Scottish Affairs Committee

Good morning and welcome to the Scottish Affairs Committee meeting. We are conducting an inquiry into the future of Scotland’s high streets, and we are very interested to see how banking and access to cash affects high streets and those who use them, either as consumers or as traders. We very much welcome Mr Leenders this morning. Thank you for coming along. I will ask you my first question. Do you think high street banks still have a role to play in a world where digital banking is becoming much more common?

I can answer that question in two parts. Yes, there is a role, and we have seen a number of brands commit to branches on high streets over the last 12 to 18 months or so. Equally, from a wider societal point, we have to recognise that the way that we shop and live our lives in a more digitised society has changed. We see that in banking as well. Where previously, back in the day as a former bank manager myself, you had an end-to-end service within a bank branch, now that is just not the experience. Customers very much want to be able to swap between channels, so maybe starting in a branch, migrating to telephony, perhaps doing some research online, etc. It is that fluidity that is reflected in the pattern of banking. That is reflected, in turn, in the resizing of branch networks across the UK.

We know that Nationwide, for example, has said it will not close any branches until 2030. Do those decisions vary from bank to bank? Do they reflect a policy decision, or is it simply about their trading situation? Is it less profitable for some and not for others? Is there a rationale behind who makes what decision?

All of those decisions are taken individually as strategic approaches to respective customer bases. Nationwide, as we have seen, is committed to a larger network and estate, whereas one or two others have committed to a somewhat smaller estate but none the less feel that it is the right size for them and their customer base. That will be based on their own research.

I notice in your description of your background that one of the areas that you are responsible for is vulnerable banking customers. I am the MP for Inverness, Skye and West Ross-shire, and to describe my area as a bank desert would be an understatement. If you live in Gairloch, which is a reasonably substantial community on the west coast of Scotland, your nearest bank is in Inverness on the east coast of Scotland. That is two hours each way if you have a car, let alone take public transport. Bank of Scotland closed its bank in Gairloch last year to enormous public upset. RBS and Lloyds—Lloyds obviously being the Bank of Scotland plus a lot—make £14 billion between the two of them in profit. Do you think there should be some sort of moral obligation on these banks to cover the most vulnerable people in rural Scotland?

I certainly agree that all banks would want to serve their customers, and all will invest heavily in the way that they treat vulnerable customers, but it comes back to my entry point, which is that, even across vulnerable communities, in-branch banking is not necessarily the solution that works for that customer base. We see fewer than 2% of the population now exclusively using bank branches; 98% will be looking to that multi-channel approach. The specific point on vulnerability is something that is addressed through the regulator, the Financial Conduct Authority. It provides guidance that the banks will all subscribe to.

I would put to you that it is commercially not viable to have these remote banks, and therefore you are focusing on the major towns where the profit is made. Could you just say yes or no on that?

I would offer a slightly different perspective, which is that it is based on the economic activity rather than necessarily straight commerciality. It is very difficult to extrapolate individual profitability per branch, but none the less I come back to the point that the vast majority of customers are not dependent on face-to-face banking services. When you think of protected characteristics, telephony can be a better solution for those with mobility issues, for example.

We have a 71% growth in population of people over the age of 75 in remote Scotland. They are the people who are most likely to want to use a retail bank. Secondly, the businesses are micro-businesses, and so, again, they are the sort of organisations that require cash. The impact of these banks closing is catastrophic to those communities.

There is always the option of an assessment of a location to see whether a different solution needs to be provided. In the example you gave where there has been a branch closure, the bank itself is responsible for undertaking its own assessment as and when it closes a bank branch. Then colleagues at LINK will, in a later session, perhaps expand a little on the work that they do to ensure that there is sufficient coverage. When we then turn to specific branches, 75% of that activity is cash-related, so it is paying money in and taking money out. We will increasingly see alternative solutions on the high street that will augment branches, banking hubs and post offices. Increasingly, we will see the roll-out of PayPoint solutions, which will put that ability to bank into local retailers. Therefore, this keeps the economic activity that is cash-based circulating within that local community.

Just finally, physical banks will be provided for people in the cities but they will not be provided for people in remote Scotland and, indeed, in remote Britain.

