In this edition of Payments:Unpacked we feature a guest blog from Martin Kearsley, Banking Director, Post Office. In his article Martin shares some insights into the future of cash in the UK.
Why reports of the death of cash are greatly exaggerated
As the determined march towards a digital economy continues, cash might seem almost old-fashioned at times to those now so used to paying by debit card or online. Indeed, the days in which our wallets and purses were packed with a busy assortment of notes and coins can feel remote – particularly in the last 18 months, when so many of our payments have come to be online.
And yet, despite attempts by some to hail its end, cash still matters in the UK – both for communities and small businesses, both for those who choose to use it as well as for those who simply do not have that choice. A suite of research testifies to this fact. Recent polling conducted by YouGov revealed that over 7 in 10 consumers believe cash is an important consumer right, while the same proportion of small businesses believe it is important to the future of the UK high street. Meanwhile, a quarter of small businesses and nearly 1 in 5 UK adults report that they would struggle to cope without the ability to use cash.,
Against this continued reliance on cash, the UK’s cash infrastructure is under threat. It has become almost commonplace now to note the interminable retreat of bank branches and free-to-use ATMs from our high streets. Since 2015, over 4,300 bank and building society branches have closed – that’s 50 branches every month or 2 a day. A further 500 bank branches are earmarked for closure in 2021.
It comes as little surprise, then, that the Government is looking to introduce legislation to protect access to cash against this spiralling change. Put simply, there is a worsening imbalance between the demand and supply of cash services in the UK.
How post offices help protect our access to cash
However, a core part of the UK’s cash infrastructure stands steadfast in this fast-evolving landscape, perhaps where you might not immediately expect it: our post offices. This is because, thanks to the establishment of its Banking Framework in 2017 (now in its second iteration), customers of all of the UK’s major banks and building societies can use any post office for basic cash and banking services – including both withdrawals and deposits.
And Post Office’s network of over 11,500 branches across the UK – more than all those of the banks and building societies combined – ensures 99.7% of the population lives within three miles of a post office and thus its cash services. In fact, with over half of its branches based in rural locations, Post Office often serves as the “last counter in town” for communities that would otherwise be left isolated in “cash deserts” without any access. With a further c.200 towns and villages recently identified as having a single bank branch remaining, the number of these potential deserts is only set to rise.
This unique combination of the Framework and the branch network’s wide range and reach means Post Office is providing a universal service for free cash and banking services across the UK. And importantly, this is an in-person provision. Digital and online banking simply does not work for everyone – and nor should we expect it to. In fact, according to recent FCA data from July 2021, Post Office branches now make up 3 in 5 (60%) of all branch-based UK cash access points. In addition, Post Office is the only organisation of substantive scale in the banking industry that continually looks to sustain and even increase the size of its network – further bolstering the strength of its provision.
The combined scale and volume of the Post Office’s cash depots, cash-in-transit services and over-the-counter provision – keeping cash moving around the UK like a kind of economic lubricant – means it is a fundamental pillar of the UK’s economic infrastructure and a vital enabler of small businesses. Indeed, over a quarter of small businesses report using their Post Office local at least once a week to withdraw or deposit their cash.
It is perhaps no surprise then that, as banks retreat from the high street, Post Office’s role is only increasing with time – in fact, even month by month. For example, in September alone post offices handled almost £3 billion in cash deposits and withdrawals across the network – the highest ever in a single month to date, topping the previous month’s new record (£2.9bn). These mounting figures demonstrate not only the continued reliance by millions on cash, but also the Post Office’s role in supporting the UK high streets to get back on their feet as we emerge from the pandemic.
The future of cash in the UK
Even while continuing to provide these reliable services, Post Office continues to innovate in this space. For example, it is playing a central role in the Community Access to Cash Pilots (CACP), alongside banks and consumers groups – an independent initiative supporting 8 communities across the UK to trial scalable, flexible solutions that safeguard cash for communities and businesses alike.
More immediately, Post Office is in the process of securing a third iteration of the Banking Framework by the end of the year. And yet despite progress towards this next Framework and industry-wide efforts to design solutions that provide access to cash, the UK’s current cash infrastructure is fragile. The Framework runs in three-year cycles and banks could pull out – as indeed, Barclays nearly did in 2019 – cutting off millions of people and small businesses that rely on cash from a vital lifeline.
It is in this context that the Treasury is introducing legislation to safeguard our access to cash on a long-term basis, potentially setting geographic requirements on the industry to fulfil. The financial services industry, wider market actors, and Government have a collective responsibility to ensure that everyone in the UK can participate fully and freely in our financial system – irrespective of their circumstances.
While Post Office cannot alone shoulder this cost and responsibility, it is one of few organisations with the cash infrastructure, robust scalability and security in place to play a central role in any solution that looks to provide an effective, sustainable cash network. And it is certainly the only retailer with a branch presence in each nation and every community across the UK to provide a front-end counter service.
Put simply, the past five years have seen Post Office evolve to become a pillar of the UK’s economic and cash infrastructure; with the right support and clarity from the industry, the next five years could see it become its most important mainstay.
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 Community Access to Cash Pilots, https://communityaccesstocashpilots.org/
 FCA, Access to cash coverage in the UK 2021 Q1, July 2021.
 Public First, The Economic and Social Impact of the Post Office, 2020.
 Post Office, Post Office Cash Tracker, October 2021.
 Post Office, The Post Office Network Report 2020, March 2020.
 Treasury Committee, August 2021.
 YouGov, Post Office and Money, June 2021.
 YouGov, Post Office and Money, June 2021.
 Access to Cash Review, March 2019.
 Which?, ‘Bank branch closures: is you local bank closing?’, May 2021.
 The Times, Why banks are closing their high street branches, April 2021