Nationalised Post Bank network proposed to help solve access to cash crisis

The 'Not Cashless, But Less Cash' report published today (Friday) also suggests a digital transition levy should be imposed on banks which would allow the Scottish Government to invest hundreds of millions in digital inclusion and connectivity as use of cash declines.

And to stem the decline of free-to-use ATMs, it suggests business rate rebates should be offered to operators who provide them, and retailers should be "incentivised" to roll out free cashback services.

The report comes three weeks after the Herald revealed one in four of Scotland's cash machines are now charging customers to take their money with the number soaring by 68% in just one year In a four month period at the end of last year, nearly 300 free cash machines were lost to Scotland - at a rate of 75 a month.

READ MORE: The free cash machine scandal - how ATM loss is affecting your area

The falling number of cashpoints is seen as a concern for elderly or vulnerable bank customers who do not use online banking, and for small businesses who rely on access to cash.

Scotland has already seen over 400 bank branches close since 2015, making it one of the worst affected areas in the UK, and often the cashpoints will also go. Banks who have made the cuts consistently say that it is the result of customers preferring to use online, mobile or telephone banking while usage of branches has fallen.

New figures reveal that the number of cash withdrawals has fallen between 3.7% and 8.7% in the year to April, 2019 with Scotland among those regions with the narrowest drop at 5%.

IPPR says the digital revolution in finance means a shift to a considerably less cash-based digital economy, but the prospect of a fully cashless UK is not on the horizon.

This shift is expected to boost UK productivity and create opportunities for business and consumers, but IPPR said "there is a significant risk" that people and areas reliant on cash may be excluded.

Adam Stachura, head of policy at Age Scotland, said: "Any support to ensure older people have more control of their financial health, and are well supported with changes to personal banking is worth exploring. Being forced into a system they are not prepared for just doesn't work.

“Huge numbers of older people are disadvantaged by their bank closing branches at a rate of knots, removing free to use cash machines and forcing people to adopt digital banking by default.

"Half a million older people in Scotland do not use the internet, 150,000 pensioners live in poverty and tens of thousands don’t have a bank account in the first instance, therefore it’s vitally important that older people who need more financial support aren’t left behind.

"Many older people rely solely on their Post Office Card Account for managing their pension income and are not in a position to open a bank account for a range of reasons."

In 2017, the Post Office established a commercial agreement with major high street banks that enabled customers to carry out a range of basic banking transactions at over 11,500 post office branches.

READ MORE: One in four ATMs now charge Scots customers to withdraw cash

This is part of an effort to ensure there are alternative sources of cash access – alongside trials of free in-store cashback services.

The report points out that when Barclays bank announced plans in 2019 for a partial withdrawal from the post office scheme they faced strong and wide-spreadn and the decision has since been reversed.

But the IPPR said the UK’s cash infrastructure has become "increasingly reliant" on the commercial agreement between banks and the Post Office to support continued access basic services for communities across the UK.

IPPR said that a new commercial agreement between the Post Office and high street banks to offer banking services was "welcome progress" that can be expected to improve access to cash, but said that delivering "long-term, sustainable access to cash and core banking services for communities across the UK" is likely to require stronger action.

"We recommend the creation of a government-owned Post Bank, building on existing Post Office banking services," the report says. " In doing so, the Post Bank could provide a bridge from the cash to the digital world.

"The UK Treasury should oversee the creation of a publicly-owned Post Bank which should operate with a public service mandate to provide basic banking services to all citizens. The bank will operate branches through the Post Office network and build on existing Post Office banking services."

The bank would be given a public service mandate to provide financial services in every community across the UK, and offer services that extend beyond access to cash and deposits.

"This public service mandate should include a requirement to provide access to basic retail banking services to all UK citizens, regardless of income, wealth, or social status, hence providing universal access to basic financial services for UK citizens," the report said.

The Post Bank would be hosted by the post office network in order to ensure communities across the UK have access to core banking services at affordable prices – "reaching beyond the offer" of the existing framework.

"The banks will also contribute to the financial sustainability of the Post Office network, including through an access payment paid to the Post Office for use of its assets," the IPPR suggested.

Reform of the banking levy would mean banks and financial service providers would fund the delivery of digital inclusion schemes against new digital inclusion targets – boosting internet connectivity, strengthening digital skills and fostering innovation that will help people overcome the barriers to the digital economy.

IPPR said that the new levy combined with new targets set by devolved governments would mean that those who stand to gain most from the digital transition will have some of their gains reinvested in communities that risk being left behind.

Rachel Statham, IPPR economic analyst and lead report author, said: “The future will have less cash. But urgent action is needed to set the UK on course towards an economy that is both more digital and more just. By getting ahead now, we can invest the billions needed to get every part of the country ready for a more digital future and protect access to cash where people rely on it.

"This could see the potential benefits brought by a move away from cash invested to narrow rather than widen inequalities, handing control over from Big Tech and banks to people and communities.

“The move away from cash should only happen as fast as people are ready for, and the benefits of doing so should be shared. By setting new digital inclusion targets at the national, regional and local level, and investing to meet these targets, we can make sure bridge the digital divide and protect cash for those rely on it.”

Carys Roberts, head of the Centre for Economic Justice and IPPR chief economist, added: “There are opportunities within reach as the UK economy shifts away from cash and towards digital payments – from productivity increases to preventing fraud and financial crime.

"But there’s also a danger that the shift to digital, if not proactively shaped, will work for some and leave many behind. The government should enable everyone to take part in the digital economy and ensure powerful companies like Apple and Google play their full part in shaping a fairer move away from cash in the UK.”