Lenders who fail to meet their responsibilities to provide cash could face fines under FCA rules, as industry data suggests cash remains the second most popular payment method in the country.
Efforts to ensure consumers and businesses have access to cash are being boosted by a series of new rules from the London-based regulator, as a report finds solid demand for banknotes and coins despite a decline in payments.
The UK’s Financial Conduct Authority (FCA) said that from 18 September, banks and building societies would be under greater obligation to check whether local communities lack access to services such as branches and ATMs and to close “significant gaps”.
The new obligations would force them to act if, based on assessments that can be requested from the respective municipalities, difficulties in providing basic services, including the ability to place cash in bank accounts, are identified.
In addition, lenders would have to keep a service, such as a branch or ATM, open until a replacement is found or operational.
Failure to comply with the regulations could ultimately result in an unlimited fine, the FCA said.
The regulatory framework covers the business activities of the 14 largest credit institutions on the high street.
You have the opportunity to review your liquidity situation every two years.
The banking sector has long been accused of isolating the population from the outside world by closing numerous branches since the financial crisis.
As part of cost-cutting measures, around 6,000 branches have been closed over the past nine years. The banks believe that the closure is an expression of the move away from branch business and towards digital banking.
Critics accuse the industry of neglecting rural communities and vulnerable people, such as the elderly, who are far less tech-savvy.
Industry data released separately on Wednesday backed banks’ claims that habits are constantly evolving as new services become available online thanks to new technologies and wider investment.
The UK Finance report on UK payment trends in 2023 showed that cash remains the second most popular payment method.
The number of people who primarily use cash increased from 1.7% in 2022 to 2.6% of the population, or 1.5 million people.
The increase may be explained by the fact that people are finding it easier to manage banknotes and coins in view of the ongoing cost of living crisis.
However, they accounted for 12% of all payments – down from 14% in 2022.
The data showed that 38% of the total 48 billion made last year were contactless payments, while the use of Apple or Google Pay increased by 12%.
The FCA, for its part, has signalled that it is not overly concerned about the current situation regarding access to cash, with a growing number of so-called banking centres and general postal services filling much of the gap left by the closure of branches and ATMs.
The report found that in June 2023, 95% of the UK population lived within one mile of a free cash withdrawal point (e.g. ATMs or post offices), and 99.7% of the population lived within 5 km.
However, Sky News reported in May that lenders were wary of the prospect of Post Office – which has been heavily criticised for its treatment of mailroom managers in the Horizon IT scandal – demands more than the current £200 million annually in fees for the use of bank customers’ websites for basic services.
Sheldon Mills, executive director of consumer and competition at the FCA, said: “Three million people continue to rely on cash, even as digital payments become increasingly popular. And many small businesses still need a place to securely deposit their daily takings.”
“That is why we have responded quickly to the new powers given to us by Parliament to ensure that appropriate access to cash withdrawals and deposits is maintained.”
Adrian Buckle, head of research at UK Finance, said: “Consumers have a huge choice of payment options available, but we are definitely seeing continued popularity of debit cards and contactless payments.”
“The key factors here are both consumer demand and new technologies that are contributing to greater acceptance, particularly among small and mobile businesses.”
“Contactless payments via mobile phone are growing rapidly. A third of all adults now make these payments at least once a month. Usage could increase further.
“This does not mean that we are on the way to becoming a cashless society. Cash is still the second most used payment method in the UK, although we are using it less overall and more and more people are living largely cashless lives.”
“We predict that over the next decade the long-term trend of a decline in cash usage and a growth in certain other payment methods such as cards and faster payments will continue.
“We also expect further developments in payments that will improve the customer experience.”