Government protects cash access services, free of charges, across the UK
New minimum expectation for cash-users set out by City Minister
Vulnerable cash users protected by Financial Conduct Authority (FCA)
A government statement published today sets out the minimum expectations on banks to protect services for people and businesses wanting to withdraw or deposit cash.
They can expect to withdraw cash without any fees – something that has been set out in law.
As part of this move, the Financial Conduct Authority (FCA) has been provided new powers by the government to protect the provision of cash access services. This includes protecting cash access without any fees for those who hold personal current accounts.
Building on laws granted through the government’s Financial Services and Markets Act 2023, the FCA will use these newfound powers to make sure banks and building societies are keeping up to these standards – and have the power to fine them if they do not.
While the country is moving further away from using coins and notes with the number of online payments rising from 45% to 85% in the past ten years, cash can still be an integral part of many businesses and people’s lives.
Economic Secretary to the Treasury, Andrew Griffith, said: “Whilst the growing choice and convenience of digital payments is great, cash has an important and continuing role to play.
“That’s why we are taking action to protect access to cash in law and laying out that this means fee-free withdrawals and the availability of cash facilities within a reasonable distance.
“People shouldn’t have to trek for hours to withdraw a tenner to put in someone’s birthday card – nor should businesses have to travel large distances to deposit cash takings.
“These are measures which benefit everyone who uses cash but particularly those living in rural areas, the elderly and those with disabilities.”
As it stands, the vast majority of people living in urban areas can access cash deposit and withdrawal services within one mile; with rural-dwellers around three miles away.
Today’s policy statement makes clear that the FCA should use its powers to maintain this level of coverage, while recognising that needs may differ by location and change over time.
It also makes clear that – if a service is withdrawn and a replacement service is needed – this should be put in place before the closure takes place.
The FCA is also required to ‘have regard’ to local deficiencies in cash access. The policy statement sets out that the regulator should consider factors such as the opening hours and distance to cash access services, as well as the need for in-person assistance.
Laws introduced in the Financial Services Act 2021 have delivered cashback in over 2,500 shops across the UK – without any need to buy something in store – through the LINK network.
Half a million people across Scotland who are dependent on cash risk being forgotten by banks due to the unprecedented rate of closures. Since 2015, 53% of Scotland’s bank branches have closed, which represents the highest percentage loss across the UK’s four nations.
From difficulties adapting to a society built on digital payments, to older people on lower and fixed incomes using it as a budgeting tool, many people opt to use cash for a number of reasons.
However, Westminster’s Scottish Affairs Committee raises concern that not enough support is being offered to support these individuals as the UK transitions to an increasingly digital society, nor has adequate research been undertaken to understand the full implications of such a move.
The Committee welcomes the Government’s introduction of its Financial Services and Markets Bill, which includes added protections on access to cash. The then-Treasury Minister John Glen, when appearing before the Committee, recognised the need for a more detailed picture of cash usage in Scotland.
The Committee is concerned that the rapid rate of bank branch closures may be as a result of banks rushing to close branches before legislation can take effect to protect access to cash and banking services.
In addition to Government legislation hoping to support access to cash, there have also been a number of voluntary agreements championed within the sector. This includes LINK’s Financial Inclusion Programme, which provides free access to cash via free-to-use ATMs in the most rural and deprived areas of the UK.
The Committee is of the view however that this should not be left to a voluntary agreement which leaves it vulnerable: future legislation should complement industry-led initiatives to guarantee free access to cash.
While access to cash in Scotland paints a deeply concerning picture, the Post Office has filled the void of many banking services within communities. It is deeply disappointing that Scotland has seen the highest percentage of Post Office closures anywhere in the UK, yet its resource and the service it offers appears to be steady.
In recent years, its offering of banking services has grown, and now offers customers more services than ever before, with the recent renewal of the Banking Framework Agreement. The Committee recommends that a long-term commitment is sought from banks to maintain appropriate banking services for their customers using the Post Office network.
Scottish Affairs Committee Chair, Pete Wishart MP, said: “Access to cash across Scotland has been decimated in recent years, leading to Westminster Committees investigating the issue multiple times.
“While the move to digital banking and payments has offered a method at which to do transactions that many of us enjoy, we cannot forget the 500,000 people in Scotland who rely on cash in their day-to-day lives. With the cost-of-living crisis deepening, many people are using cash for budgeting.
