Social Networks: Their Role in Access to Financial Services in Britain

Abstract

Almost one in ten adults in Britain do not use mainstream financial services. Most of them are not in paid employment. However, most people without paid work have accounts. Two hypotheses have been put forward: (i) reluctance by financial institutions to serve low-income customers; and (ii) information failure on the part of non-consumers. Using two different data sources, we find that non-consumers of financial services are distinguishable from consumers only by belonging to social networks where financial services usage is relatively low. As social networks play a key role in transmitting information, this supports the information failure hypothesis.