Barclays, HSBC, and Lloyds in hot water over basic bank accounts

Nine of the UK’s biggest banks and building societies – including Barclays, HSBC UK and Lloyds Banking Group – have committed to improvement plans after the Financial Conduct Authority (FCA) found a third of basic bank account experiences were poor or very poor.

The commitments follow a mystery shopping exercise by the regulator covering 298 interactions across branches and telephone channels.

Across the 298 mystery shops, the FCA rated 28% of interactions as good or very good, 38% as fair, 20% as poor and 14% as very poor.

Basic bank accounts exist to serve people who may not otherwise be able to access standard current accounts, providing essential banking services with no fees and no overdraft.

Nine banking institutions are legally required to offer them:

• Barclays UK
• The Co-operative Bank
• HSBC UK
• Lloyds Banking Group (including the Halifax and Bank of Scotland brands)
• Nationwide Building Society
• NatWest Group (including the RBS and Ulster Bank brands)
• Santander UK
• TSB
• Virgin Money UK

The exercise found the providers were not consistently offering basic accounts to customers who could benefit from them, including people facing financial hardship, those without standard identification, and especially those with no fixed address.

Firms often failed to mention basic bank accounts at all and pushed customers in vulnerable circumstances towards online applications unsuitable for their needs.

The mystery shop tested two scenarios – a person experiencing financial hardship with non-standard ID, and someone who had been through bankruptcy but had standard ID. Both showed characteristics of vulnerability.

To address the findings, the banks and building societies agreed to individual improvement plans, and the FCA worked with UK Finance to secure a collective commitment from the firms.

The firms committed to providing the right account for customers first time with clear communication and minimal friction, making it straightforward for customers without standard ID or a fixed address to open an account, and spotting vulnerability early while offering accessible alternatives to online-only journeys.

Emad Aladhal, Director of Retail Banking at the FCA, said progress had been made, with over 97% of UK adults holding a current account, but the regulator’s latest work showed that banking firms’ engagement with customers still needed improvement all too often.

“Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out,” said Aladhal.

“That’s why the biggest banks have now committed to improving how they are offered – and we’ll be holding them to account to make sure change happens.”

Peter Tyler, Director of Personal Banking at UK Finance, said a basic bank account could be an important first step towards financial independence, and while most customers who held one had positive experiences, the industry recognised more could be done to ensure consistently good outcomes.

Tyler said UK Finance and its members were committed to raising industry standards and expanding access, pointing to the recently expanded Breaking the Cycle initiative, which provides practical support to those facing barriers to accessing essential banking services, such as individuals without a fixed address.

According to the FCA’s Financial Lives survey, 4.3 million UK adults held a basic bank account in 2024, while around 0.9 million adults were unbanked with no current account at all.

The survey also found that in the two years to May 2024, 10% of the 1.3 million adults who recalled applying for a basic bank account said they were declined.

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