Managing our money
As the Financial Services and Markets Bill heads towards becoming an Act, possibly by the end of this week, it seemed timely to consider where we have been able to make progress, changing the legislation, hopefully for the better in a number of key areas.
In a three part series, I will cover the Government’s response to my own and colleagues’ efforts to improve the legislation in respect of cash, regulator accountability and the impact of artificial intelligence on our financial services industry.
First, cash. After much discussion, we have got the provision of free cash services set out on the face of the Bill.
As Minister Penn put it:
“The Government recognises that, while digital payments are increasingly present in our society, cash continues to play a vital role in many people’s everyday lives.
“That is why this Bill puts in place a framework to protect the ability of people and businesses across the UK to access cash withdrawal and deposit facilities for the first time in UK law and introduces new powers for the FCA.”
Then we heard how the Government were going further:
“Having said that, I recognise the strength of feeling on this matter in both Houses, in particular on ensuring free access to cash for individuals.
“Over 1.2 billion cash withdrawals in the UK last year were from free-to-use cash machines and we have heard impassioned contributions highlighting the reliance on cash by some of the most vulnerable in our society.
“Therefore, the Government have tabled amendments which will require the FCA to seek to ensure reasonable provision of free cash access services for current accounts of personal customers. This forms part of the regulator’s wider duty of seeking to ensure reasonable access to cash.
“The Bill already requires the Government to publish a statement of their policies on access to cash, which the regulator must have regard to when determining reasonable access and informing the use of its powers. These amendments also require the Government to include their policy on free cash access services for current accounts of personal customers in that statement.”
This is a significant shift by the Government during the passage of the Bill in the Lords. As I said during the debate:
“It is testament to all those organisations which have campaigned on cash for so many years and will make a real difference to people up and down the country.”
I also wanted to understand what ‘reasonable access’ might look like in practice.
In response Minister Penn stated:
“…that further detail will be for the policy statement. It is important to recognise that currently, on the whole, access remains extensive. According to FCA analysis, over 96% of the population are within 2 kilometres of a free-to-use cash access point.”
It was positive to have support from around the House for these changes.
Baroness Chapman, for Labour:
“We strongly welcome the Government finally bringing forward meaningful protections for cash access.”
Alongside cash, it was timely to raise some of the issues around shared banking hubs including the slow pace of roll out. I asked the Minister how many hubs the Government were hoping to see by the end of the year.
Baroness Chapman was similarly interested:
“While the banking hub initiative has promise, its coverage is too limited for it to be anything like a viable solution at this point. We welcome the fact that Lord Holmes has tabled several amendments on this. We hope that the Minister is able to go beyond previous assurances.”
Minister Penn set out the Government’s position:
“On banking hubs, determining their location and the range of services provided is a commercial decision. My noble friend asked what would be a reasonable number of hubs to have open by the end of the year. As I said earlier, over 50 have been announced. We expect delivery on that commitment to pick up as this year progresses.
“Furthermore, since the last debate, several firms have made the commitment that, where a banking hub has been announced as a result of their branch closure, they will not close that branch until the hub is open, so we have a double lock of improving the speed of delivery but not losing services until we see improvement in the pace of delivery. That is welcome and shows that the industry is taking this issue seriously.”
This should make some difference to those communities facing the ‘last branch standing’ circumstance.
On cash, significant progress made. On banking hubs, some.
I also wanted to pursue the problem of access to digital financial products and services.
I’m calling for an access to digital financial products and services review, in the same spirit as the Government’s access to cash review, the findings of which fed into the access to cash measures in this Bill as well as the banking hubs initiative.
As I put it during the debate:
“I raised this in Committee and do so again because it seems necessary and a logical next step from the Access to Cash Review, which was completed in 2019.
“Although I am a staunch supporter of cash and people’s access to and acceptance of it, the future is digital. However, we must ensure not only that that future is accessible but, equally crucially, that the transition to it is accessible. Does my noble friend the Minister agree that further work by HMT in this area would not only make sense following the Access to Cash Review but do a great service in addressing issues which will be felt sharply if we do not address them at this stage?”
In answering, the Minister gave me some slight hope that the Government had moved somewhat on this issue during progress of the Bill:
“The Government recognise that we need to be proactive in this space, and there is a range of work under way to ensure that financial services adapt to the needs of consumers in the digital age and to address the issues that [Lord Holmes] rightly raised. These include driving further progress on access to digital infrastructure, connectivity, and skills to fully benefit from this transition.
“I am grateful to my noble friend for his constructive challenge of the Government’s approach to this important issue. I assure him and all noble Lords that the Treasury will continue to consider where there may be gaps in the Government’s approach and ensure that no one is left behind as we evolve into new ways of managing our money.”
To conclude, cash access, particularly free access to cash is radically improved since the Bill began. Also, an increased focus on shared banking hubs which must be a good thing as part of the solution. And a growing interest from the Government on how we all, together, transition to digital financial services and products in an inclusive fashion.