“But what is deeply worrying is that bank branches are closing at a record rate with very limited research or thought conducted of the possible widespread implications.
“Since the predecessor Committee’s inquiry considering this very issue, it is welcome that the Government is legislating to protect access to cash. However, this positive announcement is beset by the risk that banks may close their doors before legislation on this matter comes into force.
“We are aware of the commercial considerations affecting banks, which has played a role in the recent increase of branch closures. We welcome the effort taken by the banking industry to protect access to cash, although we still feel that there is a clear need for legislation.
“In our report today, we are calling for more research into the implications of a cashless society and more secure and longer-term agreements to ensure the continued access to cash. The Government appears to be in listening mode on this issue, and I look forward to its response in due course.”
Recommendations
The Committee’s recommendations are:
The UK Government should consider asking the Financial Conduct Authority (FCA) to investigate and monitor cash acceptance levels across the UK.
If the FCA find a substantial number of retailers refusing to accept cash, the UK Government should introduce additional protections to ensure that consumers reliant on cash are not disadvantaged.
The UK Government should clarify how the Financial Services and Markets Bill will interact with pre-existing industry-led solutions such as LINK’s Financial Inclusion Programme.
We recommend that the UK Government consider legislating in the Financial Services and Markets Bill to mandate the membership of LINK for card issuers and ATM operators to ensure that the Financial Inclusion Programme can continue to provide free access to cash for as long as it is needed.
Attempts to introduce deposit-taking ATMs for both consumers and SMEs have been constrained by a considerable lack of progress from both the banking industry and the UK Government. Considering the strength of the evidence to support their introduction, we repeat our predecessor Committee’s recommendation that the UK Government set up a working group with industry to introduce network-wide deposit-taking ATMs.
Building on the structure and objectives of the Banking Framework Agreement, we recommend that the UK Government seek a long-term commitment from banks to maintain appropriate banking services for their customers using the Post Office network, to guarantee access to cash and basic banking services for all communities in Scotland.
Millions of people in communities across the UK will see their ability to access cash protected in new powers set out by the government today (Thursday 19th May).
For the first time, the UK’s largest banks and building societies will be subject to new Financial Conduct Authority powers to ensure the continued availability of withdrawal and deposit facilities in local communities across the UK.
Measures will be legislated for in the upcoming Financial Services and Markets Bill which will protect consumers and enhance the UK’s position as a global leader in financial services.
MILLIONS of people across the UK will benefit from new legislation to protect access to cash, helping to level up opportunity and ensure financial inclusion across the UK, the government announced today (Thursday 19 May).
Under the new rules, the financial regulator – the Financial Conduct Authority (FCA) – will be granted new powers over the UK’s largest banks and building societies, to ensure that cash withdrawal and deposit facilities are available in communities across the country.
The FCA’s new powers will allow it to address cash access issues at both a national and local level. To support the FCA, the government will in due course set out its expectations for a reasonable distance for people to travel when depositing and withdrawing cash. This will reflect the existing spread of cash withdrawal and deposit facilities in the UK.
Cash is the second most frequently used method of payment in the UK, and around 5.4 million adults rely on cash to a very great or great extent in their daily lives – further emphasising the importance of this legislation and new FCA powers.
Economic Secretary John Glen, who will be visiting Scotland today, said: “Millions of people across the UK still rely on cash, particularly those in vulnerable groups, and today we are delivering on our promise to ensure that access to cash is protected in communities across the country.
“I want to make sure that people are still able to use cash as part of their daily lives, and it’s crucial to ensure that no person nor community across the UK is left behind as we embrace a more digital world.”
The Chancellor set out in his Mansion House Speech in 2021 that the UK must remain at the forefront of innovation and technology, and the government recognises the need to embrace the transition to a more digital world and realise the opportunities this brings individuals and businesses.
But as we transition to a digital payments system, it is critical to acknowledge that cash access remains vital to millions of people in communities across the UK, particularly those in vulnerable groups, and no one should be left behind.
The government passed legislation to enable the widespread adoption of cashback without a purchase as part of the Financial Services Act 2021, which was possible as a result of the UK’s departure from the European Union.
And last month the government announced its intention to legislate to provide the Bank of England with the powers necessary to ensure the UK’s wholesale cash infrastructure – which includes the network of cash centres integral to the sorting, storing and distribution of notes and coin – remains effective, resilient, and sustainable, and continues to support access to cash across the UK.
