'Landmark move' to protect access to cash for Britons - but it won't stop bank branches closing down

These new powers won't stop bank branches from closing down - but will have an impact where branch closures leave significant gaps in local cash access.

Alice Haine, personal finance expert at Bestinvest said: "This is a landmark move by the FCA, benefitting segments of society that still rely on cash to pay for their everyday living needs and the many small businesses that need to be able to safely deposit their daily takings.

"Access to cash and the ability to use notes and coins in consumer transactions has become a particular challenge for the elderly, the less digitally capable, the unbanked and those on low incomes, who rely on cash to manage their finances."

The Government has selected 14 banks and building societies to deliver this new cash access system, but an expert has argued this plan does not go far enough.

If these providers find gaps in cash access, there are a range of measures to ensure cash is still available to Britons. This includes banking hubs, ATMs (including deposit ATMs) and Post Office facilities.

From September 18, the selected banks will need to:

• Assess cash access and understand if additional services are needed, when changes are being made to local services.
• Respond to local residents, community organisations and representative groups, who will be able to request an assessment of whether there are gaps in local cash access.
• Where significant gaps are found, deliver reasonable additional cash services.
• Keep facilities, including bank branches and ATMs, open until any additional cash services identified are available.

Martin Quinn, campaign director at Payment Choice Alliance said: “This plan does not go near far enough. The public have lost 6,000 bank branches in the last nine years, a few banking hubs just won’t cut it.

"What is needed is a complete moratorium on bank branch closures, because what’s to stop the big 5 closing more between now and September 18.

"Millions of people rely on the banks for cash access and small businesses will continue to need to need their local bank branch to deposit cash takings and order change for their till floats.”

Around three million people continue to rely on cash, even as digital payments become more popular. Those in low-income household (less than £15,000 a year) were found to have the strongest association with reliance on cash, as they had low digital capabilities.

With consumers, as well as small businesses still relying on cash, the FCA aim to use these powers to ensure access to cash is not restricted.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “Three million people continue to rely on cash 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.”

The FCA has made changes to the rules it consulted on, including extending the period for banks and building societies to carry out cash access assessments, giving local communities more time to make their case. Firms will also be able to review the provision of identified cash services after two years.

Ross Borkett, banking director at Post Office said: “We are delighted to see the publication of the new access to cash regulations to give consumers and businesses more certainty around the future of cash in the UK.

"Post Office will continue to play its role at the heart of the nation’s cash infrastructure, with Postmasters across the UK providing easy access to everyday banking within every community. The last few months have seen Post Office handle record amounts of cash for customers right across the UK.”

Haine continued: "Under the new rules, the FCA requires banks and building societies to not only listen to concerns from local communities and assess cash access caused by the closure of a branch or ATM but also to provide additional services when needed or keep facilities open for longer until alternative options are available.

“Those living in rural communities have been particularly affected by lack of access to bank services as lenders close branches to focus on online modes of transacting. While most people living in urban areas have access to banking services or a free source of cash within a couple of kilometres, those living in rural areas typically travel further to withdraw and deposit cash.

"This can have a knock-on effect on local retailers who may lose out on custom if consumers are travelling outside their rural location to access cash, such as a nearby town or city, and then spend in those locations rather than closer to home.

“The declining use of cash in the UK in recent times poses a challenge for vulnerable sections of society that rely on the payment method, with the cashless trend exacerbated during the pandemic amid the rapid shift towards digital payments as merchants sought to reduce contact with customers by banning cash."

Banks and building societies have closed 6,055 branches since January 2015, at a rate of around 53 each month. This represents more than 60 per cent of the branches that were open at the start of 2015.

NatWest Group, which comprises NatWest, Royal Bank of Scotland and Ulster Bank, has closed 1,368 branches - the most of any banking group. Lloyds Banking Group, made up of Lloyds Bank, Halifax and Bank of Scotland, has shut down 1,180 sites. Barclays is the individual bank that has reduced its network the most, with 1,220 branches now closed.