Credit union services should be offered through Post Office network - Consumer Focus

Published by Jon Land for 24dash.com in Bill Payments and also in Communities, Housing

Credit union services should be expanded by offering them through the UK’s Post Office network, a new report from Consumer Focus argues today.

The watchdog’s research shows a third of consumers (34 percent overall and 40 percent of those on lower incomes) would be interested in joining a credit union, but two-thirds of these say they cannot because they do not think there is one nearby.

The 'Credit where credit’s due' report argues that offering credit union services through the Post Office would significantly increase their potential to provide a long-term alternative to High Street banks, especially for people on low incomes.

This could help plug a credit gap for low income consumers who turn to high interest, short-term loans, such as payday loans, as they can’t access affordable credit through banks.

It could also provide low income consumers who do not always trust High Street banks, with transactional accounts offered through a trusted provider. This would allow many to benefit from cheaper goods and services only available online or by direct debit.

Some of the key findings revealed by Consumer Focus’s research include:

• 46 percent of consumers said that the post office would be a convenient way for them to access credit union services. This increased to 57 percent for the poorest social groups
• Almost half of consumers (46 percent) said they would trust credit unions more if they were available at the Post Office, including more than half of those on low incomes.
• Four out of 10 low income consumers say they would be more likely to open a credit union account, or consider applying for a small loan, if they could do so at a Post Office
• Among those interested in opening a credit union account, and who want to be able to use the Post Office to do so, 49 percent said the main reason was because the Post Office was local, and 35 percent because of the trust they have in Post Offices.
• Only 19 percent of those on low-to-middle incomes and 28 percent of low income groups said they were fully satisfied with High Street banks and would therefore be unwilling to consider other options to them.

Andy Burrows, Head of Post Offices at Consumer Focus, said: "The Government has suggested that a million people on low incomes could benefit from greater access to banking and affordable credit.

"Credit unions would only be one part of this picture but our research shows Post office access would really allow credit unions to deliver on their potential. Credit unions could never afford a branch network in their own right so tying up with post offices is a logical step.

"Marrying credit unions and post offices creates a situation where everybody wins. Credit unions would benefit from greater access and awareness, customers would get more convenience and alternatives to high street banking, and it would also give a shot in the arm for the post office network.

"The Post Office brand is trusted and could help boost confidence in, and take-up of, credit union services."

In the past decade credit unions in Britain have trebled their membership and there is considerable potential for further expansion. A recent study from the Department of Work and Pensions (DWP) also found that a market exists among people on lower incomes for locally provided banking, savings products and affordable loans.

The study found that among low-income groups, 1.7 million do not have a transactional bank account, four million incur bank charges and up to seven million use sources of high cost credit. Other than credit unions, the DWP suggests that ‘realistic options’ to High Street banks are ‘limited.’

Consumer Focus argues that the Post Office offers significant benefits to increasing the role of credit unions by addressing many of the current barriers to their take-up. These include:

Trust - consumers (especially those on low incomes) trust and value the Post Office network when they very often do not feel comfortable, or may be unwilling, to use High Street banks for transactional accounts, saving products or loans.

Geographical spread – post offices offers convenient access for consumers, many of whom are currently restricted from using credit unions due to limited access. The 11,800 Post Office network offers more branches than banks and building societies combined. The Association of British Credit Unions (ABCUL) estimates that in 2010, eight million adults were unable to access credit unions because of limited geographical coverage.

Availability and convenience – post offices offer credit unions the chance to reach many more people – they are used by low income groups but also offer the awareness and availability to appeal to higher income consumers too. This would help secure the long-term sustainability of credit unions by providing a wider and more diverse customer base.

Awareness – nationwide availability through Post Office would help address low consumer awareness of credit unions.

ABCUL Chief Executive Mark Lyonette said: “We know that credit unions are popular with people for whom they are accessible and providing the right services.

"This valuable research adds to the evidence that building the structures to enable credit unions to link in with the Post Office network would encourage many more people to make use of their services.

"This has the potential to save low income consumers hundreds of millions pounds in interest payments and help many more people into a savings habit.”