FCA to Ensure UK Access to Cash

The Financial Services and Markets Act 2023 is now law in the UK. The Act requires the UK’s Financial Conduct Authority (FCA) to ensure the maintenance of reasonable provision of cash deposit and withdrawal services for personal and business current accounts held at banks.

The FCA monitors access to cash and as of the end of the second quarter in 2022, 95.1% of people lived within a mile of a free-to-use cash withdrawal point, ie. an ATM, bank or building society branch or a post office. 99.7% of people lived within three miles of a cash access point. Despite this, the FCA is aware that the situation is changing, both in terms of the number of branches and payment behaviour.

The FCA also notes that as of May 2022 3.1 million adults, 6% of the total, who pay using cash for everything or most things. As such, cash is important to this group and, in particular, people with vulnerable characteristics and small businesses. If the pace of change is not managed sensibly, these groups will be negatively affected.

The FCA is going to balance off the cash needs of society with the costs firms face to meet those needs, all in the context of the wider preference of consumers to pay digitally.

FCA’s Approach

The UK’s Treasury has issued a Cash Access Policy statement and the FCA has said it will seek to maintain a network in line with the current distribution of services. It is going to consult on new rules that will work with its existing branch closure guidance, in due course.

The FCA will not take a blanket approach but one that matches the particular circumstances of localities. It is interesting that digital connectivity, the scale of impact and the number and characteristics of people likely to be affected are included in the factors to be considered. It would be interesting to see the extent to which thresholds of acceptable access are flexible.

There will be a consultation on the rules that require banks and building societies to have to conduct assessments of the reasonableness of cash provision. The expectation is that these rules will require an assessment where a community requests one.

If a gap in provision is identified, the gap is to be filled if it is reasonable for the firm to provide an additional service. There will be flexibility so that firms can choose to install shared services such as banking hubs to fill the gap, albeit complying with UK Competition Law when coordinating with other organisations.

If an assessment shows additional cash services should be put in place as a result of a pending closure by a designated firm, the closure must wait until those services are in place before going ahead with the closure.

In order to monitor coverage of access to cash across the UK, the FCA will collect information from providers of cash access services and other entities involved in cash access services.

Alongside seeking to ensure reasonable provision of cash deposit and withdrawal facilities, the FCA is keen to encourage investment in developing shared solutions, including the provision of efficient and innovative digital payment solutions.

Neither the UK Treasury’s Policy Statement nor the new powers given to the FCA extend to cash acceptance.

Next steps

• The Government will designate which firms this regulation of cash access apply to. It may designate co-ordination bodies.

• Before making any rules or general guidance, a full consultation, including a cost benefit analysis, to seek views is required.

The FCA expects any new rules to take effect by summer 2024. In the meantime, firms must anticipate the foreseeable harm to their customers of any decision to close a branch or close or convert an ATM and address it before proceeding with a closure or conversion.