FCA proposes rules to maintain access to cash

The announcement follows new capabilities granted to the FCA by the Financial Services and Markets Act 2023. In its proposals, the FCA specified that banks and building societies will need to assess gaps in access to cash, with the assessments being required to take into consideration factors such as demographics and transport. When a gap is identified, firms need to act to address them. According to the FCA’s officials, even if there is an increasing shift towards digital payments, over 3 million consumers will rely on cash for their daily transactions, especially individuals who may be vulnerable, as well as many small and medium-sized enterprises (SMEs). The FCA also highlighted the importance of supporting consumers impacted by recent developments.

Moreover, the proposals establish how banks and building societies need to assess and eliminate gaps in local cash provision. This intends to help manage the speed of change and ensure that individuals can continue to access cash if they need it. As per the information detailed in the press release, starting with the first quarter of 2023, 95.1% of the UK population are within one mile of a free-to-use cash withdrawal point, including cash machines or Post Office branches, while 99.7% of them are within three miles. The accessibility of cash access services can impact local communities, economies, and high streets, solidifying the importance of meeting local needs.

The regulatory body proposed that designated firms are required to:

• Commence cash access assessments when modifications are being made to cash access services to decide whether additional services are needed to meet local gaps;

• Take into consideration and respond to requests from residents, community organisations, and representatives to assess and eliminate gaps;

• Provide additional cash services in provision where assessments show that there is the possibility of a significant local gap;

• Guarantee that cash facilities do not get closed, including bank branches, until any additional cash services identified are available.

The FCA’s additional capabilities do not prevent bank branches from closing, however, the regulations will impact branches that are a significant local source of cash. The regulatory body intends to ensure that the rules function in coordination with existing guidance on bank branch closures. Furthermore, existing law enables retailers to decide whether to accept cash payments or not and the FCA cannot impose on them to do so. The consultation for the rules is open until the beginning of February 2024, with the FCA expecting to finalise the rules by the third quarter of 2024.

In addition to the FCA’s new rules, at the end of August 2023, the UK Treasury proposed a new policy that supports the availability of cash withdrawal and deposit services in urban and rural areas. As per the policy, banks were intended to be subject to fines if they did not provide free access to cash withdrawals for both consumers and businesses. The proposal includes that free cash withdrawals and deposits were required to be available within a one-mile radius for individuals residing in urban areas. For people residing in rural regions, the maximum distance allowed was three miles.

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