UK lockdown squeezes out cash, but slows progress on payments reforms

By on 02/04/2020 | Updated on 12/05/2020
Cash machine and cash use is down 50% since the UK went into lockdown.

The economic regulator for the UK’s £75 trillion (US$93.3 trillion) payment systems industry has announced a “revised timetable” for its work priorities as the coronavirus pandemic spreads.

The Payment Systems Regulator (PSR) published its Annual Plan for 2020/21 this week – a plan that was drafted before coronavirus caused the unprecedented national shutdown. The document sets out the regulator’s prior expectations about its priorities and planned work. Unveiling the plan, the PSR said that “much of the work described will continue, perhaps in different ways and – no doubt – to a revised timetable”. It added that it would “continuously review its work to ensure that it is focusing on the right things and adapting its approach to meet the challenges presented by COVID-19”.

From APP scams to interbank payments

Priorities for the PSR include: seeking to prevent authorised push payment (APP) scams – fraud where victims are tricked into making bank transfers to an account posing as a legitimate payee – and to protect victims; seeking to ensure that a planned overhaul of interbank payments, creating the New Payments Architecture (NPA), by retail payment authority Pay.UK “delivers a resilient way of making digital payments that supports more competition and innovation”; and ensuring people can continue to access cash from ATMs.  

The PSR, which was set up five years ago, this week said that it had “carefully assessed its requirements on the organisations it regulates and where appropriate, has acted to extend certain deadlines – especially where its regulatory requirements may distract firms from the immediate priority of dealing with the impacts of COVID-19”. 

In respect of app scams, the PSR says that it will not take “formal action” in respect of delays to the introduction of ‘Confirmation of Payee’ (CoP) rules – which alert those sending money if the recipient’s name doesn’t match their account details until the end of June. The original deadline for UK’s six largest banks – Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland and Santander – to implement the CoP rules was 31 March. The PSR says it fully expects the banks to do everything they can to protect people and implement CoP as soon as possible.

Concern over scams is mounting, with the UK’s National Crime Agency among the bodies warning members of the public to be more vigilant against fraud, particularly about sharing their financial and personal information, as criminals seek to capitalise on COVID-19.

In respect of the NPA, the PSR’s deadline for inputs to a policy development document was originally 24 March but has now been extended for at least one month. The PSR says that it is “carefully reviewing the impacts of COVID-19 and may consider setting a further revised submission deadline in the coming weeks”.

Cash use hit by coronavirus

According to the UK’s main ATM network, LINK, cash machine and cash use plunged by around 50% as the country went into coronavirus-caused lockdown.

An increasing number of retailers are refusing to accept cash during the crisis, insisting that people pay by card only. Global Government Forum reported last week that, as a reaction to coronavirus, the contactless limit for in-store spending was to increase in the UK from £30 to £45 (US$35 to US$53) – a measure also introduced in numerous other countries.

LINK believes that it is “very likely” that coronavirus will “fundamentally change” some consumers’ cash usage habits and “the requirement for cash access, as a contingency and for vulnerable consumers, will be more important than ever”. LINK says that a “fundamental review and potential restructuring of the country’s ATM network and its business model may therefore be necessary”.

Last month’s Budget announced an intention to legislate to maintain access to cash for those who rely on it. The Budget announcement came weeks after the UK’s Access to Cash Review panel published a one-year update saying that cash use in the UK had fallen faster than it had forecast, arguing that the UK’s cash system has “reached a tipping-point”, and warning that it “will collapse without legislation”.

The chief executive of ATM operator NoteMachine, Peter McNamara, told Global Government Forum this week: “Even before COVID-19, many of society’s most vulnerable already had a heavy reliance on cash. People need help to shop, not more blockages, and different forms of payment shouldn’t be discriminated against as is happening in many businesses. The Treasury must intervene urgently to ensure the revival of widespread, free access to cash.” 

About Ian Hall

Ian is editor of Global Government Fintech a sister publication to Global Government Forum. Ian also writes for media including City AM and #DisruptionBanking. He is former UK director for the pan-European media network Euractiv (2011-2018), editor of Public Affairs News (2007-2011) and news editor of PR Week (2000-2007). He was shortlisted for ‘Editor of the Year’ at the British Society of Magazine Editors (BSME) Awards in 2010. He began his career in Bulgaria at English-language weekly the Sofia Echo. Ian has an MA in Urban and Regional Change in Europe and a BA in Economics, both from Durham University.

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