Financial Services & Markets Act 2023 gives FCA new powers to protect access to cash

The Financial Conduct Authority (FCA) has published a press statement primarily addressed at banks and building societies in connection with the FCA’s future approach to ensure access to cash deposit and withdrawal services by retail and business customers. In view of the changing payment landscape with nearly 85% of all payments being non-cash in 2021, but also the fact that cash payments remain essential for certain consumers and small businesses, especially those with vulnerable characteristics, the FCA aims to strike a balance between addressing the cash needs of these groups and – concurrently – the payment industry’s shift towards digital payments.
To achieve this balance, the FCA plans to maintain a „network of cash access facilities“ in line with the current distribution of services. This will involve the development of new rules to ensure that cash access services continue to be provided reasonably as payment services continue to evolve. These rules will take into account various factors, including demographics, digital connectivity, geography, transport infrastructure, and the costs associated with accessing cash services.
Pursuant to the FCA’s plans and the HM Treasury’s objective to ensure continuous access to cash and deposit and withdrawal services, the new rules will require designated banks and building societies to assess the reasonableness of cash provision when significant changes in local access occur (e.g. conversions of automated teller machines (ATMs), conversions or closures of bank branches). Depending upon the findings from such assessments, institutions may be required to fill gaps in their cash provision strategies. Also, the FCA will use its new powers under the Financial Services and Markets Act 2023 to collect information from the industry to monitor coverage across the UK.
In this context, the FCA also notes that it plans to ensure sufficient flexibility for institutions to ensure an adequate distribution of cash deposit and withdrawal services, e.g. by allowing firms to create joint distribution hubs.
#### The FCA’s next steps in this matter
The next steps involve the HM Treasury designating which firms will be subject to the FCA’s regulation of cash access, followed by a full consultation process, and cost-benefit analysis. The new rules are expected to take effect by summer 2024.
Furthermore, the FCA emphasizes its commitment to consumer protection through the recently implemented Consumer Duty, which sets a higher standard for banking customers‘ protection, especially in cases involving branch closures and ATM conversions. Firms are urged to anticipate harm to customers before making decisions related to closures or conversions and to engage with the FCA if their actions significantly impact vulnerable customers or the overall market supply.
Finally, the FCA will collaborate with the Payment Systems Regulator (PSR) to ensure the resilience, cost-effectiveness, and accessibility of the UK’s cash infrastructure, particularly focusing on the LINK ATM network, to meet the needs of consumers and businesses.