Financial Exclusion: Access to Cash

Debate between Jim McMahon and Seema Malhotra

Tuesday 21st May 2019 Westminster Hall

[Seema Malhotra]

The hon. Gentleman puts on the record an important and well-made point, which I will address later.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I, too, congratulate my hon. Friend on securing the debate. Does she agree that when banks, such as the Yorkshire Bank in Royton, close with an agreement to relocate a cash machine in a convenience store, the agreement must be that it will remain free to use? In Royton, just a year into that agreement, a charge has been introduced.

[Seema Malhotra]

My hon. Friend makes an important point about the situation in his constituency, and that is why regulation is increasingly important. In future, the issue will be maintaining not just access to cash but free access to cash.

There has been a renewed focus on the issue of the last bank standing in a community. As Sian Williams of Toynbee Hall pointed out, however, when we get to that point, it is often too late. There is an urgent need to join up, particularly in areas that are more likely to be left behind. Financial institutions have not tended to talk to one another, so towns and communities have been left with piecemeal and inaccessible financial services.

The change has not been orderly. In the RSA’s excellent report published earlier this year, “Cashing Out: The hidden costs and consequences of moving to a cashless society”, the situation is described as a “disorderly dash from cash” with

“a misalignment of incentives between individual banking institutions seeking to shed their costly physical infrastructure…and the needs of…thousands of communities that remain reliant”

on what, for them, are essential financial services. The report finds that substantial numbers of people rely wholly on cash and that access to bank branches is about not just the older generation but the younger generation, small and medium-sized enterprises and increasing numbers of self-employed people, who all have an important stake in the debate.

This year, the Access to Cash Review’s significant report found that 17% of Brits say that they would not cope without cash. As has been said, they are the most vulnerable people, such as the disabled, the poorest and the elderly, who are unlikely to be early adopters of contactless technology. Figures from the Financial Inclusion Commission suggest that they are also more likely to be among the approximately 700,000 people in the UK who want a bank account but, for various reasons, cannot open one.

There are significant regional, area-based and income-based disparities. More than 15% of people with an income under £10,000 rely completely on cash, in contrast with only 2.5% of those in the highest income bracket. People who have less access to cash are already subject to a poverty premium; they have been left behind by contactless and digital payment technologies and cannot shop around to get the best deals.

There are also difficulties for disabled people. Eleanor Southwood’s evidence to the Treasury Committee recounted how people who are blind or partially sighted can struggle to use a taxi driver’s touch screen PIN pad, and then often need to give away their PIN. It is important to think about the role of assistive technology in this space. As chair of the all-party parliamentary group for assistive technology, I understand the potentially transformative impact of accessible technology and why it needs to be part of the debate about how financial services move forward.

The gaps in broadband provision, including in rural communities, can make access to cashless payments more difficult. Indeed, broadband notspots are not confined to rural areas; an estimated 1,000 households in my constituency do not have access to decent-speed broadband. Hounslow Council’s work to help to end notspots is a key part of the jigsaw, which will take years to deal with.

The question is how we are going to respond to the drivers of such changes, including new technologies, lifestyles and uneven economic progress, and the consequences of the increasing cost of our nation’s wholesale cash infrastructure, alongside the need for better financial education and financial inclusion. I thank the hon. Member for Solihull (Julian Knight) for being here and for his work on the all-party parliamentary group on financial education for young people.

I will say a few words about supporting the cash infrastructure. We know that The Telegraph reported last year that there were about 123 cash deserts—postcode areas that do not have a single ATM in their geographical coverage—and there are more than that now. A further 116 areas have just a single ATM, 36 of which are fee-paying ATMs. The Association of Convenience Stores also highlights how convenience retailers and ATMs enable financial inclusion, but they are also under threat from high business rates bills and cuts to interchange fees.

In addition, research by the University of Bristol on the distribution of ATMs in that city has found that the provision of cash is almost opposite to the geographical need for it. Lower-income communities are poorly served by current cash infrastructure. ATMs are changing from free to fee-charging, with deprived areas disproportionately hit. Of the 16 ATMs in Bristol that changed from free to fee-charging between October 2018 and March 2019, 11 were located in deprived areas.