Cash use in Scotland continues to drop despite government moves

Link analysis shows that withdrawals fell by 45.42% from 175.69m in the pre-Covid year of 2019 to 95.89m in 2023. The figures also show that Scots made an average of 15 visits to cash points withdrawing an average of £1,674.

But over the same period the number of free to use cash machines dropped to 38,480 across the UK, down from 40,869 at the end of 2022. There were also 9,921 charging ATMs in December 2023, down from 10,384 a year earlier.

It comes despite new legislation introduced by the UK Government through the Financial Services and Markets Bill, which aimed to ensure a minimum level of free access to cash and became law in June.

The UK Government described it as a "landmark bill" to regain the financial services rule book. When the bill received Royal Assent ministers said it "protects free access to cash in law".

READ MORE: Cash withdrawals hit all-time high on last Friday before Christmas – Post Office

His Majesty’s Treasury was to set minimum distances for cash withdrawals and deposits, which were to be monitored and enforced by the Financial Conduct Authority (FCA).

With its new powers, the FCA could stop banks and building societies from closing cash access services if there is no suitable alternative within a reasonable distance.

After this the government produced a Cash Access Policy Statement stating that the "vast majority of people and businesses in predominately urban areas" should be no further than one mile away from a cash access service.

HM Treasury also said that the "vast majority of people and businesses predominately in rural areas should be no further than three miles away from a cash access service".

The consumer organisation Which, which said that 60% of Scotland's bank branches had been lost in the last nine years, said the government needed to do more to protect access to cash.

Efforts have been made to ensure bankless towns up and down the country benefit from a new style of shared bank branch on their High Street.

The 'new model for high street banking' first emerged in the summer of 2021 with two key pilot schemes launched in Cambuslang, Lanarkshire and Rochford in Essex.

The new hope for high-street banking, funded by the banking industry came in the form of brand new five-banks-in-one hub hosted by the Post Office.

By December, last year, six hubs had opened in Scotland with the latest launched in December in Carluke, Lanarkshire.

The other hubs are in Carnoustie and Brechin (Angus), Kirkcudbright (Dumfries and Galloway) and Troon (Ayrshire).

The hubs currently consist of a counter service that will be operated by Post Office staff, where customers of any bank can withdraw and deposit cash, make bill payments, and carry out regular banking transactions. In addition, there are private spaces where customers can speak to someone from their own bank about more complex issues.

The banks work on a rotating basis, so staff from different banks are available on different days.

However, the number of cash machines has continued to decline raising concerns that “cash deserts” could be created by bank branch closures and difficulties accessing free ATMs.

According to the consumer organisation Which, only 404 bank branches are left in the whole of Scotland after 636 banks and building societies closed their doors since 2015.

Jenny Ross, Which's money editor said: "While many of us prefer to make payments digitally, cash is still a vital lifeline for many in Scotland. However, it can be difficult to access it due to the drastic amount of bank branch closures and the reduction in the number of free cash machines in recent years.

"Consumers are at risk of being excluded as in-person banking services are axed from their communities. The government must do more to protect the needs of local communities. Banking hubs could play an important role in this, but the rollout is taking far too long and more hubs must open as soon as possible to stop millions of consumers being left behind."

John Palmer, director of influencing and engagement at the older people's charity Independent Age, said: “We know that many older people prefer using cash, especially those on a low income who tell us they find it helps them to budget. While overall usage may have reduced, it is vital that access to cash is protected. “Initiatives in local communities that give older people choice in how to manage their money, like shared banking hubs, are welcome. Banks must not be too hasty in removing access for their customers near their home.”

Last month new rules proposed by the city regulator endeavoured to ensure that banks and building societies should plug the gaps in local cash provision.

Legislation that came into force in June gave the Financial Conduct Authority (FCA) new powers to ensure people could conveniently withdraw and deposit cash following the rapid rate of bank and ATM closures.

The FCA said its new rules would not prevent bank branches from closing but will help "manage the pace of change". It meant that any location set to lose a bank or other cash access point, such as an ATM, must have alternative provisions in place before it shuts.

Assessments would need to take into account local factors, such as demographics and transport. Where firms identify gaps, they will need to act to address these needs, the regulator said.

The FCA also wants to prevent people from facing unreasonable costs to access their money, which could be through charges, travel costs or time.

Graham Mott, director of strategy at Link said: “Overall, cash and ATM use has been slowly declining over the past year. While we saw a steep fall in withdrawals during the pandemic, typically around £1.5bn is still withdrawn from cash machines every week [in the UK].

"We know that more people are shopping online and paying for things using their debit card or phone, however, cash remains popular and our research shows its importance when helping people across all age groups to budget.

“Long term Link expects cash machine numbers to continue to fall. These are generally in busy city and town centres, where there are quite often five or ten on one street or in supermarkets, where three machines may become two or one. What’s important is that we continue to make sure consumers’ free access to cash does not decline and we protect every high street.

"The good news is that there is now a law to protect access to cash. Alongside ATMs, Link will continue recommend new banking hubs and deposit services that will protect cash services across the UK.”

An HM Treasury spokesperson said: "We know cash remains king for many, which is why we have protected access to cash in law; legislating to protect access to cash withdrawal and deposit facilities for people and businesses.

"This will support businesses to continue accepting cash by ensuring they have reasonable access to facilities to deposit their cash."