That is entirely based on the objective assessment that takes you to 99% or 97% coverage for access to cash. Then there is a hierarchy of solutions, which ultimately would be a banking hub that might take you through the post office to other aspects such as the ATM network, for example.

That is deeply unsatisfactory.

There are, Mr Leenders, large parts of cities too that have absolutely no access to banks. You quoted a figure there of 98% of people, as I understood it, not relying solely on a bank branch to do whatever transactions they need to make, but how much of that is from necessity because there is not an alternative? Is that a calculation that has been done to measure how this will work going forward?

It is important to get the sequencing correct. It is this data that informs the activity in branches. We see much less activity in branches, which is why they are closing. We know that it is fewer than 2% of the population who rely exclusively on a bank branch. Then it is about 5% who sometimes use a bank branch. The vast majority of routine transactions are done online or through mobile banking. For example, mobile banking has come from a standing start to about two-thirds of population coverage in about 10 years. When we look at cash and the point that you were particularly interested in for your local community, the use of cash as payment dropped 25% year on year from 12% of payments to 9% of payments just last year. Based on our analysis, which does look forward, Chair, we think that we will probably, in the next seven or eight years, see cash usage flatten out at about 5% of overall transactions, so 95% of transactions will be online and digital.

The Glasgow Herald reported last month that three out of four branches of banks in Scotland across the board had closed. Are banks doing anything to prevent a crisis in access to physical banking?

Absolutely, and this is where you come back to the solutions that are offered through the LINK assessment process. That gives you that persistent access to cash. We need to distinguish access to banking services. As I say, the way that consumers use banking or utilise banking services these days is wholly different from where it was 20 years ago. We are seeing that bank branch estates are reflective of that changing pattern of use, which is not exclusively in banking; you see it in retailing as well. Therefore, they are sizing for the demand across their customer base. It would be wrong to sequence that the other way round. It is not a consequence of branches closing necessarily that that activity is shifting. It is simply the convenience of being able to bank online or use mobile solutions.

If we are talking about vulnerable customers, I agree with the Chair that it is not just rural areas where there are bank deserts. Certainly, in my constituency, which is very residential, we have a large elderly population and our high street businesses are very much focused on social activities, bringing people together and reducing social isolation. There is another layer to the vulnerability of customers when banks are removed. That is that some of them will rely on family support or friends to help them to access their online banking. That in itself removes their independence; it removes their privacy, and it can have detrimental effects on their self-esteem. It is really important that they are able to stay independent as long as possible, and that includes being able to go to local businesses on their high street. In my constituency, we have had an assessment that there is adequate access to cash, and therefore hubs are not being prioritised, but there is a bigger picture going on here. I am interested to hear how you look at that area of vulnerability, and not just the statistics that show that people are not using the banks. Of course, if they cannot, they will not. There is that clarity that is needed there.

You make a very valid point. Where banking can move in future is to provide assisted support, and that assisted support may be friends and family. There may be ways to help those less confident to continue to bank more independently. Of course, there would be a metaphorical view from over the shoulder, but that does preserve a degree of independence that, candidly, was not there when I was a bank manager.

Statistics that are used, such as that 98% of people are not reliant on it or cash is not used by the vast majority, are all well and good when you look at the UK as a whole, but, when you look at individual rural communities and certain regions in Scotland, those percentages will be significantly reduced. That is very clear and well known. What work has been done to model, on a more regional basis, what the cash use and bank use is?

We have looked at that. In branches per head of the population, Scotland and Northern Ireland over-index the rest of the UK average. The point that was made earlier holds: there will be those more dispersed rural communities where there perhaps is not sufficient activity for an alternative solution such as a hub when a branch closes, but that would be no different from perhaps in Wales or other parts of the country. There is that demand and economic activity that will trigger the assessment to deliver a banking hub.

Do you do that assessment for businesses as well as individuals? Particularly in rural Scotland or areas that are one step removed from a high street, they still come into their high streets to use banking services. SMEs and really small home businesses are very common in rural areas, and the impact on them is huge because they need in-person banking. You cannot do a lot of what they need to do at the post office. What assessment has been done on the business impact and not just the individual, personal banking?

