avoid financial exclusion is by making their products more inclusive and easier to understand. Many communities have lost their bank branches and while seniors don’t have a choice but to adapt, banks and creditors can help make their transition to digital banking easier by having easy-to-use interfaces and providing ample guidance and assistance.

All in all, the government is pivotal in bridging the financial exclusion gap by helping both sectors achieve financial literacy. For the younger demographic, this means teaching them to be more financially responsible and introducing them to money management techniques.

On the other hand, older people will benefit the most from community-led literacy programs that help them understand the technological tools to help them oversee their finances. Additionally, banks and creditors should adjust and make it easier for people from both age sectors to open and maintain accounts. As both the public and the private sector do their part in eliminating financial exclusion in the UK, the quality of life in the country will improve and be more accessible for all.