Banks and building societies could be forced to ensure customers have access to cash amid fears the shift to digital banking is shutting out swathes of the population, under new rules tabled by the Financial Conduct Authority (FCA) today.
In a statement this morning, the City watchdog said it will roll out new rules to “maintain reasonable access” to cash for people and businesses across the UK and firms will need to assess “gaps” in cash provision.
The assessments need to take into account local factors like demographics and transport, the FCA said, and where firms identify gaps, they will need to “act to address these needs.”
The move to enshrine cash comes amid fears that vulnerable consumers will be left without access to payments as banks slash their physical footprints and more companies stop accepting physical payments.
The government granted beefed-up powers to the regulator in the Financial Services and Markets Act to ensure people could continue to access physical money.
As of the first quarter of this year, 95.1 per cent of the UK population lived within one mile of a free-to-use cash withdrawal point, such as a cash machine or Post Office branch. Some 99.7 per cent of the UK population lived within three miles of a free-to-use cash machine.
However, the availability of cash access services can “impact local communities, economies and high streets, and so it’s important to meet local needs – which may change over time,” the FCA warned.
“We know that, while there is an increasing shift to digital payments, over three million consumers still rely on cash – particularly people who may be vulnerable – as well as many small businesses. It’s important that we support consumers impacted by recent innovations,” said Sheldon Mills, the watchdog’s executive director of consumers and competition.
“These proposals set out how banks and building societies will need to assess and plug gaps in local cash provision.”
A consultation on the plans will be open until 8 February, with the FCA expected to finalise the rules by the third quarter of 2024.
Banks have been looking to cut back on their branches amid a shift to digital banking over the past ten years.
Figures from the Office for National Statistics show the total number of bank and building society branches fell from 13,345 in 2012 to 8,060 in 2022, a fall of 40 per cent.
Cash payments increased for the first time in a decade last year as concerns over the cost of living crisis prompted Brits to turn to physical currency, however.
The number of cash transactions increased seven per cent year-on-year to hit £6.4bn in 2022, according to a report on the payments market from UK Finance.