When 86-year-old David’s local Co-operative Bank branch in Bedfordshire closed in 2020, he was left without access to financial services. He used to go into the bank with a carer to withdraw money and pay his bills. Living with neurological disabilities, he lacks the dexterity needed to use a computer or smartphone, so now his only option is telephone banking. But with a disposable income of just £10 per week and wait times of up to an hour on a line that charges customers 9p per minute, he is forced to hang up early.
He wishes the bank would do more for disabled people like himself. “When my local branch closed, it was a bitter blow to me,” he tells Spotlight. “It has put me in a very difficult situation. I can’t hold on the phone for more than ten minutes because my costs will rise. It can’t carry on like this.”
Despite the bank having a free-to-call number for vulnerable customers, David was not made aware of this. A Co-operative Bank spokesperson tells Spotlight that the bank has “continually protected its lines for its most vulnerable customers” and that it would investigate David’s case. It says that pandemic-related illness and the turbulent job market has increased call waiting times but these are now improving: “The bank continues to prioritise actions to address wait times in our contact centres, and we acknowledge the inconvenience this can cause customers who wish to use this channel.”
The steady shift to online retail has left David worried about his future independence – he currently makes all shopping transactions by phone or relies on home support workers or members of his local church to buy things for him, entrusting them with his debit card. “If it all goes online, I, with many countless others, will virtually not be able to purchase anything,” he says.
He is one of millions who have felt the impact of bank branches closing. While this was expedited by the economic turbulence of Covid-19, the trend started long before – Which? reports that nearly 5,000 bank and building society branches have closed across the UK since 2015.
Access to cash has also diminished, as people increasingly opt for contactless card payments. The charity Age UK estimates that the number of free-to-use ATMs fell by 24 per cent – nearly 13,000 – between 2017 and 2020, even though 5.4 million UK adults still rely on money as their main day-to-day payment method. Cash use is not spread equally, and is inextricably linked with socioeconomic disadvantage – while London experienced an 81 per cent fall in ATM withdrawals at the start of the pandemic, withdrawals in Liverpool Walton, one of the most deprived parts of England, fell by just 23 per cent.
The impacts of a “cashless” future
In 2019, an independent Access to Cash Review funded by cash machine network Link and led by Natalie Ceeney, former chief executive of the Financial Ombudsman Service, concluded that up to eight million UK adults would “struggle to cope in a cashless society”, with older, disabled and low-income individuals particularly impacted. The review made recommendations to government, including: “guaranteeing” cash access within a reasonable distance of people’s homes and workplaces; ensuring cash continues to be accepted in shops and by service providers; and prioritising digital inclusion to upskill people in online banking.
Since then, the government has said it will legislate to protect cash, with the main proposals being ensuring people have access to free-to-use cash machines and that retail banks, building societies and the Post Office provide deposit and withdrawal facilities within specific distances, regulated by the Financial Conduct Authority (FCA). The government also accepted an amendment to its Financial Services Bill last year, proposed by the House of Lords peer Chris Holmes, which enables people to withdraw cash at the till in participating shops, cafés and other outlets without needing to make a purchase. He tells Spotlight that many people are using this new cashback option to withdraw amounts of less than £20, proving that it serves a need that even ATMs do not generally fulfil.
Holmes, a former Team GB Paralympian swimmer, is blind and a vocal campaigner for inclusion, having recently worked with the Bank of England to develop a braille £10 note. He says that financial and digital exclusion are “two forces that go hand in hand” and is calling on government to commission a review of access to digital payments to improve the accessibility of banking apps and websites.
“What’s desperately disappointing is that these digital platforms are not being designed as accessible, even though they absolutely could be,” he says. “There is no bigger cost to developing and deploying fully inclusive digital products.”
People tend to be offline for a plethora of reasons, including lack of skills or trust in online services, products or apps not being disability-friendly, the cost of devices or data, or an unreliable broadband connection, such as in rural areas. While Holmes is a keen advocate for protecting cash, he also believes that the millions who rely on it face a “poverty premium” and should be supported in getting online – utility bills, for example, are often discounted when paid via direct debit.
“In no sense do I want to condemn people to having to use cash,” he says. “In many ways, it’s less secure and more expensive. But the reality is, cash is what some people trust and there is a big job of work to enable them to become digitally included.” There needs to be “collective action” from the financial services industry, he says, to do in-person customer research and use this to inform the user experience design of banking services.
Banks collaborating to provide services
There is an obvious need to retain access to physical infrastructure, whether that be banknotes or branches. The Access to Cash Review led to several initiatives, including the industry-led Community Access to Cash Pilots, which involved testing different services across eight UK communities. This included banking “hubs” – a shared building where the Post Office provided basic services at a counter and major banks “took shifts” to provide customer services in a private room on different days.
The pilot was successful – two hubs in Essex and South Lanarkshire are still going and the idea has since developed into the Cash Action Group, which is looking at creating eight more permanent shared banking hubs across the UK this year. The programme is coordinated by Link and includes other interventions such as installing more free ATMs nationwide.
This novel approach shows a significant industry commitment towards collaboration, says Holmes: “The most positive thing about this is we’re seeing banks wanting to work together to enable financial inclusion.” He says that while this is a step in the right direction, the UK needs “hundreds” of these hubs, and there will be potential competition issues to address.
