Payment Systems Regulator's Specific Direction 12 came into effect

Specific Direction 12 (SD12) came into effect in March 2022 and holds LINK, the operator of the UK's main ATM network, accountable for maintaining a broad geographic spread of free-to-use ATMs that allows users to access cash when they need to¹.

The direction sits alongside a voluntary arrangement. In December 2021 a group of banks and building societies and consumer groups formed the Cash Action Group¹. Under that initiative, LINK assesses community cash access needs where cash access facilities close or where consumers report gaps in provision, and then works with firms to deliver additional services where the assessments identify a need¹.

The Financial Conduct Authority (FCA) has since set out its own proposals for a new regulatory regime for access to cash, using powers given to it through the Financial Services and Markets Act 2023. Parliament tasked the regulator with "seeking to ensure reasonable provision" of cash deposit and withdrawal services for personal and business current accounts across the UK, including access to notes and coins and access free of charge for consumers with personal current accounts¹. The FCA said its rules would require banks and building societies designated by the Government to assess and fill gaps, or potential gaps, in cash access provision that significantly impact consumers and businesses¹.

The FCA's consultation, published in December 2023, set out the scale of the change in how people pay. The volume of UK payments that do not involve cash rose from around 46% to 86% in the decade to 2022¹. Cash as a share of all payments fell from 61% in 2007 to 54% in 2012, 34% in 2017 and 14% in 2022¹. However, for the first time in a decade, the volume of cash payments rose by 7% year on year in 2022, which the FCA said was possibly due to a post-pandemic rebound, economic uncertainty and the increased cost of living¹.

Source: FCA, CP23/29¹

The FCA's Financial Lives Survey found 3.1 million adults (6%) used cash to pay for everything or most things in the 12 months up to May 2022, rising to 9% for those with one or more characteristics of vulnerability¹. The proportion rose to 26% for those who are digitally excluded, 15% for those with poor health and 14% for those with a household income below £15,000¹. There were 1 billion cash withdrawals in 2022¹.

On coverage, the FCA reported that as of Q1 2023, 95.1% of the UK population were within 1 mile of a free-to-use cash withdrawal point, such as cash machines and Post Office branches, with 99.7% within 3 miles of one¹. Its data suggested that in the two years to Q1 2023, 1,391 bank and building society branches closed, as did 2,176 free-to-use ATMs¹.

Why it matters for households

SD12 places responsibility for the geographic spread of free-to-use ATMs on LINK, the network that connects the UK's cash machines¹. For households that depend on cash, the practical question is whether a free withdrawal point remains within reach as branch and ATM numbers fall. The FCA's figures show 1,391 branch closures and 2,176 free-to-use ATM closures in the two years to Q1 2023, against 95.1% of the population within 1 mile of a free-to-use withdrawal point and 99.7% within 3 miles¹.

The households most affected are those the FCA identifies as heaviest cash users: 3.1 million adults used cash for everything or most things in the year to May 2022, a group that includes people who are digitally excluded, in poor health or on household incomes below £15,000¹. Small businesses are also named as relying on cash¹.

The FCA's separate proposals would require designated banks and building societies to assess and fill gaps in cash access, publish assessment outcomes and meet set timeframes for delivering additional services¹. Those rules were in draft and subject to consultation, so they were not in force at the time of publication¹.

What happens next

The FCA asked for comments on CP23/29 by 8 February 2024 and said it expected to publish finalised rules in an Access to Cash Sourcebook after the consultation¹. The FCA also noted that the Banking Framework agreement, which governs banking services at Post Office branches, runs from 1 January 2023 to 31 December 2025¹. In June 2023, the Acton banking hub opened in a local shopping centre¹. The FCA said that 101 banking hubs and 88 deposit solutions had been recommended under the voluntary scheme, but only 23 hubs had been delivered, with another 7 expected before the end of that year¹.