Financial Conduct Authority (FCA) chief executive Nikhil Rathi has called for the financial services industry and government to focus on increasing the financial capability and understanding of the UK population alongside inclusion efforts.
Rathi (pictured) highlighted that while access to products and the range of services available to more people was growing, there were still significant gaps in knowledge and capability which resulted in uncertainty and inaction by people potentially leaving themselves exposed.
This included the industry “embedding support into product design” not just leaving it as an afterthought.
Speaking at the Fair 4 All Finance, Delivering Financial Inclusion Together conference, Rathi argued this is a “pivotal moment for financial inclusion and capability”.
“When they are mismatched, it creates points of vulnerability – when small decisions carry big consequences,” he said.
“Ones you can see in the realities people face every day: in the choices they make, the help they look for, and the support they can or cannot find.”
He highlighted that the organisations had worked together on several areas including insurance by working to improve take-up among often excluded groups.
“These steps matter because inclusion is about more than simply opening the door to new products,” Rathi continued.
“It is not a once and done exercise. It’s about expanding availability of choices at predictable points in life when financial decisions are made.
“More people, making confident, informed decisions, and choosing the right tool to help.”
The FCA leader also noted that responsibility and risk for financial decisions was increasingly shifting to individuals but “the right support mechanisms haven’t kept up”.
There is more access to information than ever before Rathi asked if it was the right type of information, at the right time.
Capability and inclusion
As a result, he emphasised the need to connect financial inclusion and capability and while improved inclusion should be the goal, “capability needs to be enhanced at the same time and potentially more quickly”.
“If we expand access with capability baked in, we build individual resilience and security,” Rathi continued.
“We need to build skills that let people navigate products that may not even yet exist – in an AI-driven and automated future – while reaching those excluded from the system and encouraging those who opt-out to re-engage.”
He noted the regulator had been working on subjects such as innovation services for firms, its Financial Lives research and regulatory action to rebalance risk in the system, and hinted at some future activity already being planned.
“People need to be able to make informed choices about the services they are buying, not just be prevented from making any choice at all,” he said.
“That’s why we will help bring together those with an interest in these issues, to focus on capability-by-design at key moments, plain-language explainers, and shared evaluation so successful models can scale. We will say more about this next year.
“We will also build an evidence base – reviewing existing research and commissioning new work to help fill gaps. We will make findings public, so others can align their work.”
And he added the regulator will explore whether its colleagues can use their volunteering days to support financial education, “helping to make a real difference on the ground”.
Employers and self-employed
But Rathi said there was more for government and the wider sector to do including supporting self-employed and through employers.
He welcomed the £7m annual funding from banks to support financial education in schools and other activities.
“The task now is to expand that good work, so it is consistently ready and available for individuals,” he said.
“That means embedding support into product design, not tacking it on at the end.
“Employers have a unique role at the start of and during working life, but we must also reach those outside traditional employment – including self-employed.
“And do more to test and publish what works and what doesn’t.”
He noted that once the government has published its financial inclusion strategy, the next step will be to implement it – “turning ambition into clear outcomes”.
“We would urge the government to deepen and embed the work in schools, working with others,” Rathi said.
He concluded: “Inclusion gives people the tools, and the choice. Capability helps them to use those tools. Getting both right strengthens households and stabilises the system.”
