Bank closures hitting the vulnerable hardest: FCA

The speed of bank and ATM closures is leaving society’s most vulnerable people and communities at risk of financial exclusion, the chairman of the Financial Conduct Authority (FCA), has warned.

In an address to the Retail Banking Conference in London, Charles Randell, who heads the UK’s banking authority, said the government and regulators must take joint action to ensure millions of people living on low incomes, the elderly and individuals and businesses in rural communities are not left ‘unbanked’ as consumers switch to digital banking.

“Having to pay to access cash disproportionately affects those who are least able to afford it,” Randell said, adding, “Mobile banking, cashless transactions and a range of other technological developments may mean a wonderful life for some people.But we mustn’t forget that for some time to come, others will need access to cash or bank branches.”

More than 3,000 bank and building society branches closed their doors between 2012 and 2017, Randell said, with estimates suggesting that use of cash may fall to just one in ten of all transactions within the next 15 years as retailers and service providers decide to go cashless.

Randell said that the FCA backed the findings of the recent Access to Cash Review, led by Natalie Ceeney, which warned that bank and cashpoint closures are leaving nearly eight million people - or 17 per cent of the population- in financial exclusion, with many on low incomes needing to pay a ‘poverty premium’ to withdraw the cash they need from pay-for ATMs.

Randell said a review of banking business models by the FCA found that on a region by region basis, branch closures have been fairly evenly spread across the UK and that for the most part consumers respond to these changes by taking up mobile banking in greater numbers, alongside a drop in usage in nearby substitute branches such as Post Offices.

Last month, consumer watchdog Which? called on the government to appoint a regulator to protect access to cash, as a combination of bank branch and cashpoint closures risked leaving people struggling to pay for essential goods and services.

Cash payments still make up around a third of all payments in the UK, and around 2.2 million people say they use cash for all their day-to-day transactions, with many of these using cash to help them budget.

The warnings come as many communities are seeing the closure of the ‘last bank in town’ as consumers adopt online banking, digital wallets and cashless payments in increasing numbers.

In 2017 38 million, equivalent to 71 per cent of all UK adults, used online banking services, according to UK Finance, while research by Which? showed that cashpoints disappeared at a rate of 488 per month between June 2018 and December 2018. Around 250 free-to-use machines are closing monthly due to changes in the way the UK’s cash machine network is funded.

“As the use of cash declines, there are big questions to be asked. We’ve grown used to access to cash being free. But of course someone has to pay for it,” Randell said, stating that co-ordinated action was needed to establish who should bear the estimated £2 billion cost of keeping the UK’s cash infrastructure up and running.

“The time to face up to these issues is now,” he said.

“The declining use of cash plays into a much broader debate about financial inclusion which includes the future of communities in a digital age, the way a range of public services are delivered and consumer education,” he explained.

“We need to discuss not just who should pay for the cash system, but also what action government and local authorities should take to support people to adapt to a world where cash may not be accepted.

“And in the meantime, whether we should see cash as a public good, part of a fair society as well as a back up payment system if IT systems fail, the cost of which should be socialised; or whether the cost of cash should be borne by the (sometimes vulnerable) people who continue to use it,” he concluded.

Randell’s calls came as Lloyds, NatWest and Barclays announced they were teaming up to pilot the UK’s first shared business banking hubs, helping support businesses hit by branch closures to make local cash and cheque deposits.

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