The most important point is that that assessment is wholly independent of the banking sector. It is undertaken by LINK. LINK will be speaking to you a little bit later.

No, I am not talking about banking hubs. From a bank’s point of view, you were talking earlier about how such a high percentage are not using them. If I am honest, it sounds like, “Don’t worry about it; it’s fine”. It is not fine for a lot of the country who are impacted. You are picking this up from this room. In some parts of this country, this is a really big issue. Those are the areas that are more remote, more removed from high streets, where people do not have a quick trip into the city to get it done. What assessment has been done of the proportion of people or businesses in those areas that do not have access to banks?

That is regulated by the Financial Conduct Authority. If a branch is to close, an assessment will be made of the personal customer base, the business customer base, degrees of vulnerability and some of the geographic considerations. Topographically, as the crow flies, a distance might be somewhat shorter than if one has to take the mapped road or what have you. All of that is taken into consideration. With respect, it does come back to this point that the way that we bank, including small businesses, has very much changed. It is reflective of the convenience of digital solutions.

Where they exist when you have good enough broadband, yes.

I hear you talking about how only 2% of the population use banks. I must admit that I am guilty; I do all my banking on the phone. Is there any work done on the demographics of that 2%? I am thinking, for example, of my mum and dad. They have a cheque, and you can pay it in using an app, but they would not have a clue how to do that. I feel that we are impacting our elderly communities much more than everyone else. Is there work done to understand that 2%? Who are they?

Yes, absolutely. Typically, it is quite intuitive. It would be older customers. It is also, to a degree, somewhat younger customers who are less confident in their banking. As they become more confident, they quite quickly migrate. There are some digital natives in younger age groups who move straight into digital solutions. You see that in the popularity of what we consider neobanks such as Monzo and Starling. In the context of what is actually done in bank branches, as I say, three-quarters is paying in and taking out money. It is probably a small business point. It is also a cash exchange to float for the till. The rest is administrative and what you would do on your phone, so checking balances, perhaps some admin, or changing an address. There is a minority of activity where it is important that we consider how to support customers empathetically. That would be, for example, bereavement. It might be with power of attorney to support consumers who are that little bit more vulnerable and less able to operate independently. That is something that we are actively looking at.

It is 2% of the whole population. For over-70s, for example, I would imagine that a much bigger percentage of those will be reliant on a bank.

Yes, but not materially. There is quite a degree of digital literacy across older ages. It would be a misnomer to think that there was a specific cohort who have been left behind as society digitises. We can cut that by age. We can cut it by socioeconomic group or by income level. Typically, those on lower incomes are more reliant on cash, and therefore more likely to want to use post office, branch, hub or ATMs as solutions. Again, that is statistically valid but not a disproportionately material number.

You have that data and that can be shared with the Committee.

Yes, we can share that with you. We are preparing a report that we will be happy to provide to you once it is finalised.

Mr Leenders, you talked about an objective analysis of access to cash. I am sure it is objective in a sense, but it is also very binary. It is a very binary assessment of access to cash. Are you aware that there is no assessment on access to banking, only on access to cash? If you are lucky enough to get a banking hub, that is to satisfy an access to cash issue, not an access to banking issue. Is that your understanding of the regulation that the FCA and LINK work to?

That is the literal interpretation of the regulation; that is correct. However, within hubs, each hub has a community banker.

Sorry, Mr Leenders, we will get on to hubs in a moment. I do not want to interrupt, but I know that we are running out of time. We spent a lot of time on the last question. In Pitlochry, they are not getting a hub and Bank of Scotland has just shut. That means there is now no bank between RBS in Inverness and RBS in Perth. That is 111 miles across some fairly challenging Scottish topography. Just for context, maybe for you, the M25 is 117 miles long. I see also that Lloyds has shut in Putney high street. Imagine if people in Putney high street had to travel 111 miles to get to their next bank. That is what is happening in Scotland.

That takes us back, with respect, to the entry point that we do not see consumers using branches in that way. That is why they are closing.

