Improving financial capability for low-income households through digital skills

Improving financial capability through digital skills

Digital is changing our lives, our jobs, how we run our businesses and manage our money. This means that having the digital skills, motivation and confidence to use the internet safely is becoming essential for life and work. This report summarises research exploring challenges for support to improve digital skills for low-income households in financial difficulties, and initial recommendations on how to overcome these.

Digital exclusion compounds the ‘poverty premium’, by which those on lower incomes pay more for goods and services. Goods and services are cheaper online. Digital tools can open up easier ways of saving and managing money, for example through price comparison websites.

Those unable to access the internet cannot access these savings. The Lloyds Consumer Digital Index suggests that UK citizens could save up to £744 each year by being online, with nearly half of the offline population (47%) coming from a low-income household (Lloyds, 2019).

People who are digitally excluded are likely to be from social classes C2DE, to have left school at 16, and to have a household income under £17,499 (Yates, 2017). Their experiences of both finances and education have often been negative, embedding a lack of motivation in their life history.

It becomes increasingly difficult for them to embrace opportunities for financial learning. The most financially vulnerable use the internet for a smaller range of activities (Ofcom, 2018).

They are less likely to use digital for purchasing, communication and gathering information. When people have two or fewer digital skills, these are unlikely to include digital-financial skills.

This suggests that these activities require more advanced knowledge and confidence than other digital skills (Lloyds, 2018). With the rollout of Universal Credit, a large number of claimants have struggled to engage with its digital-by-default system: claims can only be made online. A longitudinal survey of claimants in 2018 found only half (54%) were able to register their claim online unassisted, and a quarter were not able to submit their claim at all (DWP, 2018).

The DWP now recognises – contrary to its initial assumptions – that those with vulnerabilities or complex needs may not be able to access payments. It also recognises that those with limited online access or skills and those who struggle to budget may face additional difficulties using the system.