Advantages And Disadvantages Of Financial Exclusion

Financial exclusion refers to the inability experienced by some individuals, households or groups to access and/or use necessary financial services and products in an appropriate form in order to meet their needs. Such needs span a range of basic products that include the opening of a bank account, the option of non-cash payment services, the access to credit and insurance and the capacity to build up modest assets through appropriate saving facilities .

According to the European Commission, financial exclusion is defined as “not being able to access or use financial services in the mainstream market that are appropriate to (people’s) needs and enable them to lead a normal life in the society in which they belong” . There is a growing recognition

Not having a credit card or bank account may exclude people from social and economic life, for example, it may exclude a person from making purchases online or reserving a hotel, receiving salary or doing electronic payments that are becoming a norm. The inability to exploit these services may significantly increase the risk to resort to non-status lenders and thus to generate a cycle of over-indebtedness. The societal groups that are unable to access financial services are usually unable to obtain other key social provisions, thus resulting in the close interlink between financial exclusion and social exclusion .

Nevertheless, evidence shows that financial exclusion due to poverty and to the lack of access to mainstream financial institutions is still a reality for many European citizens that not only cannot save for occasions or unexpected events but are forced to go into debt for day to day living expenses, thus leading them to a greater risk of social exclusion. “For these individuals, the inability to access affordable mainstream finance – or to be financially excluded – has detrimental effects on their participation in the economy, society, and their community, and ultimately on their social and

A payment account allows for the ordering of goods by internet, for receiving a salary, pay rent and electricity, for mortgages and life insurance . While accessing to bank accounts encourage saving and open access to credit, the fact of not having it makes life more difficult because every transaction will become more costly and time consuming. For instance, not possessing a bank account makes impossible or costly to receive payment (such as wages, pension or social assistance), it makes more difficult to gain employment, to convert cheque or vouchers into cash and to make payments for goods and services other than in