I hear you. Every time a branch shuts in my constituency, I get that data from the bank as well that shows who is using physical banking and what they are using it for, and who is on the telephone and who is on digital. I get all that. You did not answer it very well on the last question, Mr Leenders. You say that older people must not be dismissed as not being digitally literate. Of course there are digitally literate older people, but there are many who are not and will never be digitally literate. Over and above that, they have a very particular attitude towards money and personal finance that will not be satisfied from a post office counter that may or may not be open, and is almost certainly in a very different retail environment from a bank. That is very challenging for older people, is it not?

That takes me to my earlier point about how we would like to support with dual control and third-party access for that consumer base, which may be older, less confident or more vulnerable in other ways. That makes a lot of sense, and we need to look at that. I would offer a slightly different perspective if we felt that the singular solution was to sustain bank branches, because I am not convinced that that ultimately is the best solution for those consumers.

I am accepting that on its merits. I might disagree; I might not. Therefore, do you not accept that the threshold, nebulous as it is, about whether you get a banking hub—entirely in the gift of LINK, subject to what the FCA tells it to do, and subject, I suspect, behind closed doors, to what the banks want it to do—is a lottery? It is an absolute lottery.

I would have to contest the point because the regulator, the FCA, consulted carefully on the requirements around distribution of cash solutions. I would make the point that in banking hubs there is more than just cash available. There is provision for banking services as well on a voluntary basis.

Mr Leenders, I have the utmost respect for banking hubs. I have one in Brechin. It has been transformative. The problem is when areas such as Pitlochry and the vast hinterland that Pitlochry serves have their last bank closed, and they are told by LINK that they do not meet the criteria, opaque as they are, for a banking hub. That is the problem. We are talking about high streets and people coming to the high streets. They are not going to come to the high streets to access a banking hub if there is not a banking hub there. This comes down to cost. We all know that the banks fund the banking hubs. They obviously want to fund as few as them as possible. I wonder what you think, because these are all your members, Mr Leenders. All of these people affected by branch closures stood behind the banks in 2008 with £137 billion of taxpayers’ money. We were no sooner out of the financial crisis when this process of bank closures started. It is coming to its culmination. Do you think that is a reasonable way to treat the very consumers who protected your members from going to the wall?

I would offer a somewhat different perspective. The global financial crisis had really rather different drivers than necessarily more local banking or retail banking issues.

I did not mention a cause, Mr Leenders; I just mentioned a fact.

I was thinking of the cause that sits behind the fact, with respect. As LINK is giving evidence a little later, it will be able to expand on the criteria. The point that I made earlier was that there is an entirely independent assessment. The assertion that there is a degree of collusion with the banking sector behind the scenes is something that I would have to reject.

Okay, but, to get back to my pretty straightforward question, do you think this is a reasonable thank you to the people who stopped the very businesses that are closing these branches from going to the wall? Is that a reasonable thing?

If I was to reflect that in the level of customer satisfaction that we see in banking, that is actually increasing. You can look at independent studies that show some of the highest levels of satisfaction in banking that we have seen. That would pre-date the global financial crisis. That is reflective of the fact that the investment is following the demand. It is being made in advancing technologies where we see customers want to do their banking. Yes, the industry is responsive to consumers. You are suggesting that we should, in some way, preserve a historical form of banking that, regrettably, we just do not see reflected in customer behaviour.

I can see why you have come to that conclusion, but let me reassure you that I am not wanting banks preserved on the high street as mausoleums to a way that we used to live. That is not what I am asking. I am not going to ask it again, because I asked it twice. My point is that it shows a level of ingratitude. These banks are here only because consumers up and down these islands protected them through taxpayer cash. Immediately that was over, the banks started closing. That would be much less of a challenge if there was a much more proactive and well-funded regime where banking hubs popped up where banking deserts were created. That is not where we are, certainly not in Pitlochry. Finally, and very briefly, do your members take any cognisance of the appropriateness or otherwise of the environments that the post office is located in? Of course, there are very few actual post offices now. Post offices are co-located with other retail and other businesses. Are there any criteria that your members like to see before they shut up shop?

Across the post office estate, and colleagues will be able to expand on the detail, there is a level of service provision that is agreed across all of the banking sector. There are some 33 personal bank account providers and about 15 or so business current account providers. That is a consistent level of service around paying in and withdrawing cash. There are some limited administrative solutions as well, such as balance. It is something we have worked on with the Post Office for probably a decade or so now, under what we call the banking framework. The Post Office would say, as we would, that it is very well received.

