The future of local banking services and access to cash

People are relying less on both physical cash and traditional bank branches:

• Cash was used for only 14% of all payments in the UK in 2022 (pdf), according to data from the trade body, UK Finance.
• According to data collected by Which? around 6,000 bank and building society branches have closed since January 2015 across the UK, or are due to close by the end of 2025. This is equivalent to 61% of branches in January 2015.

Who’s affected by the changes?

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.

Threats to the future of cash

In 2022, automated teller machines (ATMs) provided about 90% of the cash withdrawn in the UK.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).

Protecting access to cash

In 2019 the Access to Cash Review called on Government, regulators, financial services and others to work together to “keep cash viable for the foreseeable future”. Government and regulatory responses have since referred to and build on the review’s recommendations:

• The government said in 2020 that it was committed to supporting the use of cash, noting its importance to people who are financially excluded.
• The Financial Services Act 2021 enabled traders to offer cashback without a purchase.
• The Financial Services and Markets Act 2023 (FSMA 2023) gives the FCA powers to ensure that customers have “reasonable access” to free cash deposit and withdrawal facilities.
• Under these powers, the FCA has introduced rules taking effect from September 2024 requiring banks to assess cash access triggered by a branch or ATM closure, and provide alternatives where there are no other suitable facilities.
• The 2023 Act also gives the Bank of England powers to oversee and protect the wholesale cash infrastructure. The Bank has introduced rules requiring key players to share information about their infrastructure, conduct risk assessments on third party suppliers to ensure resilience, and inform the Bank of any plans to close distribution infrastructure so it has the opportunity to make alternative arrangements.

Responses to branch closures

Related to access to cash services is the matter of access to wider banking services. There has been widespread public and political concern and debate about the closure of bank branches and the subsequent effects on communities.

For example, during the passage of FSMA 2023, Labour tabled new clauses enabling the FCA to ensure access to banking services. 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.

From 2020, the FCA has published guidance setting out expectations for banking providers that intend closing or reducing branches, services or free ATMs. It expects the provider to analyse the effect, communicate with customers, and support them to find alternative provision.

Post Offices, banking hubs and other provision

Alongside recent legislation to protect access to cash and regulation, the industry has led initiatives to protect access to cash and wider banking services:

• The Post Office has signed an agreement with about 30 banks and building societies to offer basic banking facilities to personal and business customers. Almost 3 in 10 people used those services in 2021.
• LINK, which runs most ATMs in the UK, undertakes Community Access to Cash Reviews for communities that believe their needs are not being met. The reviews may result in the provision of new services. One such service – the banking hub – provides a physical site where a range of providers offers in-person services to customers This is in addition to wider cash services offered though the Post Office’s service.
• There have been concerns about how quickly these are opening. As of July 2024, 147 have been recommended of which 41 are operational.

Further reading

• The Library briefings on Statistics on access to cash, bank branches and ATMs and Post office numbers contain more detailed data and discussion of trends.
• The Library briefing on Protecting access to cash gives a detailed snapshot of policy and statistics in 2021.