As physical bank branches close on high streets across the UK, cash is becoming increasingly sparse. It is also being used as an essential part to protect against the cost-of-living crisis.
The UK saw a record breaking day on 22 December 2023 where more than £62 million in cash was withdrawn from Post Office branches. In the same vein, the UK has seen a comeback of cash payments as a tangible way for people to manage their budgets.
Cash is still an essential part of everyday life despite the rise in cashless payments. According to the latest Payment Markets Report from UK Finance, the number of cash payments increased to 6.4 billion payments, from 6 billion in 2021. So, regulators need to protect access to cash for those customers who chose it.
Regulatory proposals in the UK
In the UK, the Financial Conduct Authority (FCA) has set out their proposals to protect access to cash which “would require banks and building societies designated by the Government to assess and fill gaps, or potential gaps, in cash access provision that significantly impact consumers and businesses.”
The aim of these proposals is to ensure provision of cash withdrawal and deposit services for both personal and business accounts. In addition to this, residents should be able to access coins and notes and ensure that access is free of charge.
Even though these proposals are a good starting point, they must go further and take a tougher stance and need revisions to have a real impact. The current proposals are only a rubber stamp, approving what banks are already doing to protect cash and services.
The UK is in the midst of rapid bank branch closures, with 177 banks announcing closures this year, plus another five have already announced closures in 2025. Regulatory bodies like the UK’s FCA should be calling for a freeze on bank branch closures, rather than allowing hundreds more this year and the next.
How to strengthen new proposed rules on protecting access to cash
As reported in Electronic Payments International, Mark Aldred, retail-banking expert at Auriga, has shared his thoughts on this proposal and believes that “the new rules proposed by the FCA to protect access to cash are disappointing and need significant revision to have any real effect.”
He continues, “In the current form the new procedures rubber stamp what the banks have been doing already in pushing through cuts to both access to cash and financial services nationwide. By the time these new rules come into effect in the third quarter of 2024, hundreds more branches will have been shuttered. The FCA should be calling for a moratorium on closures now rather than give the banks the time to rush through their plans.
Taking each proposed rule one by one, the first to undertake cash access assessments must be strengthened to require the bank to be transparent in what that assessment finds. To date, the assessments have been vague and opaque. It misses the point that the gap being created is more than the loss of access to cash but also access to financial services. There might also be an argument that the bank is marking its own homework here and whether an independent body, say the FCA itself, should perform this assessment.
The second rule to require banks to respond to customers and others on how the closure will create gaps in access is simply too weak. The FCA should be saying to banks they must proactively consult their customers about service requirements in their local community and do so in way that provides adequate time for customers and local businesses to respond. This must be a meaningful consultation process and counter that impression that banks are all too ready to contact customers to invite them to go digital or paperless but never ask whether they would like to go branch-less or not.
On delivering reasonable cash access alternatives and not shutting branches until those alternatives are available again is too weak. The default on alternative cash access services is Post Office counters, which are not a like for like alternative to bank teller in-branch service. The current controversy involving the Post Office also may affect customers’ trust in using the service to withdraw or deposit their cash.
An alternative to the Post Office that has some industry support is the Share Banking Hub, even with its limited scope. While branch closures have been swiftly executed, the opening of hubs has been painfully slow. If the FCA wants to reassure the public, they should demand that no branch is closed until there is a hub or something better open to service that community. There is simply too long a lag between the need for hub being identified and its actual availability. The FCA has an opportunity to show its teeth on this issue but, as presently constituted, its planned new rules are simply too weak to make a difference.”
As regulators in all countries are looking for ways to manage access to cash and answer to concerns from residents, more forceful action is needed from these bodies. How the proposals for the UK need revising provides a guide for other countries and their own plans to protect access to cash and financial services in communities.