Recommendation 112

HM Government Deferred

The Government agrees with the Committee on the importance of assessing the effectiveness of legislation and measures put in place by the Financial Conduct Authority (FCA), to ensure they continue to function effectively and provide the best outcomes and protections for consumers. The Financial Services and Markets Act 2023 granted the Financial Conduct Authority (FCA) responsibility and powers over protecting access to cash. The FCA’s access to cash rules came into force on September 18th 2024.1 The FCA is required by law to keep its rules under review and is committed to monitoring the impact of their regime, including through receiving qualitative feedback about the access to cash regime and conducting regular engagement with stakeholders to understand how the regime is working in practice. Feedback from businesses will be particularly important to understand the initial impact of the rules on small businesses’ willingness to accept cash. Early evidence shows that the FCA’s regime is having a positive impact. Since coming into force, LINK (the industry appointed body responsible for undertaking cash access assessment) has recommended 77 banking hubs, including 25 that would not have qualified or were previously rejected under the old regime. 21 deposit solutions have also been recommended, and LINK have seen improvements to services recommended in 15 locations that would not have been possible without the FCA’s rules. 1 PS24/8: Access to cash | FCA Banking hubs are now also being opened faster than ever.2 There are now over 70 temporary hubs open, ensuring that cash access provision remains continuous while permanent hubs are completed. Moreover, evidence shows that these solutions have a positive impact on cash acceptance. Data from the banking hubs pilot scheme3 showed that ‘92% of businesses who used the Hubs were more likely to keep accepting cash’. 80% of deposits were from local businesses4 demonstrating the impact hubs are having on communities. Furthermore, in 2024 Cash Access UK commissioned a social impact report assessing the impact of their banking hubs on businesses and communities. This showed: • 80% of businesses have used their local hub since it opened • 53% of firms said they saved time going to their nearest banking hub rather than having to travel further to a bank branch • 47% of firms said the percentage of cash spent at their business increased since a hub was opened Whilst it remains too soon for a formal evaluation of the access to cash regime, and early evidence of the regimes impact is positive, the FCA has committed to undertaking and publishing a formal review of the regime’s effectiveness in due course. The FCA intends to confirm its timings in writing to the Committee this autumn. The Financial Services and Markets Act (2023) also granted the Bank of England statutory powers to oversee the wholesale cash distribution industry, supporting the long-term sustainability of cash. On 5 June, HM Treasury recognised twelve firms as being ‘market significant’ for the provision of wholesale cash services and they were brought under the scope of the Bank of England’s oversight regime with effect from 12 June. Recommendation 2 HM Treasury, the Bank of England and the Financial Conduct Authority must ensure that the work of the Payment Systems Regulator on competition in payments markets is taken forwards during and after the consolidation of the Payment Systems Regulator into other regulators.