Huw Jones

LONDON (Reuters] – Top banks have been asked by the Bank of England to outline their plans for maintaining sufficient cash circulation in March as COVID-19 speeds up its decline. They also said they won’t be creating a new organization for distributing coins and notes.

As banks close branches, more people are using cards to pay, making access to cash a political sensitive topic. This raises concerns about the ability of people to send, store and retrieve money. Over 5,000,000 adults still depend on cash to get by in their daily lives. Many of these people have restricted access to banks.

The BoE published a report last year proposing a “utility”, or an entity that distributes cash. It would be funded through banks.

According to the BoE, Wednesday’s statement was not unanimous. This is because there are doubts as to how quickly this could be implemented given the complexity of IT issues involved.

It opted instead for sector-wide commitments that would ensure sufficient cash distribution resilience, increase efficiencies to deal with falling volumes and decrease the impact on the environment from cash processing.

Banks are required to provide individual plans detailing how they will support the BoE commitments by March 31st.

The BoE stated in a statement that “HM Treasury will support this by providing the Bank of England the power it requires to maintain the wholesale infrastructure durable and resilient into the future.”

Cash usage for payments has dropped from nearly half of 2010 to 17% by 2020. This drop was accelerated during the pandemic when some shops were unable to accept coins and notes, which required contactless payments.

Cash withdrawals have increased gradually since lockdowns were lifted. However, August 2021 cash machine withdrawals were 30%-40% less than in the same period of 2019, according to the BoE.

The BoE stated that “looking ahead, there’s considerable uncertainty about the long-term outlook for cash demand,”

Also, the Bank considers the possibility of a digital sterling. This could further reduce cash usage.

According to the Federation of Small Businesses, this strategy can bring new hope for communities that are experiencing loss of cash machines and bank branches.

“This strategy represents a major step forward. The FSB stated that government must now provide access to cash legislation as promised months ago in order to consolidate and continue the gains made today.