FCA proposes new access to cash measures

Banks and building societies in Britain will be required to assess gaps in access to cash under new rules proposed by the Financial Conduct Authority (FCA) to protect access to cash for businesses and consumers.

The move follows new powers granted to the FCA by the Financial Services and Markets Act 2023. Under the FCA’s proposals, designated banks and building societies will need to assess gaps in access to cash. These assessments need to take into account local factors such as demographics and transport. Where firms identify gaps, they will need to act to address these needs.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA said “We know that, while there is an increasing shift to digital payments, over 3 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.”

“These proposals set out how banks and building societies will need to assess and plug gaps in local cash provision. This will help manage the pace of change and ensure that people can continue to access cash if they need it.:

As of Q1 2023, 95.1% of the UK population are within 1 mile of a free to use cash withdrawal point, such as cash machines or Post Office branches. 99.7% of the UK population are within 3 miles. 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.

Under the proposals, designated firms will be required to u ndertake cash access assessments when changes are being made to cash access services – to understand whether additional services are required to meet local gaps. They will also respond to requests from local residents, community organisations and representatives to consider, assess and plug gaps. They will also need to deliver reasonable additional cash services to fill gaps in provision where assessments show that there is or will be a significant local gap and ensure they do not close cash facilities, including bank branches, until any additional cash services identified are available.

The FCA’s new powers don’t prevent bank branches from closing. However, the rules will have an impact where branches are a key local source of cash. The FCA will ensure these rules work in harmony with its existing guidance on bank branch closures. Existing law allows retailers to decide whether to accept cash or not – so the FCA cannot require them to do so.

The consultation is open until 8th February. The FCA expects to finalise the rules by Q3 of 2024.

Responding to the announcement, Martin McTague, National Chair of the Federation of Small Businesses (FSB) said “The FCA’s cash access protection proposals are highly welcome, and recognise the impact that loss of cash facilities such as bank branches and cash machines can have on local businesses and communities. It’s extremely important both consumers and small firms have choice over payments, so we’re pleased to see positive steps today to help maintain that in practice.”

“Cash is still a key payment method for countless small businesses, with our research finding that one in four high street firms say it is the number one payment method of choice for their customers. It is vital for many people in vulnerable groups, as well as for overseas visitors.”

“It is crucial that cash services are still accessible to small businesses who need to provide a variety of payment choices. Cash is also an integral back-up when electronic payments systems aren’t available, and in areas with poor connectivity.”

“Small businesses will be especially glad to see a new proposed requirement for designated banks and building societies to carry out an assessment of how the closure of a cashpoint or branch would affect overall cash access and deposit facilities in a locality, and how future gaps can be plugged.”

“We are also very pleased to see the FCA specifically mention the cash services available via Post Office counters, highlighting the important role they play in giving small firms access to essential banking services such as withdrawals and deposits.”

“Too many times in recent years, we have heard from small firms who are deeply concerned about the closure of the ‘last branch’ in their town or area, with knock-on effects on cash availability for consumers, and cash handling services for businesses. This is a known problem which has accelerated in recent years, so it is especially heartening to see the FCA respond with proposals to protect people’s ability to access cash.”

“The proposals also strongly support banking hubs, where a number of banking and deposit services are available to local communities and businesses. In places where the nearest bank branch is some distance away, these can be helpful, even if they don’t replicate the full range of services of a branch. These proposals should drive the increasing momentum and support behind banking hubs and help to accelerate their introduction in high streets and town centres.”

“We applaud the FCA for tackling this issue, and will be banking on a well thought out result which protects cash access for as many people as possible.”