Protect cash it by law – or it could be history in months

The Government is coming under increasing pressure to introduce legislation that will ensure nationwide access to cash and banking services. Such legislation was promised more than a year ago but has been delayed for a number of reasons including the pandemic.

Some experts now fear that unless the Government acts soon, the country’s cash system could collapse within the next 12 to 24 months, leaving more than five million adults reliant on cash financially excluded. It would also be catastrophic for many small businesses that are still heavily dependent on cash sales.

Consumer group Which? says the Government should set out its plans in the Queen’s Speech early next month. ‘We’re at a critical moment,’ the organisation’s Gareth Shaw told The Mail on Sunday yesterday. ‘We need the Government to show us a roadmap that will safeguard consumers’ access to cash, at a time when ATMs and bank branches are closing at record levels. Its intervention cannot come soon enough.’

The end of the line?: Some experts now fear that unless the Government acts soon, the country’s cash system could collapse within the next 12 to 24 months

The latest data from Which? indicates that 50 bank branches per month have shut on average since the beginning of 2015 with NatWest Group axing nearly 1,100. Simultaneously, many free-to-use cash machines have been taken out of service – one in four since 2018.

In some deprived areas where cash usage is widespread, free-touse ATMs have been replaced with fee-charging machines, resulting in vulnerable people being ‘overcharged’ for accessing their cash.

Shaw, head of money at Which?, believes that any legislation should require the Financial Conduct Authority – the City’s regulator – to have overall responsibility for overseeing access to cash, including holding banks to account when they do not act in the best interests of consumers.

Without such regulatory oversight, he fears that the banks will simply keep encouraging more customers to jettison cash in favour of contactless payment and mobile banking. ‘Legislation is key, not piecemeal solutions,’ he said.

The plea by Which? for Government action follows in the wake of a key report on financial exclusion published yesterday by a House of Lords committee.

Among its many recommendations, the Liaison Committee calls for the Government to come up with a comprehensive financial inclusion strategy ‘that will ensure access to cash’ and ‘protect the public’. Like Which?, it believes legislation should be introduced – laws that would impose a statutory duty on the banks to provide customers with access to cash in communities where they close branches or ATMs.

Baroness Tyler of Enfield was chair of a previous House of Lords report into financial exclusion back in 2017 – work that formed the starting point for the latest suggestions.

Yesterday she told The Mail on Sunday: ‘Access to cash was a problem in 2017. But now, with the pandemic, more bank and ATM closures and many retailers going cashless, it’s a bigger issue than ever.’

She added: ‘The current regulatory framework governing access to cash and banking services is not strong enough. The Financial Conduct Authority should be empowered to be more on the front foot when banks leave communities behind.

‘Currently, the impression is that the banks pay lip service to customers’ needs. That has to stop, which means regulation and a more proactive approach from the regulator.’ Although she said it would be ‘fantastic’ to hear the promise of legislation in the Queen’s Speech next month, she accepts that there is a ‘fight for legislation time’ which could result in disappointment.

Yesterday’s House of Lords report also called for the Government to promote more aggressively the banking services of the Post Office.

When a last bank branch in a community is shut, the local post office is often the only place where customers can then deposit and withdraw cash. The committee argues for a ‘public information campaign’ explaining the services that post offices provide – a campaign that should be both ‘comprehensive’ and ‘national’. Baroness Tyler told The Mail on Sunday she was ‘delighted’ that new-style Post Office ‘banking hubs’ were also now being trialled as part of a ‘community access to cash pilots’ project funded by the banks via trade organisation UK Finance.

The pilots are being overseen by Natalie Ceeney, former boss of the Financial Ombudsman Service, who has done more than anyone in recent years to highlight the dangers posed by the rush to a cashless society. Three years ago, she published an ‘Access to Cash’ review calling for the Government and regulators to act in order to ensure cash remains a viable payment option.

Two of the eight pilots – in Rochford, Essex, and Cambuslang, South Lanarkshire – involve the testing of the banking hubs. Others are trialling different ways of making cash more accessible in communities – from simply installing a free-to-use cash machine in a community previously deprived of one, through to making cashback services more accessible (see below).

As well as offering banking services to personal and small business customers of all the big banks, the Post Office hubs allow people to meet a representative from their bank on a selected day. Feedback so far from Rochford indicates widespread support for the idea.

