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Access to cash system on verge of collapse warns report

Access to cash system on verge of collapse warns report

UK banks and regulators are being urged to act to prevent the country from "sleepwalking" into a cashless society, in a hard-hitting report prepared by former financial ombudsman Natalie Ceeney.

The Access to Cash review prepared on behalf of the Link ATM network, concludes that digital payments don’t yet work for everyone and around eight million adults (17% of the population) would struggle to cope in a cashless society.

The report is calling on Government and regulators to step in urgently to ensure cash remains viable and provide a “Guarantee to Cash Access” for all, including those in remote and rural areas. The action plans also demands that organisations deemed to be providing essential services should also be required to allow consumers to pay by cash.

The publication of the report follows a mid-February plea from the UK's Treasury Committee for urgent action to prevent the "collapse of access to cash" as ATM numbers drop and bank branches disappear from the high street.

Says Ceeney: “There are worrying signs that our cash system is falling apart. ATM and bank branch closures are just the tip of the iceberg, underneath there is a huge infrastructure which is becoming increasingly unviable as cash use declines. In Sweden, we were repeatedly warned to plan now because once infrastructure had gone, putting it back was close to impossible. If we sleepwalk into a cashless society, millions will be left behind. We need to guarantee people’s right to access cash and ensure that they can still spend it.”

In recent evidence to the Treasury Committee, Charles Randell, chair of the Payment Systems Regulator, said that the whole system of access to cash needs to be looked at afresh.

Randall agrees that there is a need to guarantee access to free-to-use ATMs, "but with changes to the way people are using cash and contactless payments affecting the economics of the cash distribution industry, we need to have a debate this year about whether access to cash should be a universal service, rather than a commercial one."

Ceeney says that banks and regulators need to offer innovative solutions to protect cash from disappearing off the high street.

"Why can’t we get cash at local shops, through cashback, as well as at ATMs?" she asks. "Why can’t we support small businesses by letting them deposit their cash in lockers or smart ATMs rather than face the security risks and costs of a weekly trip to their bank branch? There is huge scope for innovation, not just in digital payments but also in cash.”

Lloyds banking Group last month announced plans to run a pilot scheme which will offer retailers a fee for processing cashback transactions over the counter.

Currently business owners do not receive a fee when providing cashback to their customers. Lloyds says the reward scheme will offer more support to retailers and increase the number of places where people can withdraw their money.

Nicky Morgan MP, chair of the Treasury Select Committee says that tinkering around the edges to preserve the status quo will not work.

"It’s clear that something more fundamental is needed," she says. “This report sets an expectation that the Government, the regulators and industry will respond with a plan of action. I support this approach and consider that it would be highly negligent for those parties not to provide a considered response”.

The Bank of England for its part has announced plans to convene relevant stakeholders to develop a new system for wholesale cash distribution that will support the UK in an environment of declining cash volumes.

Sarah John, chief cashier, states: “We are committed to cash. Although its use is declining, many people, including vulnerable groups, still prefer to use cash. It is important that everybody has a choice about how they make payments. The action we are announcing today will help to support cash as a viable means of payment for those who want to use it.”

Comments: (2)

Jeremy Light
Jeremy Light - pingNpay - London 07 March, 2019, 15:31Be the first to give this comment the thumbs up 0 likes

"Sleepwalking towards a cashless society"? - I remember coining that phrase two years ago in a Finextra blog https://www.finextra.com/blogposting/13654/sleepwalking-towards-a-cashless-society?ref=fintastico.com

However, portraying the UK cash system as on the verge of collapse is a little over-dramatic. Although declining, the level of cash withdrawals is similar now to that in 2003/4 when usage was rising (peaking in 2012), but there are still 33% more ATMs now than in 2003. In the same way the number of ATMs lagged the demand for cash on the way up (they peaked in 2015), the decline of ATMs will lag demand on the way down. See the stats on the Link website.

The availbility and acceptance of physical cash is important, and does need to be managed, but the real issue is the fundamental need to replace cash with a digital equivalent that exhibits similar characteristics to the physical form, as outlined in my blog, such as no requirement to register to use it (or for anything, including a bank account).

This requires true innovation, and, two years on, there is scant evidence any is underway, or even comprehension by the industry, including Fintechs, that it is needed.

Andy Hunter
Andy Hunter - Perficiam Ltd - London 08 March, 2019, 13:41Be the first to give this comment the thumbs up 0 likes

This is more than a little over-dramatic. With around 70,000 ATMs, 11,000 Post Office branches and 9,000 bank branches in the UK there's still a long way to go. Lloyds announcement about commercialising cashback seems positive, however. When I was involved in the remittance market, I recall colleagues in India referring to this as the 'Human ATM'!