Lloyds queries Universal Bank's potential to help the excluded

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The Independent Online

One of the leading banks involved in the Universal Bank has cast doubt on whether the project can deliver its key aim of reducing the number of people in the UK who have no access to financial services.

Lloyds TSB, which has agreed to finance its share of Universal Bank, joined an authoritative independent research group yesterday to question how much impact the Government's much-vaunted project would have on the 4.5 million households without a fully functioning bank account. A central component of the Universal Bank is that people will be able to open a very basic account at a post office, which will have the main function of allowing them to cash benefits with a plastic swipe card.

Geron Walker, head of social exclusion at Lloyds, said: "There is not very much in this, and it is not going to encourage financial inclusion."

Elaine Kempson, director of the group that carried out the research for the Joseph Rowntree Foundation, said: "When we spoke to people who were financially excluded, they didn't like the post office account, they thought it did not offer very much at all."

Stephen Byers, the former secretary of state for trade and industry, launched the Universal Bank last month. His successor, Patricia Hewitt, will be overseeing its implementation from October 2002.

The negative findings will fuel increasing doubts about this aspect of the bank, following disappointment among many participants in the initiative that the so-called Post Office Card Account would not offer services like the payment of utility bills or a limited overdraft function.

Lloyds, which signed up along with 10 other banks, has decided to launch more initiatives to encourage the nearly 4.5 million "unbanked" households to use its financial products.

"The needs of a large number of people can't be met by the existing institutions. So, rather than shoe-horning them into what is available, you have got to offer them something different," Mr Walker said.

Lloyds has pioneered a project in Portsmouth to lend money to individuals and small businesses that would probably not be granted loans on the high street. The initiative involves co-operating with a not-for-profit local organisation. The bank said it expects to roll the same idea into three other areas this year.

The bank highlighted its initiative as part a study published yesterday by Joseph Rowntree, which was researched by Bristol University. Other banks involved in the research were Bank of Scotland, and NatWest, now owned by Royal Bank of Scotland.

But people interviewed for the study were enthusiastic about the banks' own basic accounts, which will also be offered via post offices.