Fair Digital Finance is the theme of this year’s World Consumer Rights Day. Our Spanish member OCU  has been fighting for fair and inclusive financial services for older consumers. This blog dives into OCU’s long running campaign and why universal obligations for financial access and recognising the concept of vulnerability in law will be critical to financial inclusion.

Vulnerable consumers excluded from financial services

All sorts of consumers can be vulnerable in essential  consumer services, due perhaps to their circumstances, health, cognitive ability or age. Older age is recognised as a time when people can become particularly vulnerable to exclusion as they experience rising costs and lower income, mobility issues, difficulties accessing services or as service provision or products becomes more complex.

OCU has found that many older Spanish consumers are vulnerable to exclusion from financial services and products. A combination of pressures have reduced access to essential banking services, particularly for those without access to the internet. Without meaningful access, older consumers end up paying more for a limited service at inconvenient times and locations.

How banking and finance has changed for Spanish consumers

Spain has many very sparsely populated rural areas. Some small towns are home to less than 5,000 people and historically have tended to have just one bank branch.

The deregulation and liberalisation of financial markets in the 1990s began to uproot banking away from local, community provision and towards more profitability which further threatened financial access.

In the aftermath of the global financial crisis in 2008, yet more services were shut in unprofitable areas and a shift towards digitised banking began. This grew as the fintech market established itself and younger consumers bypassed traditional banking for a virtual, smartphone based experience. 

The Covid-19 pandemic has further embedded digital as a default option for all sorts of consumer services, so physical stores and bank branches continue to close down. Banco de Espana figures show that from 2008 to 2021, the number of physical bank branches has dropped by 54 percent.

Bank closures and the growth of digital banking have impacted some much more negatively than others, leaving those outside of metropolitan areas and without internet access with limited options for accessing cash and other financial services.

Financial exclusion is hitting elderly Spaniards hard

These changes have hit older Spanish consumers particularly hard. Currently around 20% of Spain’s population are aged over 65, and they are much more likely to live in remote, rural areas.

OCU’s major new piece of research into rural digital exclusion found that in some places, alternatives like mobile units visit places that used to have a branch so consumers can make payments and get cash. However, these are not widely available or very frequent and don’t solve the challenges of financial exclusion. The research also showed how reliant older people were on family and friends to assist with their banking.

Online banking is challenging for older consumers

At 96%, internet access is high in Spain but there are differences in access and usage between age. Scratch beneath the surface and we find that 3,300,000 Spaniards over 65 do not have access to the internet. And while almost all people aged 25-34 years use the internet regularly (98%), only 23 % of people over the age of 74 do. This older cohort is more likely to be using it for communicating with family, entertainment or news, whereas younger consumers will use it for a full range of activities like socialising, shopping and banking.

A government study has shown that 43% of Spaniards above the age of 65 do not use online banking services because they lack the digital skills to do so. Confidence also plays a part – older people are often targeted by scams and fraud in the offline world and these same fears carry over into the digital world.

Older consumers are familiar with tracking and securing their money in traditional ways and are understandably unwilling to change their habits. 

Banks continue to push older consumers away from branch banking and towards online banking by limiting opening times, increasing fees and commissions for transactions done over the counter and setting high minimum withdrawal amounts. Older consumers end up paying more for a limited service at inconvenient times and locations.  Not enough is being done to deal with the underlying factors which make complex online banking transactions challenging for older consumers.  So what does OCU want to see change?

Making financial inclusion a reality

With indepth knowledge of the causes of financial exclusion for older consumers, OCU knows that simply pushing people towards online banking is not the answer.

Financial exclusion is tied to many different elements as well as age: general vulnerability, to geographical location, technological change, transport links and digital access.

In terms of general vulnerability, OCU have achieved an important strategic change to the national General Consumer Law to formally recognise vulnerable consumers, and acknowledge that older people fit into this category. For the other interlocking issues, OCU has called for a comprehensive approach to digital inclusion made up of:

• More research to recognise how and where age discrimination occurs in consumer services and takes steps to prevent it.
• Consider banking services as an essential service such as telecommunications or postal networks, and oblige providers to offer a minimal viable service in all locations.
• Develop inclusive technologies and hybrid services so that consumers are not forced into using an unsuitable digital offer. Make the best use of technology to simplify services and spot when people are having difficulties.
• Target areas where older consumers feel particularly vulnerable such as security of money and banking.  Develop laws that specifically focus on scams against vulnerable people.
• As a complement, but not a replacement, develop digital and financial literacy programmes for older people who want to develop skills and confidence in online finance.

Direct advice to consumers March 2022

The theme of World Consumer Rights Day on 15 March 2022 is Fair Digital Finance, and next week OCU will be holding local events across their national network to help consumers with access to financial services.

Over the whole week, Consumers International is holding a Fair Digital Finance Forum looking at the latest news and policy developments in consumer finance – register to take part here.