If the FCA rules pass, banks will need to be more responsive when local residents ask them to maintain access to cash, argues Steve Round, co-Founder of SaaScada, and former chair of The Big Issue Foundation.

He suggests that there will be a need to keep bank branches open if banks would otherwise be unable to meet local demand for cash access.

Most vulnerable groups rely on cash

Round tells RBI: “Despite the meteoric shift to digital payments, today was a key step in the FCA’s journey to return life to the UK’s cash deserts. And protect the 3 million UK consumers who rely on access to cash.

“It is often the most vulnerable groups – low-income individuals, the elderly, and rural populations – who rely on cash. If banks fail to plug gaps in access to cash, we risk deepening inequality and reinforcing barriers to financial services. This could leave millions of adults disconnected. Under the new proposals, banks will be forced to reassess the services they provide so vulnerable customers are not locked out of financial systems by a no-compromise cashless society.

Cash is essential for SMBs to flourish

“Small to medium-sized businesses will also benefit from the latest proposals. Cash is still essential for the day-to-day running of many small, community-focussed businesses. It offers customers greater flexibility, which a completely cashless system would render impossible. If SMBs receive quality support from financial regulators, they can thrive. So can local communities.

“Everyone has the right to spend and bank how they wish. If that means facial recognition and digital wallets, then the technology is ready. But cash-preferred customers who seek physical interaction and the 50% of SMBs who rely heavily on cash matter too.”

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Rules need to be more ambitious: FSB

Meantime, the Federation of Small Businesses (FSB) says that the access to cash proposals are a good starting point. But it argues that the proposed rules need to be more ambitious. In particular, it stresses the need to maintain small firms’ freedom to choose cash as a form of payment. It says that this is inseparable from the broader cash services ecosystem.

The FSB highlights the extent and the pace of branch closures. As RBI noted earlier this year, the UK now has the third-lowest branch density of any country in Europe with about 6.2 branches per 100,000 inhabitants.

The FSB also flags up essential services such as local cash deposit facilities for small business owners. In particular, it says that the FCA’s proposals put businesses and consumers’ concerns effectively as a last resort. As things stand, they will not stem the tide of bank closures and the decline in cash infrastructure.

Federation of Small Businesses case to the FCA

The FCA should broaden its focus beyond ATMs to include comprehensive support for cash deposit services and face-to-face assistance. The FSB says FCA powers should be leveraged to expedite the development of banking hubs. And they should ensure they include SME banking and deposit services.

The partnership with cashpoint provider LINK identifies the need for over a hundred hubs. Progress to date has been pedestrian with only 33 opened so far.

And the FSB says that cash infrastructure should be considered a public good. This would mean that concerns about competition sensitivities do not fully apply. Moreover, banks should be held to higher standards when considering the impact of their closures on access to cash.

Martin McTague, FSB’s National Chair, says: “A small business must be free to choose which payment options it wishes to accept, including cash. To enable this, it’s vital for the infrastructure required for cash to remain available in all areas.

“Cash access is too important to be left to innumerable individual commercial decisions. Taken together, these represent a significant threat to people and businesses’ ability to withdraw, process and deposit cash.

“The FCA’s consultation rightly recognises this. It’s a good start, but could go further. We’re concerned that the FCA’s proposals won’t be enough to pause the trend seen in recent years towards fewer free cashpoints and bank branches.

Cash is vital as a competitor form of payment

“Cash is vital as a payment option when digital systems go down, or in areas with poor reception. Many vulnerable groups, from elderly people to those fleeing domestic violence, rely on being able to use cash. It is also a key payment method for many visitors to the UK who are wary of high bank fees when paying by card.

“Now is the time for the FCA to shore up and defend a flexible payments ecosystem which can not only support small businesses and vulnerable communities with cash. But can also help to prepare the infrastructure for a diverse range of payment options, including a digital currency.

“The proposals should look to the future, too. Banking hubs and other solutions to access to cash may well also be the best opportunities for building digital currency infrastructure in the future.

“As a country, we need a flexible and diverse payments ecosystem that is ready for changing consumer behaviour and needs.