Good Things Foundation, Toynbee Hall & The Money Advice Service: what is the problem we are trying to solve?
Why being poor makes you poorer, and why being offline makes you even poorer still.
Digital and social exclusion
Good Things Foundation are the leading digital inclusion charity in the UK. But as a digital inclusion charity, we respond to the entanglement of social and digital exclusion. As Beatrice Karol Burks says:
“digital exclusion is increasingly tied to other areas of social exclusion — and the approach we take to tackling digital exclusion must tackle those social problems as well.”
One major social issue that we are trying to address is financial exclusion. Over 2017, we have been working with Toynbee Hall on a project funded by the What Works Fund. Toynbee Hall have helped us to recognise how important digital inclusion is to financial inclusion.
Our own analysis of the Ofcom data suggests class is an independent indicator for digital exclusion. Simply, if someone has less money, then they are less likely to be online. There is a very close association between poverty and financial exclusion, so it is likely that digitally excluded people are also financial excluded.
One way to explore this is through a concept called the poverty premium.
The poverty premium
The poverty premium is the idea that: the less money you have, the more you pay for essential goods and services.
This happens in all sorts of everyday expenditures. For example:
- Paying for electricity using a pre-paid meter costs more than using utility credit
- Living in a poorer neighbourhood means that your insurance is likely to be higher
- Credit and borrowing costs are likely to be higher for people on low incomes.
Separate calculations by The Joseph Rowntree Foundation, Save the Children, and Citizens Advice Scotland estimate that people living in poverty pay roughly 10% more for essential goods and services. This equates to costs estimated at between £1000 and £1300 per year.
Digital exclusion and the poverty premium
The poverty premium is related to whether a person has access to the internet. Digital exclusion means:
- being unable to switch tariff online
- being unable to find information with which to make informed choices
- being unable to pay through automated services, such as direct debit
- being unable to compare prices for essential goods (such as white goods) online
Digital exclusion exacerbates existing contributors to the poverty premium (such as poor credit) and directly contributes to the poverty premium (by preventing access to cost reductions available on the internet).
The 2016 Lloyds Consumer Digital Index calculated that low income individuals (people on an income of <15 000) can save around £516 per year by transacting online and using online services. This represents a huge chunk of the poverty premium.
What are we doing to address the poverty premium?
We know that:
the ability to transact online can reduce the poverty premium.
But, we also know that people often find it hard to transact online — not just because they don’t know how — but because online transactions are potentially risky.
So, we designed an intervention which provides support for them to undertake an online transaction. The idea is that:
- Learners attend financial capability classes for 8 weeks at an Online Centre
- After 4 weeks, participants choose a transaction which they would like to complete. The transaction should save them money on something which they would have bought anyway
- Someone in the Online Centre helps them to go through the transaction.
The idea is that, once someone has been through a transaction, they realise that it is safe. If they know it is safe, then they are more likely to transact again, on their own.
The feelings of risk and safety are clearly very important here. From our early interviews with learners, after buying something online for the first time they stayed nervous until their stuff arrived. After that, they knew it worked, and felt much more confident in the system that they had just put money into.
We also know that a lot of risk is mitigated through the relationship between learners and their tutors at the Online Centres. Their tutors (who may have known them for a year or more) are very trusted. They help them to navigate, they give them advice, they reassure them that they are doing it right, and they translate complicated language. Through this project, we are starting to understand how important this relationship is for behaviour change.