The Financial Services (FS) industry is the largest taxpayer in the UK, contributing around 10% of the UK’s total economic output. But the industry still has more to give to help the UK “level up”.  

Levelling up has been used in financial terms since the 1940s when it was used to refer to government benefits for the wives of serving soldiers. But since it featured in the Conservative Manifesto in 2019, the term has been used by all political parties to describe reducing inequality between places and people, not only in financial terms but also health and education. It is about making things equitable no matter who or where you are.

To help to create a more equitable society, financial services must take a purpose-driven approach by working together to support a common goal. FS firms have huge potential to drive change by providing access to finance, supporting small businesses, promoting financial literacy, and investing in infrastructure. To an extent, the future of the UK is in the FS industry’s hands. So, we need to use our influence to close the opportunity gap between different regions of the UK and boost growth.

Putting purpose-driven finance on the agenda

As the UK continues to navigate the ongoing challenges of inequality, economic disparity, and social mobility, there is an increasing need for purpose-driven finance. This month, the Bank of England hiked interest rates to 4.5% – marking the twelfth consecutive increase and leaving consumers to manage the fallout. UK mortgage rates have risen to the highest level since October 2008, while the ONS reported record rent prices in England. And the cost of borrowing on a credit card has hit a 16-year high.

 The FS sector has a crucial role to play in levelling up every part of the country, but to achieve this, the industry must take a more socially responsible and sustainable approach to finance. This means enabling access to finance for individuals and businesses in low-income areas, while promoting local investment and economic growth. This support can come in the form of targeted financial products designed for specific needs such as 100% mortgages to enable renters to become homeowners, or tailored business banking products designed to help small businesses thrive, create jobs, and contribute to their local communities.

Guiding customers through financial hardship with data

Historically, local businesses and people in low-income areas have struggled to gain access to the latest banking features such as smart mobile wallets or flexible lending options. Instead, customers were offered ‘banking lite’ products that offer only a minimum level of functionality.  

However, as some core banking technologies have become more cost effective, it is possible for financial institutions to create personalised and feature rich product offerings for their customers without ‘breaking the bank’, so to speak. For example, using a modern core banking engine, firms can launch smart wallets to assist those who struggle to manage money that help them budget and plan. This is achieved through use of options such as time locks or restricted access to funds to ring-fence money needed for bill payments. 

What’s more, by updating core technology, it is possible to gain much better insights into both the business and the customers it serves. Real time data can drive the development of appropriate services, or simply ensure that timely notifications are delivered to customers when they transact, when money is taken from their account, and when they are close to set spending limits. This makes it easier for customers to take control of their finances by providing real time information.         

Financial literacy will help customers choose their products wisely

Data will help banks to level the playing field. But for consumers to get the most out of smart money management tools, promoting financial literacy is critical. More than a third of adults (39%) in the UK say they do not feel confident with managing money, which presents a major challenge in a constantly changing economic world. What’s more, the demand for financial education is high – in fact 72% of 15-18 year olds across the UK want to learn more about money and finance in school.

Vulnerable children and those from disadvantaged backgrounds would benefit the most from quality financial education. It was recently found that 15 year olds from disadvantaged backgrounds have similar financial skills to 11 year olds from affluent backgrounds. By providing educational resources and financial planning tools, the financial services sector can help individuals from disadvantaged backgrounds gain control of their finances and improve their financial well-being for life.

Making levelling up more than hot air 

The FS sector has a big role to play in the levelling up agenda. Through education and first-class financial products that help consumers manage money more effectively, firms can help people from all backgrounds to better understand their finances and plan for the future. But to turn levelling up into a reality, the industry must come together to emphasise financial inclusivity, and address the imbalances between geographical regions and create a level playing field.