The Financial Conduct Authority (FCA) has called for “enlightenment” on financial inclusion.

Speaking at PwC Glasgow for the Scottish Financial Enterprise: Extending Financial Inclusion event on Friday, FCA chief executive Nikhil Rathi said that while the regulator cares about financial inclusion and is seeking solutions to spread it, it doesn't have all the “levers at its disposal” to justify making it a statutory requirement.

Rathi noted that over two per cent of British citizens are unbanked and that successive UK governments had decided not to make financial inclusion a statutory obligation for the authority, which it has agreed with.

“Certain proposed amendments to the Financial Services Markets Bill around financial inclusion sought to place obligations on the FCA such as broad-based reporting,” he explained. “We don’t have the remit or powers to tackle all financial inclusion issues.”

He continued: “We will be doing more to understand what barriers remain in place for these people, including why over half of those without accounts say they don’t want or need them, and how to bridge what clearly points to a service and trust gap.”

Rathi went on to note that financial inclusion could not be solved by state action alone and that there also needs to be commercial incentives.

“The FCA welcomes genuinely creative and evidence-based solutions that regulated firms put forward to support financial inclusion,” he said, adding that technology had a role to play in tackling financial inclusion challenges.

As an example, Rathi said AI, data analytics and machine learning could “dramatically lower the cost” of providing financial services and enable inclusion.

In his concluding statement, Rathi stressed the need to be able to “pull levers in the same direction” as government, which would then enable the FCA to make a significant impact.

“Together, we need a new enlightenment that can spark a solution to financial inclusion,” he said.

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