British banks could be fined if they fail to maintain a minimum level of free access to cash, the government stated on Aug. 18.
The policy statement came amid concerns that increasingly ubiquitous digital transactions will lead to a so-called cashless society.
It means that most urban residents should be able to withdraw or deposit cash free of charge within a mile of where they live and that most rural residents should be able to do so within three miles of their homes, as they currently can.
The Treasury stated that the Financial Services and Markets Act 2023 has given the Financial Conduct Authority (FCA) new powers to police the level of cash access and to fine banks and building societies if they fail to meet the standard.
The FCA stated that it'll launch a consultation “in due course” on how the new rules will work with current rules after the government designates which firms the regulation will apply to.
It also stated that the new rules are expected to take effect in the summer of 2024.
Under current FCA guidance, a service provider must inform the FCA if it’s considering closing a branch, an ATM, or a service that it provides so that the regulator can analyze the potential impact.
The FCA stated on Aug. 18 that it expects that the proposed rules will require a designated firm to fill gaps where cash access is needed.
Importance of Cash
Economic Secretary to the Treasury Andrew Griffith said in a statement: “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.”
According to the FCA, the proportion of digital transactions has nearly doubled to 85 percent in 2021 from about 45 percent a decade ago.
The COVID-19 pandemic has pushed the trend further, with contactless payments making up 61 percent of all credit card and 75 percent of all debit card transactions, the financial watchdog stated.
However, there’s still about 6 percent of the population—or 3.1 million adults—who used cash “to pay for everything or most things” in the 12 months up to May 2022. The percentage was higher among people with vulnerable characteristics, such as those in poor health or financial difficulty.
Data from the 2022 Financial Lives Survey also shows that about one-fifth of adults with a current account regularly visited a branch and that the figure was higher among adults with vulnerable characteristics.
The FCA also found that access to cash has so far been “generally good” for most people.
From April 2022 to June 2022, 95.1 percent of the UK population had a free-to-use cash withdrawal point, such as a cash machine or bank, post office, or building society branch, within a mile of their home, and 99.7 percent of the population could find these cash points within three miles, according to the FCA.
The announcement coincided with a “Don’t Kill Cash” campaign by GB News, whose show hosts—including former politician Nigel Farage—submitted a petition to the Chancellor of the Exchequer on Aug. 17.
The broadcaster stated that its online petition had gathered 300,000 signatures by Aug. 17.
