FCA mandates banks to ensure cash access in local communities

BANKS and building societies in the UK will soon be required to ensure that local communities have adequate access to cash services, following new regulations announced by the Financial Conduct Authority (FCA) on Tuesday (23).

These rules, effective from 18 September, mandate that financial institutions assess and address significant gaps in cash access, particularly where branches and ATMs are closing.

A recent research by the regulator revealed that the volume of cash payments in the country fell by 65 per cent between 2015 and 2021 due to innovation and changing consumer behaviour.

Concurrently, the number of bank branches and ATMs has significantly decreased, with 1,358 branches and 4,450 ATMs closing in the two years leading up to June 2023. This reduction in access to cash services adversely impacts those who rely on cash, prompting parliament to grant the FCA powers to ensure reasonable provision of cash deposit and withdrawal services.

Under the new rules, banks must evaluate the need for additional cash services in the community when making changes to local services. They must also respond to requests from local residents, community organisations, and representative groups who can request assessments to identify gaps in cash access.

If significant gaps are found, banks are required to provide reasonable additional cash services. Furthermore, banks must keep current facilities, such as branches and ATMs, operational until new services are available.

Sheldon Mills, executive director of consumers and competition at FCA, stressed the ongoing need for cash access.

Mills said, “Three million people continue to rely on cash, even as digital payments become more popular. 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.”

To address gaps in cash access, various solutions will be implemented, including banking hubs, ATMs (including those accepting deposits), and Post Office facilities.

The government has designated 14 banks and building societies to implement this new cash access system. The FCA has adjusted the original rules to give banks more time to conduct cash access assessments and to allow local communities more time to present their case. Additionally, banks will be able to review the provision of identified cash services after two years.

Recent research published by the FCA found out that those most reliant on cash are typically from low-income households (earning less than £15,000 annually) and those with limited digital capability or access.

A survey revealed that six per cent of UK adults depend on cash for most or all of their purchases, with higher reliance among those who are digitally excluded, have low incomes, are unemployed, or are in poor health.

Additionally, low-income households and non-employment status also increase cash reliance.