Following this announcement, the association’s newly launched paper is entitled "Redefining Community Finance: Unlocking Pathways to Financial Inclusion" , and it calls attention to underutilised solutions and services, including community finance options like credit unions.
In addition, as several people and individuals in the UK are struggling to access affordable and secure financial services, The Payment Association’s paper also highlights the potential of these institutions, but also the overall significant barriers that are hindering their overall growth and development.
The Payments Association’s Financial Inclusion Working Group was developed with the specific purpose of informing and collaborating with the government, third-sector bodies, and regulators in order to provide clarity on optimisation and solutions in payments that can reduce financial exclusion, as well as the overall poverty premium. At the same time, the initiative is expected to achieve this by collaborating with multiple industry bodies, which will develop through secure and efficient campaigns, as well as informing regulatory and legislative decisions.
The whitepaper identified multiple problems and challenges. According to the research, a first step towards prompting optimised private and public sector buy-in, as well as attracting investment to the sector, and reaching more clients is set on reassessing and redefining the `brand` of the overall community finance. In this, there also needs to exist a distinction between credit and debt, as these nuances matter as they serve to reinforce stereotypes.
In addition, the traditional geographic definition of `community` also limits members’ research, and the paper proposes broadening the overall explanation in order to encompass shared values or experiences. By utilising these connections, community finance will also have the possibility to serve a wider range of underserved customers and partners. Furthermore, regulatory pressures also complicate the matters, as community finance providers face the same regulations as larger institutions, despite them having fewer resources.
The call to action is set on the recommendation to establish a dedicated `sandbox` environment where community lenders and technology providers will have the possibility to collaborate and develop optimised and secure solutions. At the same time, the governments should learn from several successful initiatives in other countries, such as the Credit Union Service Organisations (CUSOs) in the region of the US.
An overall fairer regulatory framework that acknowledges the mission of community finance organisations would also be needed, as this can be coupled with business rate relief and a kitemark system, in order to signify trust and quality.
At the same time, encouraging engagement from mainstream financial institutions, levies, targeted investments, mentorship programs, as well as improved signposting initiatives could also be explored. Partnerships and collaborations between community finance providers and regulators are crucial in the process of navigating the common bond challenge, as well as sharing successful solutions across the sector.
By incorporating these recommendations, the overall potential of community finance could have the possibility to be unlocked and accelerate the development of financially underserved communities.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now