I have one quick question before I move on to this. I have been listening carefully to what you have been saying throughout, including things such as a historical form of banking and whether we want to sustain bank branches. Do you and your members actually believe in high street banking?

Absolutely, and, as we spoke about earlier, that is why there are commitments to networks that are reflective of the demand that individual brands see.

That is only in certain areas where they are seen as fit and worthy. I have not got the impression throughout this that you are a strong advocate for high street branches.

I come back to the point that I was a bank manager. I have run branches, so I have seen both sides of the debate and I can empathise with a lot of the more emotive considerations that this Committee is giving to the point. Equally though, banks compete against each other in an environment where technology is moving very quickly. There are some in that market that do not offer banking by branch as a solution, so that is an additional cost that they need to compete with. Yes, there are commercial and economic considerations. No one would deny that. Equally, the view that banks are dismissive of those customers who prefer to bank in branch is just not something I recognise.

The Government have an access to banking review live at the moment, which may or may not mandate for more in-person services or for protecting them. What would that look like for the banking sector if that is the conclusion of the review? How would that be implemented?

The services that are provided in branches, hubs and so on, historically and to date, are broadly very much the same. As I say, three quarters is about cash transactions. Then you have a series of more administrative issues such as understanding your balance and recent transactions. Probably about 10% is making transfers between accounts or to other people. Then, on those unfortunate occasions that we all face a handful of times in our lives, there will be a need for support to deal with a bereavement, for example, or a power of attorney, but that would be low single digits of actual activity. I would expect that that will be reflected in the findings of the independent review, because that just has not changed over time. I would expect that the central premise will be the extent to which a much more hybrid approach to banking and banking services will serve communities into the future.

How will that be delivered? For example, you cannot do bereavement support over a phone. You cannot do some of these other services online. You need to have a bank branch. As we have heard earlier, there are areas in Scotland where you have to travel over 100 miles to get to a bank branch. If the review comes back and says that in-person services need to be protected or enhanced, would more branches be opened? How is it actually going to be delivered? I understand the services, but how would it be delivered?

With respect, those services typically include referrals to specialist units. It is not as if there is an individual in a branch, nor has there been for some time, who would specialise particularly in, say, bereavement or mandate issues such as a power of attorney. That would largely be centralised, which comes back to this pattern of banking where consumers might want to have that initial conversation to understand. They equally might have done some research on the internet and might want some clarification, but are very comfortable in moving into a telephone or Teams video-based environment periodically, perhaps taking information digitally in other circumstances. That whole nature of walking into a bank branch, as perhaps 30 years ago when I was in the networks, is no longer there. It is just not how people operate.

I have a final question. If the review comes back and says, again, that in-person services need to be enhanced and protected, would banks continue what seems to be their endless process of closing bank branches?

As I mentioned earlier, most of the large franchises have established that they are committed to the size of their estates for the medium term.

The medium term could be three years. You will understand this; we can all understand this. A business needs more than a three-year horizon for planning. Three years is not really protecting; it is giving someone a bit of breathing space. It is not protecting. A three-year commitment is not enough for a business.

I would beg to differ because the way that society and the speed with which society is adopting technology and digitisation needs to be reflected and balanced in those commitments. We have talked about access. The point was made earlier about a lack of broadband or internet access. Infrastructure simply is not there in some of those areas that you represent, but that is changing very fast.

It is not changing quickly.

Forgive me, but think about Starlink, for example.

Internet and broadband in Scotland is not changing quickly. There is no way in a few years’ time that there is going to be sufficient broadband access across the country to make sure everybody has the use that they need. That is not going to happen.

With respect, it probably will not be based on the existing distribution model, but, as we see the innovations that I refer to, such as Starlink, coming into the market, we will be familiar with internet access on aeroplanes, for example. It is a different type of distribution that will start to come through. That is why we need to think forward a little more. When we consider making those commitments, we need to be flexible enough to move with the technologies and the way that society adopts them.

