Should Financial Services Profits Pay a Dividend to Society?
The UK’s largest banks and insurers reported another year of strong profits for 2025, and the CBI‘s financial services survey for the first quarter of 2026 recorded business volumes growing at the fastest rate since December 1996.
Fair4All Finance, the not-for-profit set up in 2019 to improve access to fair and affordable financial services, puts the number of people in financially vulnerable circumstances in the UK at more than 20 million. The contributed piece below asks whether the sector’s profitability carries an obligation to narrow that gap, and what a measurable answer would look like.
Kate Pender is chief executive of Fair4All Finance, the not-for-profit financial inclusion organisation. She was appointed to the role in September 2024, having previously been its deputy chief executive and director of growth and development, and before joining spent twenty years in economic development and small business support. The article that follows sets out her opinion.
UK banks and insurers have reported strong profits, a sign of a sector that has rebuilt resilience since the financial crisis and is once again delivering robust returns for shareholders. Total full year 2025 profits from the UK’s main high street banks and major insurers stand at over £53 billion, a significant increase from £37.4 billion in 2021. These numbers have been backed by the latest CBI survey showing financial services business volumes rebounded in the first quarter of 2026 at the fastest rate since December 1996.
Yet over 20 million people remain financially vulnerable, with too little savings to absorb a shock, too few affordable options when they need credit, and a significant protection gap in insurance cover. We must therefore conclude that the system is not working for everyone.
A healthy financial system should be able to deliver resilience and returns, while expanding access to affordable credit, savings and protection. The issue is not profitability itself, but whether inclusion is embedded in how that profit is generated and whether the benefits of a strong financial system are shared across the economy.
Our work in 2025 has highlighted the windfall that delivering on financial inclusion could achieve, a startling £6.4 billion of economic growth to the UK each year. The overarching risk we face is that our collective actions to tackle financial inclusion do not sufficiently meet the scale of the challenge, and that this inclusive growth is not realised.
For us this is a strong call to arms. But for people facing hardship and exclusion it is an imperative, where our collective inaction risks perpetuating their financial vulnerability.
Put simply: is our financial system growing in a way that widens participation and improves resilience, or is it leaving the same households on the margins?
Many households still lack access to small-sum, fairly priced credit and meaningful savings buffers. When a washing machine breaks or a car needs urgent repairs, families without savings are pushed towards more expensive alternatives. In many instances they are encouraged to borrow more than they need: only one high street bank offers a personal loan for less than £1,000. Too many people (nearly two million) are forced to borrow from illegal lenders and loan sharks, a picture in which there is no improvement.
Our modelling suggests that somewhere between 10 and 30 per cent of current buy now pay later users are likely to be rejected once the new regulatory regime, which took effect in July 2026, is fully implemented. Crucially, this exclusion will be concentrated among those in the most precarious financial positions who benefited from buy now pay later as an alternative, interest free, form of credit.
While preventing people from taking out unaffordable credit is the correct protective measure, the fact remains that a significant proportion of consumers risk losing a flexible, low-cost option without a clear, safe alternative to take its place.
Insurance should be a stabiliser, and can prevent a setback becoming a crisis. But for many households, cover is either unaffordable, inaccessible, or poorly matched to needs, with one in four people in financially vulnerable circumstances having no insurance whatsoever. This reflects a broader issue: too often, financial products are designed around ‘average’ customers, rather than those whose circumstances fall outside standard models. It is not necessarily the case that products are unaffordable. How they are designed and accessed can drive low uptake and affordability problems.
The Government’s Financial Inclusion Strategy, published last year, creates a moment of accountability. It makes clear that financial inclusion is a mainstream economic priority with practical steps on improving access to banking and savings, credit and insurance. It is a platform the industry should support. The challenge is whether industry will match that ambition with delivery that is measurable, sustained and embedded. Not only in corporate responsibility strategies, but in product design, underwriting, credit policy and customer support. Over 10 million people started making pension contributions when auto enrolment was introduced. That is the scale of change we should be aiming for in supporting people to build up a useful savings buffer.
This question becomes sharper when set against the direction of regulation. Constraints introduced after the financial crisis are being eased, including changes around capital requirements and ring-fencing. That may be justified on competitiveness grounds, but if the system is being given more flexibility to generate profit, where is the corresponding expectation that it delivers broader participation?
We believe financial services profitability carries an implicit social licence. The ability to generate strong returns rests, in part, on delivering a system that works for everyone. When mainstream finance cannot serve a meaningful share of the population, the costs are borne elsewhere: by households, employers, public services and the wider economy. For example, four per cent of all motor insurance policies cover uninsured drivers, yet there has been no scaled change to make motor insurance affordable for those who are missing out, and record numbers are now driving uninsured with vehicle seizures at their highest in 17 years.
Innovations in technology and AI are transforming finance, and banks and insurers deserve credit for improving digital journeys and reducing friction. However, rather than looking at innovation and new technology solely as ways to reduce cost and build efficiency, firms could also look at ways to evolve their offerings, pricing and ways of working to serve more customers with a wider range of products. Recent research found that while most insurers are already using AI, it is mainly improving efficiency for existing customers in lieu of tackling exclusion.
The community finance sector (credit unions and community development finance institutions) has shown how open banking technology can be used successfully to offer credit to consumers with thin or poor credit files, demonstrating that the tools exist. The fastest growing tech company in the UK is using AI and open banking to transform access for those who are excluded. Widespread adoption of this technology is needed to deliver the scaled change that is required.
New models show what is possible. For example, the Financial Inclusion Strategy highlights the need to test new approaches to small-sum lending. In the US, the Small Dollar Loan Program has shown how clear frameworks can give lenders confidence to serve customers who are currently excluded. Done well, these models can combine modern distribution with strong affordability safeguards and be evaluated transparently to understand what works at scale. The No Interest Loan Scheme piloted by Fair4All Finance has seen loan recipients moving on to being able to borrow on commercial terms, with interest and without a guarantee, as the pilot helped lenders realise there were commercial returns to be made from customers they had previously excluded.
The case for action is both social and economic. Fair4All Finance research published in 2023 found that the unprecedented and rapid support from banks during Covid-19 significantly helped customers, with no detrimental impact on bottom lines. Against that backdrop, the level of investment required from the financial sector is modest. Small, sustained changes in product design, distribution and partnerships could unlock disproportionate benefits. For example, some firms have started embedding benefit calculators into lending journeys to support customers to maximise their income where applicable, given the £24 billion in unclaimed benefits each year. However, progress is inconsistent across the sector.
So, what would it mean to treat profits as a ‘dividend’ to society? Not a windfall tax, but an expectation that profitability is matched by demonstrable progress on financial inclusion. At present, there is no consistent way of comparing how large institutions perform on inclusion. Creating that focus would be a sensible place to start.
Ultimately, the strength of the UK’s financial system should not be judged by profit alone, but by whether it enables more people to manage shocks, build resilience and participate fully in the economy. Aligning profitability with inclusion would not weaken the system. It would make it stronger, more sustainable, and more worthy of public confidence.
