How banks must now protect access to cash amid branch closures and disappearing ATMs

Banks and building societies can no longer leave customers and small businesses out in the cold when it comes to access to cash, following a new ruling from the Financial Conduct Authority (FCA).

Branch closures from high street brands such as Natwest, Barclays and Lloyds, as well as fewer ATMs on the high street, have left local communities with limited options for accessing cash - forcing the regulator to step in to protect vulnerable consumers. 

As of today (18 September), major banks and building societies now need to weigh up if local communities lack access to cash and fill any significant gaps.

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“Government action to protect cash access in the UK is long overdue, and it’s only right that the FCA enlist the help of the banks who caused the problem in the first place," says Andrew Martin, chief executive of payments firm SMEB.

"We hope that these new rules will better protect communities from becoming banking deserts - especially those in rural areas."

The FCA is making use of new powers it gained from the previous government at the end of 2023 to ensure “reasonable access” to free cash withdrawals and is putting them into action with new rules.

The importance of cash was also highlighted in July when nationwide IT outages meant many retailers such as supermarkets had to close as they couldn’t take digital payments

The FCA has said its rules are already making a difference, with 15 communities that had not previously been assessed as needing a banking hub now getting one, six will get an ATM and another six are getting an automated deposit service or enhanced Post Office.

“Three million people continue to rely on cash, even as digital payments become more popular,” says Sheldon Mills, executive director of consumers and competition at the FCA.

“Many small businesses still need somewhere to safely deposit their takings each day.  

“That’s why we’ve acted quickly in response to new powers given to us by Parliament to ensure reasonable access to cash withdrawal and deposits is maintained.” 

Tulip Siddiq, economic secretary to the Treasury Tulip Siddiq, says:  “Cash continues to play a vital role in the lives of millions of people and businesses across the country, so I welcome the FCA's new rules. Our commitment to roll out 350 banking hubs will also help provide local communities with access to the critical banking services people rely on." 

How are banks and building societies being told to protect cash access?

The government has designated 14 banks and building societies to deliver this new cash access system. 

These include most of the major household names including Barclay,s HSBC, Lloyds Bank, Nationwide, NatWest and Santander.

The FCA is unable to order banks to keep branches open but as of 18 September, they will need to assess cash access and understand if additional services are needed, when changes are being made to local services.  

Additionally, they will have to respond to local residents, community organisations and representative groups, who will be able to request an assessment of whether there are gaps in local cash access. 

Where significant gaps are found, banks and building societies will need to deliver reasonable additional cash services and keep facilities, including bank branches and ATMs, open until any additional cash services identified are available.  

Firms will also be able to review the provision of identified cash services after two years. 

Gaps could be filled with a range of measures including banking hubs, ATMs and Post Office facilities, the FCA said

ATM provider LINK, which launched 15 new banking hubs earlier this month to take the total to 81, said the FCA’s move is positive for consumers.

“Banking is changing, but as last week's global IT outage shows, access to cash remains vital for consumers and businesses and the new regulations will help LINK and the banks work together with the FCA to protect access to cash on the high street for years to come,” says Adrian Roberts, deputy chief executive of LINK.

Alice Haine, personal finance analyst for Bestinvest, says maintaining access to cash is vital for some parts of society such as those in rural areas and vulnerable people who are unfamiliar with digital payments

“Banking hubs, ATMS that offer deposit facilities and ramping up Post Office services may go some way to ease the difficulties posed by gaps in the system, as well as the widespread public and political concern about the closure of bank branches and the impact on communities, but businesses must also be encouraged to continue accepting payments in cash,” says Haine.

While electronic payments make our lives easier, Haine says last week’s IT outage highlights why carrying a small amount of cash in our wallets should still be an essential personal finance rule to cover those ‘just in case’ moments when the technology we rely on so heavily fails.  

She adds: “Consumers should also endeavour to make ad hoc payments with notes and coins to ensure cash payments remain normalised. 

“This is important to ensure the facility does not disappear entirely from lives, not only offering a backup in times of global uncertainty or when a phone or credit card has been stolen but also to ensure the vulnerable, those on low incomes or the unbanked can still make payments with ease. By continuing to insist on access to cash and for businesses to accept cash payments, we can ensure that society, and our finances, remain protected over the long term.”