Cat Farrow, programme lead for the Cash Action Group, says that these hubs have also had a positive societal impact, serving as “anchor units” that have helped to create a sense of community and boost independence for older people following the pandemic. In future, the hubs could also be transformed into training spaces with free wi-fi where people could learn online banking skills.
Physical infrastructure will continue to play an important role, she says, particularly for people with accessibility issues: “We might find that digital isn’t actually appropriate for everybody. For example, people with cognitive impairments may benefit from having physical cash in front of them to manage their money in that way.”
Industry innovations for cash access
There were several initiatives launched to keep people financially connected during the pandemic, including the straightforward solution of physically posting cash. The Post Office partnered with the Department for Work and Pensions (DWP) to identify 30,000 vulnerable customers and offered them a “cash delivery” service, as did Barclays, NatWest and Tesco Bank. Some banking groups, including Lloyds Banking Group and NatWest Group, opened special helplines for over-70s and vulnerable people.
Christopher Brooks, head of policy at Age UK, says that cash deliveries are an expensive long-term solution but could be plausible if banks identified a small group of customers who would benefit from such a service. A recent survey from the FCA shows that ATM use decreases as people get older, with a third of over 75s not using cash machines in 2020, often due to vision or dexterity issues, confusion around use or safety concerns, says Brooks.
Pre-paid carers’ cards are another helpful intervention offered by several banks, which enable trusted people to access a limited amount of money from someone’s account so they can do their essential daily shopping for them. Carers have their own card with a separate pin, alleviating security concerns about handing over card details. Other fintech apps have been launched to tackle cash access issues specifically; Sonect allows people to “click and collect” cash at a shop of choice rather than find a free ATM, while Shrap is a “cash recycling” service where users load their small change onto a virtual card to use locally.
Many of these initiatives require a degree of digital competency and access; some programmes tackle digital and financial exclusion in tandem. Clean Slate, a social enterprise, recently partnered with the digital inclusion charity Good Things Foundation on Nobody in the Dark – an initiative providing financial guidance for people on low incomes. This centred around supporting individuals to complete an online “money health check” questionnaire, which simultaneously increased their digital confidence and signposted them to further support around safer internet use, with some participants receiving free digital devices.
Jeff Mitchell, founder at Clean Slate, says that upskilling people is crucial because the “poverty premium” extends beyond the cost of using cash. Universal Credit is now solely online, meaning that digitally disconnected individuals miss out on potential entitlements, and there are additional costs associated with being offline – getting a fine for not buying an online parking permit, for instance. Banking apps can empower people on low incomes with more “laser-focused” daily budgeting, he says: “There’s an opportunity to help people be as scrupulous with their financial management as if they were working in cash.”
Government action to tackle exclusion
There is a “mismatch” between what policymakers create and what people need, says Mitchell – the sudden shift of Universal Credit online locked many people out of the benefits system, and was counterintuitive to the fact that low income is one of the key driving forces of digital exclusion. The new system also means that recipients need a bank account to receive their benefits.
Digitisation of services coupled with other industry shifts, such as firms starting to charge customers for basic bank accounts, could mean even more people are financially excluded. The government has a duty to better regulate such changes in the banking sector, says Mitchell. “If the government is now saying that someone must pay for a bank account in order to receive benefits, there seems to be a social justice issue,” he says.
Procedures around the closure of bank branches need to be more thorough, adds Age UK’s Brooks, beyond notifying customers – the FCA should scrutinise why branches are closing and ensure that people are always resourced. “The regulator could intervene, forcing branches to stay open until a shared hub launches,” he says. “Otherwise, communities will be cut adrift.”
Holmes thinks that a “national network” of these shared hubs needs to be legislated for, to ensure pockets of the UK are not left behind by a patchy system. He believes that cash needs to be designated “critical national infrastructure” and is calling on government to create a “universal service obligation” for it, which is what currently exists for broadband. “This would mean that, wherever you are, you could have an absolute expectation and reliance that you could reasonably access cash,” he says. This is not just a question of inclusivity but of resilience – in the event of a cyberattack halting the UK’s digital payment systems, a cash network would be crucial.
For older customers, fear of fraud is a major barrier in their transition to online banking. Brooks believes that the Contingent Reimbursement Model (CRM) Code, a voluntary mechanism that banks sign up to reimburse scam victims, should be strengthened and mandated. “Some banks are very good and refund most customers, while others only do so under duress or when forced by the ombudsman,” he says. They could do better due diligence, he adds, by actively identifying at-risk individuals and increasing “banking friction” such as risk warnings and “cooling-off” periods, where payments don’t go through for 24 hours.
Financial and digital exclusion are evidently linked, and the most vulnerable people in society are feeling their impacts. While fintech is the future, retaining traditional payment methods will be vital to enable people to transition online and empower them to manage their money as they choose. Industry and government have a collective responsibility to help people do that, whether that be through distributing free devices, providing online banking training, or ensuring in-branch services survive. “If we can make some significant strides towards financial inclusion, everybody benefits,” says Holmes. “It makes sense socially, economically and psychologically – there are no downsides.”