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Nesta is working across a variety of innovative projects and programmes that are designed to support the financial inclusion of UK citizens.

Why are we doing this?

The statistics are stark. Research suggests that as many as 12.7 million people in the UK could be financially squeezed: people who have significant financial commitments but little capacity to cope with sudden changes to their financial circumstances.

  • 16 million adults have less than £100 in the bank
  • 15 million people (31 per cent of the population) report one or more signs of financial distress
  • Over 5.4 million high-cost short-term loans were made last year
  • The estimated size of the high-cost loan sector is £3 billion
  • The UK owed £1.576 trillion at the end of January 2018.

We support the great work within the sector to provide much-needed support and advice for citizens. We are also interested in how innovation and innovative approaches can support the scaling of current solutions that work, and the development of new and better ways of supporting financial inclusion.

Financial inclusion is where people have access to financial products and services on reasonable terms that help them meet their financial needs. Market-provided solutions are particularly important, e.g. affordable credit, debt repayment programmes, savings incentive programmes, access to appropriate and affordable insurance. Financial capability is people’s ability to manage their financial lives and to understand and assess their options in the financial marketplace. Enhancing financial capability typically takes place outside the marketplace – through education, money training programmes, debt advice, money seminars etc.

What are we doing?

Nesta is working on a variety of projects and programmes across four teams to address financial exclusion.

  • We have launched the Affordable Credit Challenge prize to support partnerships between affordable credit providers and UK based fintechs
  • Launched Open Up Challenge 2020 to support consumers through open banking
  • Supported five financial innovators to scale by developing meaningful cross-sector partnerships through the Inclusive Economy Partnership
  • Granted investment for proven ideas, such as microfinance company Purple Shoots and four other innovative financial inclusion programmes, through the Savers Support Fund
  • Ran the Open Up Challenge, developing a banking data sandbox and supporting 25 world-leading fintechs to develop innovations to help small businesses save time and money, find better services, and discover intelligence in their financial data.
  • Developing an Ofgem switching challenge for poor and disengaged customers (up to half of the ‘poverty premium’ – the additional cost people in poverty often shoulder for products and services, whether through pay-as-you-go tariffs, high-cost credit or being stuck in unfavourable deals – is comprised of extra energy payments)
  • Impact investment in financial services innovators (such as Ffrees Family Finance and Fair Finance).

What else are we doing?

Nesta is a supporter of the work of the End High Cost Credit Alliance, the work of Fair4allfinance and Nationwide’s Open Banking for Good programme. We are currently conducting research as to how to encourage fintechs to invest in affordable credit products and services, asking the questions:

Which types of organisation can widen financial inclusion? How can we harness the resources and capabilities of the affordable credit sector and the fintech sector? How can we encourage the joining of forces to widen financial inclusion?

Our hypothesis is that cross-fertilisation between these two segments, drawing on their respective strengths and complementing each other’s weaknesses, could prove impactful. But there is little understanding of the extent of the contribution this could make or how to make effective cross-fertilisation happen.

We think some of the important parts of this missing conceptual common ground are:

  1. A shared language and breakdown of the issues clustered under the title “financial inclusion”
  2. A better understanding by each segment of each other (motivations, constraints, cultures etc)
  3. A better understanding of the value of the assets that each party has that could be deployed to widen financial inclusion
  4. An openness to work in a non-hierarchical way and flatten the power dynamics at play.

What’s next?

Over the next few months, Nesta will be testing its hypothesis and we will be looking for funders and supporters for the recommended outcomes. This will complement the Savers Support and IEP programmes we are already running. We will also be advocating for:

  • More co-investment and crowding in investment into current providers of affordable credit and funding for challenger alternatives
  • More work with the private sector to leverage their assets to support the provision of debt advice and affordable credit
  • More strategic partnerships between social innovators and charities to develop better products and services that are fit for an uncertain future
  • More focus on how citizens can be supported to develop their own solutions to solve financial capability problems in their own communities.

Team

Kate Sutton

Kate Sutton

Kate Sutton

Head of Corporate Social Innovation

Kate is responsible for managing Nesta's Corporate Social Innovation and Inclusive Growth work

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Sarah Mcloughlin

Sarah Mcloughlin

Sarah Mcloughlin

Programme Manager, Innovation Programmes

Sarah is a Programme Manager working on the Savers Support Fund

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Chris Gorst

Chris Gorst

Chris Gorst

Prize lead

Chris leads on challenge prizes designed to stimulate and accelerate fintech and data-driven innovations.

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