Taken together, these measures will ensure that the UK’s cash infrastructure is viable for the long term.
These powers will be legislated for in the upcoming Financial Services and Markets Bill, which will protect consumers and enhance the UK’s position as a global leader in financial services.
Financial Services and Markets Bill will maintain and enhance the UK’s position as a global leader in financial services having left the EU.
The Bill will protect cash by ensuring continued access to withdrawal and deposit facilities across the UK.
Banks can be required by the regulator to reimburse victims of authorised push payment fraud.
New laws to protect access to cash and help victims of financial scams were announced during the Queen’s Speech yesterday.
The new Financial Services and Markets Bill, announced in yesterday’s Queen’s Speech at the state opening of parliament, will support consumers by protecting access to cash. It will ensure the continued availability of withdrawal and deposit facilities across the UK, and that the country’s cash infrastructure is sustainable for the long term.
Cash remains an important payment method for millions of people across the UK, particularly those in vulnerable groups, and the government is committed to preserving it.
The Bill will also enable the Payment Systems Regulator to require banks to reimburse authorised push payment (APP) scam losses, totalling hundreds of millions of pounds each year. This will ensure victims are not left paying for fraud through no fault of their own
These measures form part of wider plans to maintain and enhance the UK’s position as a global leader in financial services, cutting red tape while maintaining high regulatory standards and ensuring the sector continues to deliver for individuals and businesses.
Economic Secretary to the Treasury, John Glen said: “We are reforming our financial services sector now we have left the EU to ensure it acts in the interests of communities and citizens, creating jobs, supporting businesses, and powering growth across all of the UK.
“We know that access to cash is still vital for many people, especially those in vulnerable groups. We promised we would protect it, and through this Bill we are delivering on that promise.
“We are also sticking up for victims of financial scams that can have a devastating impact, by ensuring the regulator can act to make banks reimburse people who have lost money through no fault of their own.”
The Financial Services and Markets Bill delivers on the ambitious vision for the financial services sector set out by the Chancellor at Mansion House last year. It builds on the Financial Services Act 2021, which was the first step in amending the UK’s regulatory regime outside of the EU.
The Bill will make the most of the opportunities of Brexit, by establishing a coherent, agile and internationally-respected approach to financial services regulation that is right for the UK.
The main elements of the Bill are:
Revoking retained EU law on financial services and replacing it with an approach to regulation that is designed for the UK. This includes the Solvency II legislation governing the regulation of insurers, which the government has committed to reform.
Updating the objectives of the financial services regulators to ensure a greater focus on growth and international competitiveness.
Reforming the rules that regulate the UK’s capital markets, the engine of the UK economy, to promote investment.
Ensuring that people across the UK continue to be able to access their own cash with ease.
Introducing additional protections for those investing or using financial products, and to make it safer and support the victims of scams.
More details will be available when the Bill is formally introduced.
People will be able to get cashback from shops without needing to buy anything under new proposals to protect the UK’s cash system announced today (15 October 2020).
government sets out plans to protect the UK’s future cash system and ensure people have easy access to cash
proposals would see cashback offered at shops without consumers having to make a purchase
the Financial Conduct Authority would also be given overall responsibility for the UK’s retail cash system to protect consumers and SMEs
Under the government proposals, cashback without a purchase could be widely available from retailers of all sizes in local communities across the UK.
Although cash use is declining, with people increasingly choose cards, mobile and e-wallets to make payments, it remains crucial for groups across the UK – including the elderly and vulnerable. Many find that cash is more accessible than digital payments methods or that it helps them to budget and manage their finances.
These proposals, which also include making the Financial Conduct Authority (FCA) responsible for ensuring the cash system benefits consumers and SMEs, are the latest step in the Government’s effort to support the millions of people and business who rely on cash day to day.
John Glen, Economic Secretary to the Treasury, said: “We know that cash is still really important for consumers and businesses – that’s why we promised to legislate to protect access for everyone who needs it.
“We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK’s cash system and make sure people can easily access cash in their local area.”
To ensure no one is left behind by the transition to digital payments, the government announced at the March 2020 Budget that it would legislate to protect access to cash and ensure that the UK’s cash infrastructure is sustainable in the long-term.
Today it is seeking views on its approach to this legislation from consumer organisations, businesses, financial institutions, providers of ATM and payment services and others through a call for evidence.
One proposal under consideration is cashback without a purchase, which could help to keep cash widely available by reducing cash infrastructure costs.
