The challenges of charity banking

Charities, voluntary organisations, and community groups need to be able to bank. However, over the past few years, we’ve heard from a growing number of NCVO members that it’s becoming more and more difficult to find banking services that meet their needs.

Without access to banking services, organisations can’t appropriately manage their finances. This might mean they can’t carry out charitable activities and may fall short of regulatory requirements.

It's a complicated problem that the Campaign for Community Banking Services tried to tackle in 1998. The Campaign was a coalition of charities that came together in response to widespread bank branch closures, with the goal of supporting local economies, increasing social and financial resilience, and supporting branch-dependent customers such as charities. It ceased activities in 2016 in the face of rapidly accelerating branch closures, which led them to conclude they could not achieve their goals.

Fast forward to the spring of 2022, when our UK-wide survey of organisations from across the voluntary and community sector found four key and overlapping challenges.

1. Services that charities need are increasingly unavailable.
2. Services that are available are not suited to the way that charities operate.
3. Charities often encounter poor customer service.
4. Online banking is not designed for or accessible to charities.

We explored these challenges in more detail in a briefing that we published in June 2022 (pdf, 234KB). One of the strongest themes was the lack of access to much-needed in-person banking services which met voluntary organisations’ needs, such as paying in cash or changing the account mandate when new trustees are elected.

With over 1,260 responses to the survey, it was evident that banking is one of the most pressing day-to-day challenges for charities of all sizes – from hyperlocal micro charities that are run entirely by volunteers, to national ‘household names’, right across the country.

Since last summer, we’ve been using the survey results to drive a new project with UK Finance (the membership body for the banking and finance industry) to improve charity banking. Over the course of numerous discussions and workshops with representatives from banks and the voluntary sector, we’ve worked with UK Finance to explore potential solutions to the four key challenges listed above.

The solutions being considered include the development of a range of online tools. For example, account opening and maintenance checklists for both charities and banks, aimed at helping charities understand why banks require certain information, and helping banks understand charities’ specific needs.

There’s also a shared desire to build on existing tools that we know the voluntary sector values, and to develop additional support to ensure they’re embedded and effective. The Charity Commission has also been part of this work, and is considering how reporting requirements can support better understanding and working between charities and their banks.

Of course, we recognise that some problems that can’t be solved by improving transparency and information-sharing. For one, bank branches continue to close – a whopping 5,355 branches have closed since January 2015, and a further 193 are expected to close this year. While the financial services and markets bill does intend to protect access to cash, the focus in this area is on individuals rather than organisations such as charities.

Branch closures are also restricting access to knowledgeable charity banking experts. People told us they’re now having to spend hours queueing – either in person at their nearest branch, which is often not very near at all, or on the phone – only to speak to someone who doesn’t know about charity banking.

Linked to this, there are situations where an appropriate banking service simply can’t be found. HSBC’s decision to introduce a £5 per month fee to maintain accounts in autumn 2021 prompted many small voluntary organisations to look elsewhere, only to find that some banks with free charity accounts were not accepting new community customers.

Plus, community accounts often don’t permit online banking because they’re required to have dual signatories. This means these organisations often need to use cash and cheques, which typically incur an additional fee for each transaction.

We’re very aware of these large and systemic challenges, and alongside the work with UK Finance, we’re considering other options for influencing policy and practice.

For charities of all shapes and sizes, we have extensive help and guidance to support good financial management, including specific guidance on banking for charities and voluntary organisations.

If you need information and guidance on a banking issue, you can also get in touch with our small charity helpdesk.

Our partners in this work are ACRE, Charity Finance Group, NAVCA, NICVA, SCVO, and WCVA.