The City watchdog has announced new rules today, requiring banks and building societies to consider whether residents can access cash before deciding to close branches.
From 18 September, banks will be required to evaluate if the closure of local bank branches or ATMs leaves communities without sufficient access to cash.
If significant gaps are identified, banks will have to provide “reasonable additional cash services”, which could encompass banking hubs, ATMs and Post Office facilities.
The Financial Conduct Authority (FCA) stated that bank branches must remain open until additional cash services are available. The government has designated fourteen banks and building societies to implement this new cash access system.
“Three million people continue to rely on cash, even as digital payments become more popular. And many small businesses still need somewhere to safely deposit their takings each day,” said Sheldon Mills, executive director of consumers and competition at the FCA, as reported by City AM.
This move to protect cash access comes amid concerns that vulnerable consumers could be left without access to payments. Consumer group Which? reports that UK banks have closed over 6,000 branches since 2015.
Access to cash has become a politically significant issue. Last year, the government granted the FCA enhanced powers under the Financial Services and Markets Act to ensure people could continue to access physical money.
In the run-up to the election, Labour has committed to establishing 350 new banking hubs in towns and villages across the UK over the next five years.
Despite a decline in cash usage, a recent report from UK Finance indicates that this downward trend may decelerate soon.
The report highlighted a seven per cent drop in cash payment volumes during 2023 to 6 billion, equating to 12 per cent of all payments. This level mirrors the figures from 2021, following an uptick in cash payments in 2022, the first increase in ten years.
According to the report, 39 per cent of individuals are now leading “largely cashless lives”. Yet, the proportion of the population predominantly using cash has climbed to 2.6 per cent, up from 1.7 per cent in 2022.
As cash usage consolidates among those with a strong preference for it, the decline is expected to plateau. UK Finance predicts there will be 3.4 billion cash transactions in 2033, constituting around six per cent of all payments.
Debit cards continued to be the preferred method of payment, representing 51 per cent of all transactions in 2023.
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