Half a million people across Scotland who are dependent on cash risk being forgotten by banks due to the unprecedented rate of closures. Since 2015, 53% of Scotland’s bank branches have closed, which represents the highest percentage loss across the UK’s four nations.

From difficulties adapting to a society built on digital payments, to older people on lower and fixed incomes using it as a budgeting tool, many people opt to use cash for a number of reasons. However, the committee raises concern that not enough support is being offered to support these individuals as the UK transitions to an increasingly digital society, nor has adequate research been undertaken to understand the full implications of such a move.

The committee welcomes the government’s introduction of its Financial Services and Markets Bill, which includes added protections on access to cash. The then-treasury minister John Glen, when appearing before the committee, recognised the need for a more detailed picture of cash usage in Scotland. The committee is concerned that the rapid rate of bank branch closures may be as a result of banks rushing to close branches before legislation can take effect to protect access to cash and banking services.

In addition to government legislation hoping to support access to cash, there have also been a number of voluntary agreements championed within the sector. This includes LINK’s financial inclusion programme, which provides free access to cash via free-to-use ATMs in the most rural and deprived areas of the UK. The committee is of the view however that this should not be left to a voluntary agreement which leaves it vulnerable: future legislation should complement industry-led initiatives to guarantee free access to cash.

While access to cash in Scotland paints a deeply concerning picture, the Post Office has filled the void of many banking services within communities. It is deeply disappointing that Scotland has seen the highest percentage of Post Office closures anywhere in the UK, yet its resource and the service it offers appears to be steady. In recent years, its offering of banking services has grown, and now offers customers more services than ever before, with the recent renewal of the banking framework agreement. The committee recommends that a long-term commitment is sought from banks to maintain appropriate banking services for their customers using the Post Office network.

Pete Wishart, Scottish affairs committee chair, said: “Access to cash across Scotland has been decimated in recent years, leading to Westminster Committees investigating the issue multiple times. While the move to digital banking and payments has offered a method at which to do transactions that many of us enjoy, we cannot forget the 500,000 people in Scotland who rely on cash in their day-to-day lives.

“With the cost-of-living crisis deepening, many people are using cash for budgeting. But what is deeply worrying is that bank branches are closing at a record rate with very limited research or thought conducted of the possible widespread implications.

“Since the predecessor Committee’s inquiry considering this very issue, it is welcome that the Government is legislating to protect access to cash. However, this positive announcement is beset by the risk that banks may close their doors before legislation on this matter comes into force.

“We are aware of the commercial considerations affecting banks, which has played a role in the recent increase of branch closures. We welcome the effort taken by the banking industry to protect access to cash, although we still feel that there is a clear need for legislation.

“In our report today, we are calling for more research into the implications of a cashless society and more secure and longer-term agreements to ensure the continued access to cash. The Government appears to be in listening mode on this issue, and I look forward to its response in due course.”

The Committee’s recommendations are:

• The UK Government should consider asking the Financial Conduct Authority (FCA) to investigate and monitor cash acceptance levels across the UK.
• If the FCA find a substantial number of retailers refusing to accept cash, the UK Government should introduce additional protections to ensure that consumers reliant on cash are not disadvantaged.
• The UK Government should clarify how the Financial Services and Markets Bill will interact with pre-existing industry-led solutions such as LINK’s Financial Inclusion Programme.
• We recommend that the UK Government consider legislating in the Financial Services and Markets Bill to mandate the membership of LINK for card issuers and ATM operators to ensure that the Financial Inclusion Programme can continue to provide free access to cash for as long as it is needed.
• Attempts to introduce deposit-taking ATMs for both consumers and SMEs have been constrained by a considerable lack of progress from both the banking industry and the UK Government. Considering the strength of the evidence to support their introduction, we repeat our predecessor Committee’s recommendation that the UK Government set up a working group with industry to introduce network-wide deposit-taking ATMs.
• Building on the structure and objectives of the Banking Framework Agreement, we recommend that the UK Government seek a long-term commitment from banks to maintain appropriate banking services for their customers using the Post Office network, to guarantee access to cash and basic banking services for all communities in Scotland.