The Financial Conduct Authority is reportedly looking into new rules that would give it the power to stop banks from closing high street branches, in a bid to ensure consumers have continued access to cash.
In a consultation last month, the Treasury said it was considering new legislation that would give the UK’s financial regulator the power to ensure the public has “reasonable” access to cash, the Financial Times first reported.
According to the plans, the method for ensuring access to cash would be up to the FCA’s “discretion”.
In the wake of the consultation, senior regulators have expressed their preference for preserving in-person banking alongside ATMs in the UK, as well as encouraging the increased use of cashback services, according to the FT’s citation of people familiar with the matter.
Britain’s banks have closed thousands of high street branches and ATMs as part of cost-cutting measures in the past few years – a trend exacerbated by the pandemic.
Santander, HSBC and Lloyds TSB all closed numerous branches this year, affecting hundreds of jobs.
Cash usage plummeted during the height of the pandemic as a result of consumers seeking to limit the amount of physical cash they handled to reduce the likelihood of catching Covid.
Many people switched to using contactless card payments, a trend that was already well underway before Covid, prompting experts to predict Britain may soon become a cashless society.
The Financial Conduct Authority estimates that withdrawals from cash machines dropped £37bn in the first 12 months of the Covid pandemic.
But although the shift to digital helped banks maintain their services during the pandemic, it “removed some of the vital human elements of banking” that UK consumers value, said Tom Merry, managing director at Accenture.
“While there’s little doubt a growing number of customers will be perfectly happy taking a digital-first approach to banking going forward, banks must be mindful that others will continue to want a branch experience for the foreseeable future, even for basic transactions,” he said.
“Banks will need to carefully manage this evolving journey and recognise that the necessary transition to a new branch model cannot happen overnight.”
Where banks have closed branches, consumers looking for cash have turned to their local Post Office branches for access.
New data released today suggests that cash is continuing to play a significant role in facilitating transactions in the UK, as a record £665m was withdrawn from Post Office counters in July – the highest monthly total, excluding the Christmas period, ever.
Personal cash withdrawals in July were up 4.6 per cent month-on-month and up 14.3 per cent year-on-year, suggesting consumers are flocking back to pennies and pounds after they avoided hard currency amid the worst of the Covid crisis.
Martin Kearsley, banking director at the Post Office, said: “As some banks continue to close branches, either permanently or in response to staff shortages during the pandemic, Post Offices are ‘the last counter in town’ in many places across the country.”