The Financial Conduct Authority (FCA), the regulatory body overseeing financial markets in the UK, has proposed a new measure to ensure that customers can still access cash services even as more banking activities move online.
In light of the increasing digitalization of financial services, the FCA has invoked its authority under a recent financial services law to require major banks like Barclays, Lloyds, HSBC, and NatWest to conduct “cash access assessments” before closing any branch.
The shift towards digital payments has raised concerns about the accessibility of cash, especially for the approximately 3 million consumers and numerous small businesses who continue to rely on it.
Sheldon Mills, the FCA’s executive director of consumers and competition, emphasized the importance of these proposals in preserving access to cash for those who need it.
He acknowledged that while digital payments are on the rise, many people, especially vulnerable individuals and small businesses, still depend on cash for their financial transactions.
In the first quarter of this year, the FCA reported that 95.1% of the UK population lived within a mile of a free-to-use cash withdrawal point, indicating relatively easy access to cash services.
However, concerns persist as the country explores the possibility of introducing a digital version of the pound in the coming years.
Such a move could further reduce the practicality of using physical cash, particularly as some businesses have already adopted card-only payment policies.
The British Retail Consortium (BRC) also weighed in on the matter, revealing that cash was used for 19% of purchases made by its members, which primarily consist of large retail chains contributing to over a third of the UK’s retail spending.
Interestingly, cash transactions saw a slight resurgence last year, marking the first increase in a decade. This uptick occurred after a decline to 15% in 2021, attributed to pandemic-related restrictions that encouraged the use of contactless card payments.
The FCA clarified that existing legislation permits retailers to choose whether or not to accept cash as a form of payment.
They intend to finalize the new rules addressing cash access by the third quarter of 2024.
As the financial landscape continues to evolve, these measures aim to strike a balance between digital innovation and ensuring that cash remains accessible to those who rely on it, thereby safeguarding the financial needs of both individuals and businesses.