現金へのアクセス

‘Cash is Dead! Long Live Cash’ - rumors over the demise of cash are not new; this adapted adage was used back in 2012 by the then CEO of the Federal Reserve Bank of the San Franciso, where he argued that cash was here to stay despite the shift to electronic payments. However, since then, the pandemic forced a major shift in payment behaviour to electronic payments, particularly accelerating use of contactless. While this did lead to a rapid decline in cash initially in 2020, use of cash has since stabilized in most markets. For example, usage increased in UK in 2022, with many people continuing to use cash for budgeting, convenience, acceptance, and trust-related reasons.

However, while demand for cash is likely to continue, an additional threat to cash has arisen on the supply side. This has particularly been the case in the UK, where justified by the success of digital banking and declining usage, banks have been significantly reducing the size of both their branch and ATM networks. The UK’s Financial Conduct Authority (FCA) cash coverage data found that in the 2 years to June 2023 1,358 bank and building society branches and 4,450 ATMs closed. While branch closures continue a longstanding trend (UK total branch network numbers declined from over 13,000 in 2012 to just over 8,000 in 2022), ATM numbers in the UK have also notably dropped in recent years (declining from around 70,000 in 2018 to under 50,000 in 2023), with the quantity of free-to-use ATMs particularly falling.

This has led to a situation where many smaller towns have ended up without local branches, and in some cases no local ATMs, restricting access to cash, both for obtaining (e.g. withdrawals), but particularly for depositing cash (off-premise ATMs typically operate as cash dispensers). While local Post Offices do provide access to these banking services, resulting political pressures led to new requirements in the Financial Services & Markets Act 2023, instructing the FCA to ensure reasonable provision of cash deposits and withdrawals services for personal and business current accounts in the UK.

This has resulted in the FCA recently publishing its Access to Cash policy statement, with additional / revised requirements for both tracking access to cash, but also assessing the potential impact of further branch and/or ATM closures. While this may have first glance this may seem more an operational rather than technology issue, it does have some implications for both omni-channel and digital banking worth noting.

Cash remains important for several disadvantaged social groups

While cash can be an emotive subject for some, the proportion of people who are actually reliant on cash is pretty low (i.e. use it to pay for most things, including large purchases and bills). FCA-commissioned academic analysis of its Financial Lives 2022 Survey, which tracked financial behaviour of around 20,000 individuals, found that only around 6% of adults rely on cash (as opposed to just having a preference for cash). Key reasons being convenience and trust in cash over other methods, but for many it is used for budgeting purposes, including to avoid going into debt.

However, there is significant overlap of this figure with vulnerable customer groups:

• digitally excluded (low digital capability or poor digital access) 350% more likely to be cash reliant;
• low-income households (annual income less than £15,000) 178% more;
• unemployed people 83% more;
• those with poor health 60% higher.

Overall, the analysis found the proportion of adults being cash reliant across vulnerable groups (digital excluded, poor health, or low incomes) was 9%, with institutions having additional responsibilities for dealing with such groups (see Banks Must Prepare to Deal with a Growing Number of Vulnerable Customers for more detail here).

After trigger events, institutions need to assess and rapidly remedy cash access

Following a consultation period, the FCA’s Access to Cash policy statement strengthens existing requirements (Branch or ATM closures), imposing mandatory demands beyond the existing industry-run voluntary scheme in this area. Significantly, institutions need to consider the impact of a trigger event, such as closure of a bank’s own or other entities (which could be the Post Office or independent ATM deployers) cash facilities, considering impact on a bank’s own customers and wider community. This assessment could be carried by the bank or through a designated coordination body (such as LINK). Main requirements are outlined in the FCA diagram below:

Source: FCA

Key aspects here are that remedial services are put in place before closures occur or that there is not an unreasonable delay (within 3 months) if a gap is identified (e.g. local Post Office closed), and that there is clear communication and support provided to both customers and the local community. There is a minimum delivery obligation of two years for replacement services, after which a further assessment can be conducted as to whether services are still needed.

Traditional banks will need to invest in omni-channel capabilities, as well as digital

There has already been an industry response to the new rules, with HSBC UK, as an example, announcing this month it will not make any new branch closures (beyond that already announced) to 2026, extending a previously commitment to not announce any new closures in 2024 last year. To some extent, this may also reflect the fact that most banks have already made the significant reductions in recent years (in addition to impact of finalized rules), however, it is also being accompanied by branch renewal programs for remaining branches. HSBC UK is investing £50 million in updating its branch network in 2024 (covering over 1/3 of its branches this year), as well as planning to extend its presence in Shared Cash Access UK banking hubs from 41 to 100 in 2024. Interestingly, it is also continuing to invest in telephony and digital channels alongside this, looking to reduce call waiting times and increase resolution at first point of contact for its contact centers, and enhance digital tools for its customers to manage their money. Moreover, it is also working with customers to develop digital skills (such as provision and training in use of mobile tablets to selected customers).

While for most customers digital will be the primary medium for both payments and bank interactions, banks need to remember and consider both digital excluded and vulnerable customers. Physical channels will need to play an important role is ensuring all customer needs continue to be met, even in an increasingly digital world.