Although all the trials under the cash pilot project will only run for six months, Ceeney’s wish is that if the two Post Office banking hubs prove successful, they could pave the way for a nationwide rollout.

Some, she believes, could be located in the very branches that are due to shut in the coming months as all the major banks – such as HSBC, Santander and TSB – reduce their high street presence. ‘Such hubs would breathe life back into struggling communities,’ says Ceeney.

Baroness Tyler said: ‘I see these Post Office hubs as a really important part of fixing the access to cash problem.’

The Mail on Sunday has long campaigned for access to cash to be maintained. We have also been a longstanding supporter of shared bank branches – an idea first put forward by the Campaign for Community Banking Services in the late 1990s. Although trials were carried out, the banks quashed the idea.

Last week, we asked the Government to comment on when legislation on access to cash was likely. It failed to comment.

VICTORY AS CASHBACK WITHOUT MAKING A PURCHASE GETS THE GO-AHEAD

NOT all news on access to cash falls into the ‘bad news’ category.

Six days ago, there was a victory when a proposed amendment to a Bill passing through Parliament was accepted by the Government – paving the way for retailers to offer customers cashback without the need for them to buy anything in the store. Currently, cashback can only be obtained if someone buys something first.

As foreshadowed by The Mail on Sunday earlier this month, the amendment to the Financial Services Bill was tabled by Lord Holmes of Richmond, a passionate supporter of ‘inclusion’ in all walks of life, including financial services.

He believes all consumers should have easy access to cash, hence his determination to get the amendment accepted.

Last week, he told The Mail on Sunday: ‘To get the amendment through is important and significant. If it had not passed, it would have represented a further fundamental blow to the availability of cash across the UK.

‘Millions would have faced further isolation, financial exclusion and all of the associated negative consequences of such a shut-out.

‘The country’s cash network needs to be seen as a piece of critical national infrastructure. Without this move, the network would have been in danger of catastrophic collapse, perhaps within the year.’

Lord Holmes said that come the summer, more shops up and down the country will allow customers to obtain cashback.

He added: ‘The fact remains that cash still matters and millions of people depend upon it. Yet wider availability of cashback represents just one step among the many we need to take to tackle the issue of financial exclusion.

‘The whole financial services landscape needs to be transformed so that people from all walks of life are financially included – whether it’s through access to cash or digital financial services.’

Lord Holmes’s success on ‘cashback without purchase’ has been universally welcomed.

Natalie Ceeney, chair of the community access to cash pilots initiative, said: ‘Giving people more ways to access cash is welcome, particularly for communities which don’t have bank branches and ATMs. But enabling widespread cashback is only a small part of the answer. Retailers still need places to get cash and to bank their takings. Many people need cash out of hours when a retailer offering cashback might be closed.

‘We need a joined-up approach to both protecting cash and making sure that digital payments are a real option for everyone.’

John Howells, chief executive of cash machine organisation Link, said: ‘This is a significant breakthrough and it’s a real win for communities across the UK. Cash machines aren’t going to be replaced by cashback but, as we continue to use less cash as a country, there will be some locations where an ATM simply isn’t economically viable and cashback from the village shop or pub will help to ensure free access to cash – without the need to travel to the nearest town instead.’

Baroness Tyler of Enfield said she was ‘absolutely delighted’ that Lord Holmes’s amendment had been accepted. ‘I’m so, so pleased.’

New ways of providing cashback without the need for a customer to make a purchase are being tested as part of the community access to cash pilots projects.

Last week, Swiss fintech start-up Sonect launched an app that will allow people living in Burslem, Staffordshire (one of the eight chosen cash pilot locations) to order cash – and then pick it up from one of ten local retailers. The ‘click-and-collect’ service is free of charge.

Ron Delnevo, UK director for Sonect, said the beauty of the app is that it gives customers a ‘guarantee’ that they can collect cash when and where they want it. He is confident that the app will in time be taken up by other retailers – including pubs – and that all the big banks will get four square behind it.

Gareth Shaw, of consumer group Which?, said cashback was just one of a number of measures required to ensure nationwide access to cash. Legislation to safeguard cash, he reiterated, was paramount.