The Financial Conduct Authority (FCA) has announced new rules to ensure continued access to cash for consumers and businesses. The decision comes as a report reveals that despite a decline in overall payments, there is still a solid demand for physical notes and coins.
Starting September 18th, banks and building societies will be required to assess if local communities have access to necessary services, such as branches and ATMs. If significant gaps are identified, they will be obligated to take action and provide alternative options for banking cash. Failure to comply with these rules could result in an unlimited fine.
The FCA’s regulatory framework applies to the 14 largest lenders on the high street, who will be required to review cash provision every two years. This move comes amid criticism of the banking sector for leaving communities cut off through branch closures since the financial crisis. Over the past nine years, approximately 6,000 sites have been shut down in an effort to cut costs, with lenders arguing that the rise of digital banking has made physical branches obsolete. However, critics argue that this has left rural communities and vulnerable populations, such as the elderly, without access to essential banking services.
According to data released by UK Finance, cash remains the second most popular payment method in the UK. The number of people mainly using cash has risen to 2.6% of the population, accounting for 12% of all payments. This is a slight decrease from 2022, when cash accounted for 14% of payments. The rise in cash usage may be attributed to the ongoing cost of living crisis, with many finding it easier to budget using physical notes and coins.
The FCA’s report also showed that as of June 2023, 95% of the UK population was within one mile of a free-to-use cash withdrawal point, such as cash machines and Post Office branches, with 99.7% within three miles of one. However, concerns have been raised about the Post Office’s treatment of sub-postmasters in the Horizon IT scandal, and the potential increase in fees for bank customers to use its services.
Sheldon Mills, executive director of consumers and competition at the FCA, stated, “Three million people continue to rely on cash, even as digital payments become more popular. And many small businesses still need somewhere to safely deposit their takings each day. That’s why we’ve acted quickly in response to new powers given to us by parliament to ensure reasonable access to cash withdrawal and deposits is maintained.”
Adrian Buckle, head of research at UK Finance, added, “There is a huge amount of choice available to consumers in terms of how they make payments, but we can definitely see the continued popularity of debit cards and contactless. This has been driven both by consumer demand as well as new technologies which help to increase acceptance levels, particularly among small and mobile businesses.”
He also acknowledged the growth of mobile contactless payments, stating that one third of adults now make these payments at least once a month, with potential for further usage. However, he emphasized that this does not mean the UK is on its way to becoming a cashless society. Cash still remains the second most frequently used payment method, and UK Finance predicts that the decline in cash usage and growth of other payment methods will continue over the next decade.
Buckle also noted that they expect to see further developments in the payments landscape that will improve the customer experience. The FCA’s new rules aim to ensure that access to cash remains reasonable and available for those who rely on it.