When local shops accept and dispense cash, it is recycled through local communities and there is less need to transport and distribute notes and coins via cash centres, which reduces the associated costs.
Last year, consumers received £3.8 billion of cashback when paying for items at a till – making it the second most used method for withdrawing cash in the UK behind ATMs.
Current EU law makes it difficult for businesses to offer cashback when people are not paying for goods and this has been a barrier to widespread adoption. The Government is now considering scrapping these rules once the transition period ends on 31 December 2020.
The government is also considering giving the FCA overall responsibility for maintaining a well-functioning retail cash system given its existing regulatory role and consumer protection objective.
At present, The Bank of England, Financial Conduct Authority, Payment Systems Regulator, and HM Treasury each have specific roles and responsibilities for oversight of the cash system. Close coordination between these authorities has been highly effective, particularly in managing risks to cash through Covid-19, but there may be significant benefits to giving a single authority overall responsibility for setting requirements to meet the cash needs of consumers and SMEs.
The call for evidence opens today (15 October 2020) and will run for six weeks. It will seek views on how to ensure industry continues to offer ways to withdraw and deposit cash, how to improve cashback, what affects cash acceptance, and where regulatory responsibility should sit.
The National Audit Office (NAO) recently reported that HM Treasury and the public bodies responsible for overseeing the cash system need to work together more effectively to achieve the government’s goal of safeguarding access to cash. A coordinated effort is needed to prevent vulnerable people who rely on cash for transactions from being excluded.
Ten years ago, cash was used in six out of 10 transactions but by 2019 it was used in less than three in 10 transactions. The outbreak of COVID-19 may have accelerated this trend, as data suggests that market demand for notes and coins declined by 71% between early March and mid-April during the lockdown, although demand has since been recovering.
The decline in the use of cash in transactions is putting pressure on the cash system. Commercial operators who distribute cash rely on high demand to maintain the attractiveness of their business models, and cover large fixed costs, such as bank branches and ATMs. In March 2020 the government announced that it would be bringing forward legislation to protect access to cash and address the sustainability of the cash infrastructure.
According to the NAO, the pressures on the cash system could mean that people who rely on cash find it more difficult to use cash in transactions. Published research shows that older people and those on a low income are more likely to make cash transactions.
In the two years to December 2019, there was a 17% reduction in free-to-use ATMs. LINK3, with support from the Payment Systems Regulator, have protected ATMs in specified areas where provision is limited.
However, while there remains a higher number of free-to-use ATMs in more deprived areas, in the two years to January 2020 the proportion of free-to-use ATMs has declined faster in those areas than in less deprived areas.
The NAO cannot currently see a clear link between the government’s aim to safeguard the consumer’s ability to use cash, and the responsibilities of the five public bodies in the cash system.
No single body has responsibility for reporting on the performance of the system in meeting the government’s aim. In May 2019, HM Treasury established the Joint Authorities Cash Strategy Group (JACS) to coordinate work to support nationwide access to cash. Although the group has improved joint working towards government’s aims, JACS does not oversee the cash system and has no decision-making power.
Changes in cash use are having an impact on the production of coins. Coin production shrank by 65% in the last decade to 383 million UK coins a year in 2019-20, from around 1.1 billion in 2010-11.
When the Royal Mint (the Mint) replaced the old £1 coin in 2017, the public returned large volumes of all coin denominations. As a result, the Royal Mint’s stocks exceeded targets in all denominations.
At the time of the NAO’s fieldwork, the Mint had no plans to produce new 2p or £2 coins for at least ten years. To drive efficiencies, the Mint has reduced headcount by 22% on coin-making work within its currency division and scrapped two of its six plating lines.
Despite fewer people using cash for transactions, the demand for notes has continued to increase.
In 2020, the number of notes in circulation reached a record high of 4.4 billion, with a value of £76.5 billion. In 2018, the Bank of England (the Bank) estimated that only 20%–24% of the value of notes in circulation were being used or held for cash transactions, with UK households holding a further 5% as savings.
Little is known about the remainder, worth approximately £50 billion, but possible explanations include holdings overseas for transactions or savings and possibly holdings in the UK of unreported domestic savings, or for use in the shadow economy. The Bank and other government bodies have little reliable information to quantify how much is likely to be held where.
