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Our cash infrastructure is on the brink of collapse, but now’s the time we need it the most

By protecting our cash infrastructure, we can help our local economies and communities to recover by combatting Covid-19. If we let it disappear, it is society’s most vulnerable who will be impacted most, says David Mundell MP | Credit: PA Images

4 min read

The government has committed to legislate to protect access to cash over the course of this Parliament. However, if it doesn’t act now, we risk losing the cash infrastructure forever.

As I recently raised in the House, the ability to access cash is more important than ever.

Covid-19 has dramatically changed cash usage patterns.

Yes, cash transactions are down by more than 50% due to lockdown measures and there is a harmful misconception that cash is dirtier than other payment  methods, but for many, cash is a lifeline.

The infrastructure behind it must therefore not be left to waste away as once it’s gone, it’s gone forever.

Cash is especially important for the most vulnerable, particularly those living in rural areas where banks have withdrawn branches.

Covid-19 has exacerbated the importance of cash for many.

The Access to Cash review found that 2.2 million people in the UK only use cash. 1.3 million people are unbanked, without access to a current account or alternative e-money account.

Around 17 of the population – over 8 million adults – would struggle to cope in a cashless

society and in rural areas, infrastructure poses a significant barrier to accessing cash due to a lack of broadband or reliable 4G. Of 5.3 million adults who never use the internet, 3.7 million live in rural areas.

Covid-19 has exacerbated the importance of cash for many, especially those that rely on other people to shop on their behalf, whether elderly, vulnerable or self-isolating.

Cash is also essential to budgeting, which will be increasingly important as people have their wages reduced through furlough or are laid off completely.

Prior to the pandemic, LINK, the UK’s ATM network operator, initiated cuts to the ‘interchange fee’ – a fee paid by banks to allow customers to withdraw their cash.

In practice, this has meant ATMs becoming uneconomical and thousands of machines being converted from free to pay to use, while thousands more have disappeared altogether.

Between January 2018 and March 2020, an astonishing 10,500 free to use ATMs have been lost – a 19% reduction in the size of the free to use network.

It would cost over £100 million to replace the infrastructure which has been lost over the past two years.

As we look towards recovery, the government must reprioritise protecting access to it.

While consumers now pay, banks are benefiting in two ways.

Firstly, banks have saved hundreds of millions of pounds in reduced fees to ATM operators.

Secondly, they are benefiting from the side effects of consumers switching to alternative payment methods via card, as they receive income from each payment, and overdraft fees.

Even before Covid-19, being able to access cash, either at all or at no extra cost, was already dire.

The pandemic has only served to accelerate the collapse of cash’s infrastructure which will, in turn, leave hundreds of thousands of the most vulnerable at a disadvantage compared to those who are willing and able to access their cash at an additional cost.

To put this into context, although theaverage transaction amount is now around £60, for the most part, those in rural and urban areas outside of London are taking out amounts closer to £10 or £20.

Paying up to an additional £2 for these smaller transactions is a significant cost compared to those prepared to take out £60.

Cash drives local economies. As we look towards recovery, the government must reprioritise protecting access to it.

By ensuring access to cash via a network of free to use machines, cash is able to be recycled in localities, supporting small businesses and local communities towards the road to recovery, especially as restrictions are lifted.

Ensuring this free access is entirely possible and would come at no extra cost to government.

ATM operators have said they are willing to convert their paying machines back to free if the network is funded fairly, as it used to be.

So, what would this look like?

Government legislation to protect access to cash must be expedited. We must act now, with urgency, to protect our cash infrastructure or there will be nothing left to protect.

Any legislation must ensure that cuts to the interchange fee – the fee paid by banks per

withdrawal so their customers can access cash – must be reversed.

Banks have saved £200 million since the first cut to the fee, passing on the cost to customers in accessing their cash.

Going forward, the interchange fee must be based on the original cost study – this was considered a fair method and took into account cash usage trends.

This ensured cash was available where it was needed most and would have protected our access to it against the huge drop in cash withdrawals as a result of the pandemic.

The solution is simple and it can happen quite literally overnight, at no extra cost to government.


David Mundell is Conservative MP for Dumfriesshire, Clydesdale and Tweeddale

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