22 April 2006

Straight payments?

The BBC personal finance programme Money Box reported today on an initiative by the government's Financial Inclusion Task Force to encourage people who are currently outside the banking system to use (and get the benefits of) banking services. One idea is to provide access to information about banking via intermediaries that people are currently dealing with (such as utility companies). Task Force member Teresa Perchard explained how people currently buying power via a pre-payment meter are paying more for it than people paying by direct debit. So there is a carrot to draw them into banking systems.

OK up to a point. But one of the advantages of pre-payment systems is their transparency. You know at the point of use how much it's costing you. As environmentalist Dominic Gooding has pointed out, once you start paying utility bills by direct debit you are much less in touch with your day to day payments and consumption increases. Wouldn't it be bigger-hearted of the utility companies to make the costs of pre-payment the same as payment by direct debit? That would be a more genuine step towards financial inclusion.

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