Tackling the Poverty Premium with data: Our research with Virgin Money

At Smart Data Foundry, we believe that making private sector financial data accessible for research can lead to more informed decisions, especially when it comes to supporting individuals experiencing poverty. That’s why we’re proud to have worked alongside Virgin Money to shed new light on the poverty premium – the extra costs that people on lower incomes often must pay for essential goods and services.

This blog takes a look at our latest research findings, why they matter, and what we hope happens next.

What is the Poverty Premium?

The poverty premium refers to the additional costs that people on lower incomes pay, not through choice but through a lack of options. These could include paying more for insurance if you live in a certain area, relying on prepayment meters for energy, or being forced to use fee-charging cash machines.

These extra costs affect people who are already struggling financially, putting further strain on household budgets. It’s estimated that at least 24% of UK households experience at least one poverty premium, costing a typical parliamentary constituency £4.5 million per year. (Evans, J. and Davies, S. Mapping the poverty premium in Britain. Technical report, Personal Finance Research Centre, University of Bristol, 2022.)

Reducing or removing these unfair costs could make a real difference to people’s financial wellbeing and unlock better opportunities across society.

Working together to understand the problem 

In partnership with Virgin Money, we developed a new approach to identifying and measuring the poverty premium using real-world financial data – in this case, banking transactions from 250,000 anonymised Virgin Money current account holders (a meaningful yet geographically limited data set).

This early work focused on data from the Northeast of England and the Central Belt of Scotland, analysing around 321 million banking transactions over a two-year period.

Our findings show the potential of using banking data to identify and understand financial vulnerability at scale – and in ways that could inform practical, targeted action.

What we found

Here are some of the key findings from the research:

• Half of customers (50%) experienced at least one poverty premium.
• 14% experienced two, while 2% experienced three or more.
• The most common was paying insurance in monthly instalments, affecting 32% of customers. However, this may be a choice in many instances and not necessarily a premium due to low-income (e.g., actively choosing to pay insurance in monthly instalments vs annually). 

Other premiums included:

• Area-based insurance premiums
• Non-standard energy payments and prepayment meters (affecting 4–10%)
• Higher grocery costs due to limited access to low-cost options (3–4%)
• Fee-charging ATMs affect around 1% of people.

Our analysis also explored how these premiums overlap, with some groups more affected than others:

• People aged 45–54 were most impacted overall.
• Individuals aged 18–24 were more likely to experience multiple premiums compared to their group size.

Where the Poverty Premium hits hardest

The geographical analysis revealed that poverty premiums are not evenly distributed, even within local areas. The highest rates were found in Teesside, Newcastle, Sunderland, Hartlepool and Middlesbrough – especially in urban districts. As mentioned, this analysis is currently restricted to the Northeast of England and the Central Belt of Scotland, as opposed to being a national view.

What’s more, areas with high poverty premiums also showed other signs of financial vulnerability, such as:

• Spending most of their income on essentials
• Frequently having less than £100 in their account

This suggests that data like this could help guide local, tailored responses, making sure support goes where it’s most needed.

Why this matters 

This research proves that anonymised financial data, used responsibly, can help us understand complex challenges like the poverty premium in ways we haven’t been able to before.

It also shows that ongoing, safe access to current account data can help track progress, enabling organisations, councils, and policymakers to see what’s working and where more support is needed.

While this initial study focused on a specific region and sample, 97% (Appendix A Product holdings Financial 2022, Financial Lives May 2022 Survey, the Financial Conduct Authority) of the UK population uses a current account, meaning there’s real potential to build on this work across the country.

What’s next?

We’re hopeful that more financial institutions will consider responsibly sharing data to support this type of work. By growing the dataset, in terms of people, geography, and time, we can better understand where poverty premiums are having the biggest impact and how to reduce them.

Ultimately, this could help create more effective services, smarter policy, and fairer outcomes, giving more people the chance to live with dignity and financial security.

If your organisation works in financial services, policy, or research, or if you want to play a part in building a more financially fair society, we’d love to talk.

Together, we can turn data into action that really makes a difference.