Cash within a kilometre: Government consults on access to cash

Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on the Treasury’s publication of a consultation on proposals for new rules to guarantee access to cash.

Key points from document:

The Treasury is consulting on rules that mean people shouldn’t have to travel more than a specific distance to access cash without a charge.
It is likely to set that initially at 1km, but wants the flexibility to increase the distance over time if people’s need for cash changes.
It says there’s already a framework for a geographical limit, because Link’s cashpoints and the Post Office have geographical commitments.
It proposes that rules will apply to the big high street banks and will be overseen by the FCA.

Sarah Coles, personal finance analyst, Hargreaves Lansdown:

“There will be life after the death of the branch network. The government’s consultation into access to cash will come as a bitter blow to those who can’t imagine life without their local branch, but will be a huge relief for the millions of people who just need to be able to get hold of cash without paying a fee or travelling miles.

“Cash has been getting harder to get your hands on. 4,000 banks have closed their doors in the last six years, which is the equivalent of two branches every day*, and 16% of people say that a branch they used to use regularly has closed down in the past 12 months**.

“The closure of bank branches is a vicious circle. The more that close, the more people move online, so there are fewer people relying on high street branches, so more of them close. The pandemic picked up the pace of this ever-decreasing circle, closing more branches temporarily and causing online banking to spike. The low interest rate environment that we’ll need to recover from the pandemic will make matters even worse, because banks find it harder to make money, and so they’re looking to cut costs by closing more branches.

“For those attached to branches, the bad news is that the government isn’t going to demand that they stay open. Instead, the proposals will focus on ensuring you don’t have to travel miles to get your hands on your money. It has already legislated to allow cashback without a purchase, Post Offices provide services on behalf of a number of high street banks, and banks are trialling shared branches.

“The good news, from the Post Office’s perspective is that this consultation strengthens its argument for a change in the way it runs banking services. It has launched a Save Our Cash campaign to persuade the government to make it compulsory for banks to offer services through Post Offices, rather than relying on a voluntary commercial agreement. With the Post Office a key plank of the government’s strategy, and plans to make it compulsory for banks to provide access to cash, this looks increasingly likely.”

Post Office Statistics:

8 million people have said they would struggle to manage their money without cash.
4,100 bank branches exist in the UK today, with 55 closing every month.
55% of small business do not accept cards and rely entirely on cash payments.
10% of consumers have been unable to pay for goods with cash recently.