It might just be worth saying at this point that the Committee has been doing another inquiry into digital connectivity, particularly in remote and rural areas in Scotland. Our inquiry would bear out Ms Cross’ point very strongly. Starlink is not an alternative to broadband for many people because, geographically, it does not work everywhere and is very expensive. For those people who are trying to access banking, it might be a more alternative way that they have to use to be able to do their banking. It is something the Committee is very concerned about.

What I am going to ask you has probably already been spoken about, but it is still something that I want to put forward to you. In addition to the bank closures, the number of free-to-use cash machines in Scotland has fallen by a quarter since 2018. Can you tell me what the industry is doing to ensure that people can continue to access cash? There are communities where it is still in demand, but is there enough demand there to give the communities that are not getting the service the proper service? Can you tell me what your plan is for that?

If I may, I will perhaps defer or ask you to point that question towards my colleagues at LINK, as they administer the ATM network. It will come back round to that point of demand and the extent to which cash is used. Each week, I see the aggregate cash in and out of wholesale cash centres, and year on year it is reducing. When you think of that translated into payments, as I have mentioned before, it is a significant drop. We will see that trend continuing to a floor, we would think, of about 5% of transactions. There are big benefits in using digital payments. You have far more protections. As we see, again, with the modernisation of the payments regime, the function of a payment will become far wider than simply moving money from A to B. You will be able to include data and information alongside that payment. Payments are going to be only more supportive of society going forward, whereas cash is obviously essential as a fallback. No one would deny that. It will always have a place in society; we know that. As we have articulated earlier in this conversation, there are certain groups of consumers such as lower socioeconomic groups, lower-income groups, perhaps older age and perhaps younger, who will always want to use cash, but again, that network estate is based off a demand footprint.

Just as you said, some people, specifically the elderly, do want to still use cash. That is something that we need to look into.

If I may just follow that up before going for supplementaries from my colleagues, many of whom want to ask you one, we will raise this when we speak to LINK, but Mrs Burke was actually quite specific in asking what the industry was doing about ensuring there is cash access for the people who need to access cash.

The industry supports and funds the entire cash regime as a payment scheme end to end. It buys the notes from the Bank of England. It buys coinage from the Royal Mint. It distributes that through cash centres, cash in transit, and delivers it to point of sale. The industry makes a material commitment to sustain access to cash. I hear the particular point about ATMs as a component of that. That is something that LINK would be far better placed to answer for you.

Does the industry understand that, when it withdraws a bank branch, it is also withdrawing a source of cash?

That is part of the consideration that is undertaken as part of those assessments.

On the point of ATM machines, you may not have the figures, but I am just wondering how many cash machines across Scotland you can withdraw £5 from.

That is something I am afraid you would have to ask my colleagues from LINK. I would not have that detail, I am afraid.

Are those colleagues in the room today?

They will be in the next evidence session.

Have your members, or your organisation itself as the umbrella, noticed any changes in the trends with the use of cash? Has there been an uptick or a shallowing of the decline in the use of cash as some people try to budget better by using cash?

Yes, we have seen that. That has fallen away again. We have seen a fairly steady trajectory in the reduction of the use of cash. That accelerated through the pandemic by some measure. Then we saw a degree of correction. There was a slower decline, but we have now reverted to the mean and we are seeing that continued decline in the use of cash. Our last set of data did not reflect your point, but in the set before, which would have been 2024, we did see a migration to cash, which we understood to be a use of cash as a budgeting tool. To counterbalance that, we also see that consumers like a mobile app because that gives them real-time data on how much money they have in their account. Then there is a degree of preference between whether you want to physically feel that cash or whether you are comforted by the fact that it is in your bank account.

This is just a very short question. Do you know what number of people 2% represents? It sounds like a small number, but it would be really interesting to know what actual per head that number represents.

My mental arithmetic suggests that there are about 5.5 million people in Scotland, so you are probably looking at something of the order of a few hundred thousand individuals across the highlands and islands and the mainland of Scotland.

It is a significant number of people; that is the point that I am making.

Yes. Absolutely, it is, and you cannot deny that. It is also about the spread. We know that Scotland consists of some significant conurbations and then a large degree of rurality.

We are already demonstrating that even those of us who live in highly populated areas have difficulty with access to cash.

