When Systems Fail: The Hidden Impact on Financial Inclusion

The Treasury Committee's investigation into bank IT failures reveals a critical but often overlooked relationship: the connection between operational resilience and financial inclusion. While we often think of financial inclusion in terms of access to banking services, the reality is that mere access isn't enough - those services must work reliably and consistently for everyone.

The Asymmetric Impact of System Failures

When banking systems fail, they don't fail equally for everyone. Consider two different customers during an outage:

The multi-channel customer barely notices. With multiple payment cards across different banks, a healthy credit score, and cash reserves, they simply switch to an alternative payment method. The system failure is an inconvenience, nothing more.

But for the financially vulnerable customer, relying on a single debit card and operating with minimal reserves, a system failure can trigger a cascade of consequences. A missed payment leads to late fees, which causes an overdraft, which incurs more fees - a spiral of financial stress from a single point of failure.

The Digital Paradox

Digital banking has revolutionised financial inclusion by reducing barriers to access. But this increased digitisation creates new vulnerabilities. Not everyone has access to modern smartphones or reliable internet connections. When digital becomes the only channel, technical literacy becomes a prerequisite for financial inclusion.

The Treasury Committee's focus on compensation reveals how system failures impose both visible and hidden costs. Beyond immediate fees and charges, customers face damaged credit scores, strained business relationships, and lost opportunities. For vulnerable customers, these impacts can persist long after systems are restored.

Building More Inclusive Resilience

The future of financial inclusion depends on building systems that are both accessible and reliable. This means designing for the margins - ensuring systems fail gracefully, maintain critical functions offline, and prioritise vulnerable customers during recovery. Support must be consistently available through multiple channels, with clear escalation paths and proactive outreach to at-risk customers.

Conclusion: Beyond Access

The Treasury Committee's investigation reminds us that financial inclusion isn't achieved simply by providing access to services. True inclusion requires building systems that work reliably for everyone, especially those most vulnerable to disruption.

The most inclusive financial system isn't necessarily the most technologically advanced - it's the one that works consistently and reliably for all its users, regardless of their circumstances. This is where operational resilience and financial inclusion meet, and where the real work of building an inclusive financial system begins.