Banks and building societies looking to close branches will have to weigh up whether residents are able to access cash under new rules announced by the City watchdog today.
Starting from 18 September, banks will have to assess whether closing local bank branches or ATMs leaves communities without adequate access to cash.
Where significant gaps are found, banks will need to provide “reasonable additional cash services”, which could include banking hubs, ATMs and Post Office facilities.
Bank branches will have to be kept open until additional cash services are available, the Financial Conduct Authority (FCA) said. Fourteen banks and building societies have been designated by the government to deliver 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,” Sheldon Mills, executive director of consumers and competition at the FCA, said.
The move to enshrine cash comes amid fears that vulnerable consumers will be left without access to payments. UK banks have closed more than 6,000 branches since 2015, according to consumer group Which?
Access to cash has become an increasingly important issue politically. Last year the government granted beefed-up powers to the FCA in the Financial Services and Markets Act to ensure people could continue to access physical money.
Ahead of the election, Labour pledged to open 350 new banking hubs in towns and villages across Britain over the next five years.
While cash usage is falling, a new report from UK Finance suggests that the pace of decline is likely to slow in the near future.
The report showed that the volume of cash payments fell by seven per cent during 2023 to 6bn, representing 12 per cent of all payments. This brought the number of payments back to its 2021 level after the volume of cash payments increased for the first time in a decade in 2022.
The report showed that 39 per cent of people were living “largely cashless lives”. However, the share of the population who mainly used cash rose to 2.6 per cent from 1.7 per cent in 2022.
As usage becomes concentrated among people with a strong preference for cash, the dropoff in usage will slow. The trade body forecast that there would be 3.4bn cash payments in 2033, making up about six per cent of all payments.
Debit cards remain the most popular payment method, accounting for 51 per cent of all payments made in 2023.