U.K.: Small Firms Call for More Cash Access

The Financial Services & Markets Act received Royal Assent on 29 June 2023. It empowers the Financial Conduct Authority (FCA) – the financial services regulator –  to act where they find or anticipate shortages in cashMoney in physical form such as banknotes and coins. More access services that would significantly impact local areas. On 7 December 2023, the FCA published a consultation on their proposed new rules. The consultation closed on 8 February.

The Federation of Small Businesses (FSB) has responded to the consultation, stating that the proposals to protect and widen access to cash are a “good start but could go further.”

The FCA’s proposals include:

• Developing a more comprehensive cash assessment process that is more responsive to a broader range of local needs
• Publishing assessment outcomes and making processes transparent
• Responding to a broader range of trigger events to undertake a cash assessment in a local area
• Meeting set timeframes for delivery of additional cash access services identified by cash access assessments. This will prevent unreasonable delays, reducing the cost burden on consumers and businesses due to limited access to cash in their local area.

Maintaining the Freedom to Use Cash

FSB supports these proposals, but believes they do not go far enough in maintaining small firms’ freedom to choose cash as a form of paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More, which we see as inseparable from the broader cash services ecosystem.

For example, FSB believes that the proposals need to adequately address the ongoing decline in cash access infrastructure, with bank branch closures continuing at an alarming rate and a shrinking and increasingly fragile free-to-use ATM network.

The consultation also overlooks essential services such as local cash deposit facilities for small business owners and assisted cash services that offer personal interaction.

Moreover, the FCA’s proposed cash access request scheme is insufficient, as it effectively puts businesses’ and consumers’ concerns as a last resort and is unlikely to stem the tide of bank closures and the decline in cash infrastructure.

The Cash Infrastructure should be considered a Public Good

To strengthen the FCA’s proposals, FSB is calling for:

• The FCA to broaden its focus beyond ATMs to include comprehensive support for cash deposit services and face-to-face assistance
• FCA powers to be leveraged to expedite the development of banking hubs, ensuring they include SME banking and deposit services. Despite the partnership with cashpoint provider LINK identifying the need for over a hundred hubs, progress has been slow, with only 33 opened so far
• Efforts to maintain consumer cash withdrawal access should consider the necessity of local cash managementManagement and control of cash in circulation. More infrastructure for SMEs to offer cash payment options. Cash infrastructure should be viewed as a public good, meaning concerns about competition sensitivities do not fully apply. Banks must be held to higher standards when considering the impact of their closures on access to cash.

Martin McTague, FSB’s National Chair, said: “A small business must be free to choose which payment options it wishes to accept, including cash. To enable this, it’s vital for the infrastructure required for cash to remain available in all areas. Cash access is too important to be left to innumerable individual commercial decisions, which, taken together, represent a significant threat to people’s and businesses’ ability to withdraw, process, and deposit cash. The FCA’s consultation rightly recognises this – it’s a good start, but could go further. We’re concerned that the FCA’s proposals won’t be enough to pause the trend seen in recent years towards fewer free cash points and bank branches.”

Cash is Vital as a Competitor to Other Forms of Payment

Cash is vital as a competitor to other forms of payment and as a payment option when digital systems go down or in areas with poor reception. Many vulnerable groups, from older adults to those fleeing domestic violence, rely on being able to use cash, and it is also an essential payment methodSee Payment instrument. More for many visitors to the UK who are wary of high bank fees when paying by card.

Now is the time for the FCA to shore up and defend a flexible payments ecosystem that can support small businesses and vulnerable communities with cash and help prepare the infrastructure for a diverse range of payment options, including a digital currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More.

The proposals should look to the future, too. Banking hubs and other solutions to access cash may also be the best opportunities for building digital currency infrastructure in the future.

As a country, we need a flexible and diverse payment ecosystem ready to changing consumer behaviour and needs.

The FCA should work with the Treasury to safeguard the cash ecosystem, taking a more holistic and comprehensive view of the issue. Now is the time to be ambitious in building the payment infrastructure small businesses and consumers need now and in the future.

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