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Ireland: the Government Proposes to Protect Access to Cash

Categories : Cash is a contingency and fall-back solution, Cash is a public good, Cash is the first step of financial inclusion
November 30, 2022
Tags : Acceptance of cash, Access to cash, Ireland, Regulation
The Department of Finance Retail Banking Review highlights the increasing pressure on the cash infrastructure due to closing of bank branches and ATMs. It recommends a legislative framework to ensure reasonable access to cash.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

Reasonable Access to Cash

The report recommends that the government prepare legislation in 2023 requiring banks to provide reasonable access to cash. The metrics are to be defined in consultation with the Central Bank and other stakeholders, and the initial objective will be to preserve access at December 2022 levels.

The legislation will provide the Central Bank with the responsibility and powers to protect the resilience of the cash system, including the authorisation and supervision of ATM operators and cash-in-transit firms in respect of their cash-handling activities and related financial services.

A new National Payments Strategy is to be prepared in 2024. The Strategy should be informed by and aligned with the retail payment strategies of the EU Commission and the Eurosystem. It should set out a roadmap for the future evolution of the entire payments system, taking account of developments in digital payments, the use of cheques and other issues, and guide how future changes should be made to the legislative Access to Cash criteria.

Mandatory Acceptance of Cash?

The strategy should also consider and consult on whether specific business sectors and public bodies should be required to accept cash or facilitate its acceptance.

Ireland is joining a growing group of countries which have issued guiding principles or regulations for access to cash: the UK, Canada, the Netherlands, Lithuania, and Finland. In the UK, the government passed legislation in the Financial Services Act 2021 to enable cashback without a purchase and are set to outline expectations for reasonable distances people should be required to travel for access to cash services. In the Netherlands, 23 organisations involved in the payments system signed a new Cash Covenant this year to ensure that cash continues to function correctly as a payment instrument in the face of a steady increase in electronic payments. Under a memorandum signed by the Bank of Lithuania and financial institutions in Lithuania, the number of localities with cash withdrawal facilities is set to double this year. The Bank of Finland published guiding principles on the availability and access to cash-based services.

The Irish banking market is highly concentrated as the number of traditional banks has decreased from 12 before the Global Financial Crisis to 3 today. The review notes that while the use of cash and visits to bank branches have been in decline in Ireland and elsewhere for some time, a European Central Bank (ECB) survey found a majority of people want to have the option to pay in cash, even if some have a preference for digital as a means of payment. In July, just three days after making the announcement, AIB scrapped its decision to remove cash services from a third of its branches, following significant backlash from consumers, business owners, farmers and politicians.

A Shrinking Cash Infrastructure

“The high cost of providing cash services, as well as the move to a more digitalised banking model has incentivised banks to move away from the direct provision of cash services. However, there continues to be, and will likely always be, an enduring societal demand for cash. In this regard, the Government and the Central Bank, in accordance with the ECB’s Cash Strategy, have a fundamental responsibility, together with the banking sector, to ensure the smooth supply of cash and access to cash for consumers and SMEs. Government policy should therefore support the development and maintenance of a sustainable and resilient cash system for as long as cash is needed.” concludes the Review.

“It is important that future reductions in the cash infrastructure do not outpace society’s expectations or needs,” says the Review Team. A legislative framework should be put in place to manage any further decline in the cash infrastructure in a fair, transparent and equitable manner. The framework should be on a legislative basis that, after consultation with relevant stakeholders, will set criteria for the provision of cash services and enable the cash system to evolve in a controlled manner.

In addition to bank-provided ATMs and cash counter services, access to cash is facilitated by ATMs located in shops and other settings; cashback is provided by retailers and agency arrangements such as those currently in existence with An Post.

The Review Team has noted the effective operation of the cash system relies on a small number of Cash-in-Transit (CIT) firms, and a high proportion of ATMs are owned and operated by unregulated non-bank providers, also known as Independent ATM Deployers (IADs). CIT firms and IADs are critical to the distribution of and access to cash across the country, and currently, neither are subject to authorisation or supervision by the Central Bank. The Review Team recommends that both be brought within the Central Bank’s regulatory perimeter.

Developments have Outpaced Consumers and SMEs.

“Regardless of the pace of further change, it is important to support consumers and SMEs in their transition to a more digitally-based retail banking products, as well as the likely further reduction in the use of cash in the coming years. The Review Team is of the opinion the developments in the sector have outpaced the capacity of some consumers and SMEs to make this transition to digital.” says the report.

This post is also available in: Spanish