At March 2020 the Bank’s contingency holding of notes significantly exceeded its minimum guidance levels, which was partly affected by the launch of the new £20 note. Its contingency stock levels were above minimum levels for all denominations, with a total value of £39 billion, against its minimum contingency guidance level of £20.5 billion.
The Bank considered these stock levels to be appropriate in light of the transition of the £20 note to polymer. However, it is not clear from the documentation shown to the NAO what process the Bank operated to determine adequate stock levels, and how the cost implications of building stock levels were taken into account.
Recent anti-counterfeiting work by both the Bank and the Mint is delivering improvements. Indications so far are that £5 and £10 polymer notes, with new security technology, have reduced the incidence of counterfeiting compared to equivalent paper notes. In addition, since the Mint introduced new advanced security technology, surveys have found very low counterfeiting rates for the new £1 coin and other denominations.
The NAO recommends that HM Treasury should set out more clearly the specific outcomes it wants the cash system to deliver for consumers and small businesses, and how this should be balanced against costs.
To drive efficiency, the Mint and the Bank should maximise opportunities to learn from each other’s experiences of cash production and align production capacity closely to future needs.
Gareth Davies, head of the NAO, said:“As society progresses towards the wide use of digital payments, the use of cash in transactions is dwindling. It may become harder for people to access cash when they need it and those without the means to pay digitally will struggle if cash is not accepted.
“HM Treasury now works more closely with the public bodies in the cash system to achieve the government’s goal of safeguarding access to cash. However, the approach is fragmented, and it is not clear that the action being taken will keep up with the pace of change.”
Lothian MSP, Miles Briggs, said:“Edinburgh and the Lothians have been moving away from cash over the last decade, but there are many people who still rely on using cash.
“The Covid-19 pandemic has accelerated the use of contactless payments which is not convenient for everyone.
“The UK and Scottish Government must work together to ensure that people who prefer using cash to manage their money have easy access to it.”
Cash delivery payments are now available for the most vulnerable individuals thanks to the Post Office in partnership with the Department for Work and Pensions (DWP).
The cash payments are available to the DWP to use to support their most vulnerable customers, initially in England, who are shielding because of the risk of infection should they leave their home.
The National Shielding Service is a working partnership with DWP that enables contact to be made with specific customers to determine if they need to receive a cash payment to be delivered.
When notified by DWP of those individuals who require a cash delivery, the Post Office will ensure cash is sent to their home using Royal Mail Special Delivery and that it arrives by 9pm the following day. This means that those individuals who must avoid leaving the home because of the risk of infection receive the cash that they need.
The Post Office has repurposed part of its foreign exchange cash delivery business to enable the overnight delivery of sterling cash and meet demand.
Guy Opperman, the Minister for Pensions and Financial Inclusion, said: “We’re doing whatever it takes to ensure people are supported through these unprecedented times. This joint initiative enables us to reach out directly to those most likely to need support, and get cash delivered to their door where necessary.
“Thanks to the hard work of DWP and Post Office staff, vulnerable customers can rest assured there is help available if they need it.”
Nick Read, Chief Executive at the Post Office, said: “I am delighted that Post Office has been able to switch its travel money delivery business to get cash directly to those that need it most.
“Working with the DWP we are able to help some of the most vulnerable in our society, including those who have been asked to shield themselves at home, with the ability to deliver cash directly to their door.”
Postal Affairs Minister, Paul Scully, said: “Vulnerable people may be self-isolating but they are not alone.
“This vital service will ensure the Government can get cash to people that need it, without them having to leave their homes. I want to thank postmasters and their teams for their continued hard work to support our communities across the UK.”
This new cash delivery option has initially been made available to those POCA customers who are shielding at home and are the most at risk from the virus.
There are around 27,000 Post Office Card Account (POCA) customers to whom this could applyand they are being actively contacted to ensure they are able to regularly access their payments.
This service adds to the range of measures the DWP can use to support these individuals shielding at home, providing a last-option mechanism for customers to receive cash who cannot visit their normal payment location.
Gareth Shaw, Head of Money at Which?, said: “This is an important move that recognises vulnerable people need help to access the cash they rely on to pay for essentials during the coronavirus lockdown.
“The difficulties many people are facing without easy access to cash demonstrates why the government must act swiftly on its promise to legislate to protect the availability of cash for consumers for as long as they need it.”
These products can be offered to their customers who are self-isolating and require cash. The Post Office is considering how to make its new cash delivery service available to the UK’s financial institutions and who can offer it to their customers.
