Cash-strapped communities: The loss of free access to cash in Britain

The way that people pay for goods and services is changing as more and more consumers opt for digital payments over cash. In 2017, debit cards overtook cash as the most common payment method. Despite this, cash is still widely used, and while it is estimated that 1.9 million people in the UK mainly use cash for their day to day spending, nearly everyone (97%) still carries cash and 85% of people keep cash in their home. Though there is still widespread use of cash, the overall fall in cash spending has impacted on the demand for cash withdrawals from ATMs.

In response to this, free-to-use (FTU) ATMs have been closing or converting to pay-to-use (PTU) at a rate of around 600 a month in the most recent data. In total, the FTU ATM network has shrunk by around 10% percent since January 2018, meaning that more than 5,000 ATMs have closed or converted in this time.

This reduction in the ATM network is not in everyone’s interest and it could lead to considerable harm, particularly for those who continue to rely on cash.

Our findings shows that, over the past two years, those in rural and deprived communities have been put at greater risk of experiencing harm, as ATMs closures or conversions to pay-to-use make it harder for people to access cash. We found that Individuals in rural areas - who are more likely to need cash due to poor digital infrastructure - will have to travel considerably further to reach their next nearest ATM than those in urban areas. We also found that those in the most economically deprived communities are those most likely to see their ATMs convert to PTU, meaning that those on a lower income - who are more likely to rely on cash for payments and budgeting - face a greater risk of financial exclusion.

Given this, Which? has recommended the following actions need to be taken:

The Payments Systems Regulator (PSR) should act immediately to regulate UK ATM interchange fees. As a first step, to prevent the continued acceleration of FTU ATM losses, the PSR must regulate interchange fees to support its stated aim of protecting cash access for UK consumers who need or want to use it as a payment method.

The Government must legislate to give the PSR a defined duty to maintain a suitable geographic spread of access to cash, free of charge. Given that we are already seeing rapid changes taking place in the market, the government must act now and give the PSR a duty to maintain access to cash across the UK to ensure that in the coming years:

People in deprived communities, who are more likely to need cash, are not penalised by having to pay to access cash.

People, particularly those in rural areas and small towns, are not forced to travel unreasonable distances to access cash free of charge.

Which? believes it will be necessary, as the market continues to change, for a form of minimum service guarantee to be introduced. The government must ensure that the PSR has both the necessary incentives and powers to guarantee access to cash for as long as consumers need it - if necessary by introducing Universal Service Obligations.