Through the Financial Services & Markets Act 2023 (FSMA), the UK parliament has given the FCA the power to seek to ensure reasonable provision of cash deposit and withdrawal services for personal and business current accounts in the UK or part of the UK.
Under the FCAs assessment, the accessibility of cash remains good. According to the regulator, as of Q2 2022, 95.1% of the UK population is within one mile of a free-to-use cash withdrawal point, such as cash machines, Post Office branches, or bank/building society branches, and 99.7% of the UK population is within three miles of a free-to-use cash access point.
However, due to the rising number of cashless payments and the changing bank branch networks, the FCA reports that if the pace of change is not managed sensibly, customers reliant on cash will be significantly affected.
Cash payments remain important to customers who are vulnerable and to many smaller businesses. While digital payments make life easier for many, cash is still vital for some consumers in the UK, with the FCA finding that 3.1 million adults (6%) used cash to pay for everything or most things in the 12 months up to May 2022.
The financial watchdog aims to take a “balanced” approach to the cash needs of customers and small businesses, considering the cost requirement for firms to meet the needs of customers’ digital preferences.
The FCA will seek to maintain a network of cash access facilities that is in keeping with the current distribution of services so that people and businesses who remain reliant on cash are able to withdraw and deposit it.
They report that the rules will be flexible and take consideration of the cash needs of personal customers and SMEs in different areas, noting that needs will vary according to the demographics of the local population, and characteristics of the area, e.g., digital connectivity, geography, transport infrastructure, or number of retailers.
The FCA will consider a number of factors which will make it so an area is significantly affected by deficiencies in cash, such as:
- the number and characteristics of people likely to be affected including the impact on those in vulnerable circumstances;
- the number of businesses which accept cash payments likely to be affected; and,
- the distance to the nearest suitable access and the costs people and businesses face to travel there.
The rules of the access to cash regime will be used to assess significant changes, such as the closure of a bank branch or the removal of an ATM. This is only applicable to banks and building societies designated by the government.
The FCA notes that their powers do not extend to asking retailers accept cash as payments for goods or services.
Moving forward, the UK government will designate which firms the cash access regime will apply to, and may designate co-ordinated bodies.
Before making rules or general guidance, the FCA will first undertake a full consultation, including a cost benefit analysis, to seek views from a variety of stakeholders. They are currently working with the Payment Systems Regulator (PSR), which retains oversight of LINK, the UK’s largest ATM network, to ensure the UK’s cash infrastructure remains resilient, cost-effective and accessible to meet the needs of consumers and businesses.
Dependent upon the outcome of the consultation, they expect any new rules will have taken effect by summer 2024.
The FCA notes that in the meantime, “firms must anticipate the foreseeable harm to their customers of any decision to close a branch or close or convert an ATM and address it before proceeding with a closure or conversion. As outlined in non-Handbook Guidance for firms on the Consumer Duty (FG22/5), firms should engage with us if they are considering withdrawing or restricting access to products or services in a way that will have a significant impact on characteristics of vulnerability or on overall market supply.”
Anna Roughley, head of insight of the Lending Standards Board, comments: “We welcome the treasury’s announcement of new rules that will require banks to provide free cash withdrawals within three miles of consumers and businesses. Many people rely on cash for everyday transactions, such as paying for groceries or bills. The closure of bank branches in recent years has made it more difficult for people to access cash, especially in rural areas and for people with disabilities. This is an important step in ensuring that everyone has access to cash, regardless of their location – an essential for financial inclusion, which is the goal of ensuring that everyone has access to the financial services they need to participate fully in the economy.”