Data (Use and Access) Bill [HL]
The Data (Use and Access) Bill [HL] is scheduled to have its second reading in the House of Commons on 12 February 2025.
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An overview of policy relating to the closure of bank and building society branches and to efforts to protect access to cash.
The future of local banking services and access to cash (876 KB , PDF)
People are relying less on both physical cash and traditional bank branches:
Research by the Financial Conduct Authority (FCA) in 2022 found that the digitally excluded, older people, people in poor health, those with lower financial resilience and those with lower financial capability depend more on cash.
In 2019, the FCA identified similar groups as being most likely to be affected by bank branch closures. Many small businesses also depend on physical branches, according to a report from the Federation of Small Businesses in 2016. The Scottish Affairs Select Committee reported in 2019 that whole communities – especially in rural areas – are affected when the last branch in a community disappears.
In 2022, automated teller machines (ATMs) provided about 90% of the cash withdrawn in the UK. But the number of free-to-use ATMs has fallen over recent years, partly because fees payable to machine operators have reduced. Those operators have often responded by introducing pay-to-use ATMs.
Although there have been attempts to remedy that trend, the National Audit Office warned in 2020 that providing ATMs could become uneconomical, leading providers to withdraw. But the number of pay-to-use ATMs has also fallen since 2019.
Many businesses and traders have also moved towards non-cash payments. This could also threaten the future of the cash distribution industry (pdf).
Over the past decade various government and industry initiatives have been put in place to try and maintain access to cash and bank branch services.
With respect to banking services, in 2017, the industry agreed an Access to Banking Standard, where banks would proactively inform customers and stakeholders of forthcoming closures and alternative facilities.
The standard has been superseded by guidance from the FCA setting out expectations for banking providers that intend closing or reducing branches, services or free ATMs.
Banks have an agreement with the Post Office whereby the Post Office provides banking services on their behalf in its branches. Banks have also collaborated to launch banking hubs in areas of the country with few or no services. These are staffed by bank employees and so can offer wider support than Post Offices.
With respect to access to cash specifically, the largest ATM operator LINK which sets the amount of money ATM operators get paid has set a premium fee for remote and low-use ATMs in an effort to protect their viability.
LINK has also been responsible for delivering a voluntary scheme on behalf of banks whereby it conducts cash access assessments (pdf) in response to service closures or community requests. LINK then has the option of recommending a variety of new services.
In 2023 Parliament passed the Financial Services and Markets Act 2023 (FSMA 2023) which gave the FCA responsibility to maintain cash access. The FCA’s rules which came into effect in September 2024 require banks do not close services until they have carried out an assessment that it would not impact withdrawal and deposit services in the area.
Its assessments will be modelled on LINK’s previous scheme, and conducted by LINK, but with a wider range of criteria which should result in more areas having their services protected or new services recommended.
The act also gave the Bank of England powers to oversee and protect the wholesale cash infrastructure.
While FSMA 2023 gave the FCA powers to protect cash access, it did not extend to wider banking services. During the passage of the act, Labour tabled new clauses to that effect. The government did not support the clauses, with then Economic Secretary Andrew Griffith MP noting the development of sector-led banking hubs and saying intervening in the market by legislating would not be proportionate. The clauses were withdrawn.
Additionally, the act did not directly address the issue of cash acceptance. The 2019 industry-led Access to Cash Review, which has been influential in policymaking since, warned that retailers refusing cash poses a threat to the cash infrastructure. Traders can face significant costs handling cash, including security costs, the cost of travelling to bank branches, and deposit and withdrawal fees charged by banks on businesses.
The review did not recommend requiring retailers to accept cash, but rather to experiment with initiatives to make it cheaper for businesses to handle cash, like deposit-taking ATMs.
The future of local banking services and access to cash (876 KB , PDF)
The Data (Use and Access) Bill [HL] is scheduled to have its second reading in the House of Commons on 12 February 2025.
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