My constituency of West Dunbartonshire is no different from everyone else’s constituencies, I would suspect. For instance, the Bank of Scotland on Main street in Alexandria in West Dunbartonshire closed earlier this year, but we are very fortunate in that we have a new banking hub in Alexandria Main street. I would agree with you that it has been very well received. It is open Monday to Friday, it is extremely busy, and it provides both personal banking and business finance, as well as a post office. I regard that as a major boost for local businesses on the main street. I know we have talked about in-person banking for vulnerable groups, but I am more interested in the small businesses and local organisations. If high streets are to survive, it is about unique local businesses—go local and buy local. They rely on high street banking to deposit cash almost on a daily basis more than the national retailers do. To what extent is that a factor when the banks decide and are looking at whether to close a branch on a particular main street? Do you consult the local businesses when reaching that decision in relation to the extent that they rely on that bank?

Yes, there is extensive communication as a brand determines to close its branch. You are right in your observation. For larger franchises, the more secure solutions for volume cash such as collection and delivery are predominant. They are less relevant in the context of high street and bank branches. Through the post office, obviously there is the ability to pay in and to withdraw, as well as to exchange cash for float; it is “change giving” in its terminology. As I mentioned earlier, there are other solutions that we think will sustain that economic activity locally. For example, as I mentioned, through PayPoint, the local retailer might be able to support the banking of cash in that community as much as the post office, or a branch or hub. We would see that as a solution to support those cash-based small businesses in communities.

There was a suggestion from the Federation of Small Businesses on our high streets that banks should be putting more money into accelerating the role of banking hubs. Do you agree with that?

Again, colleagues from Cash Access UK are with you a little later on. We are committed to 350 hubs by 2029; there are some 230 or 240 open already, with some in the pipeline. There are some local complexities. When we were more directly involved at the inception of the banking hub project, there were challenges in finding premises on high streets. There were preferences from landlords for different tenants, and some of the premises were simply not suitable, but the specific parameters of that would be something for Cash Access UK to expand on.

We spoke earlier specifically about vulnerable customers, but there are other groups of customers who are just less willing or able to use digital services. How are banks specifically preserving in-person services for these groups against the wider trends in technology and consumer behaviour?

It comes back to the different options that consumers have. In this conversation, we are perhaps understating the role of telephony, for example, which is a technology that most would agree is pretty much ubiquitous and proves very helpful. We discussed earlier perhaps some protected characteristics such as mobility where telephony is a great solution. Of course, telephony as in the telephone of old again expands into more digital solutions such as video conferencing and face-to-face calls, which we will be familiar with, through WhatsApp, Teams or Zoom.

We are looking at this in the context of the high streets, so are the banks mindful of the effect their removal from the high street has on both these groups and on the high street shops?

Yes. We have done some very interesting work with an organisation called the Connection Project on individuals who would otherwise have considered themselves to be much less digitally competent and confident. When provided with infrastructure, hardware, hypercare, training and solutions, the adoption levels are very high. There is a lot to be explored in supporting consumers to bridge into that type of world.

Are the banks committed to funding that kind of work?

Yes. We have been funding that for a couple of years now.

We have already spoken quite a bit about the challenges of connectivity. It would appear that a lot of the mitigations around bank closures are really about shifting people towards online banking. Would you agree that a lot of the mitigations are actually reliant on good connectivity, when we have already identified that connectivity remains a challenging issue for large parts of the country?

It is clearly a component, but we would first look to the outcome that we want to provide for that individual consumer. What is the solution that they are looking for, and how best and most efficiently could that be delivered? Yes, there will be certain technologies that are reliant on 4G or 5G broadband; there are others that are less so. You come back to telephony, etc. That landline in itself can provide that connectivity into the solution that delivers the best outcome.

Is connectivity taken into account when there is a decision taken to close a bank branch?

As I understand, yes. As I say, colleagues will be able to talk in more detail about the assessments that they make.

How do you respond to the suggestion that banks do not understand the scale of the challenges involved in accessing more distant branches in rural Scotland in terms of time, cost and transport reliability? I will just come back also to online connectivity. This Committee has heard time and again from communities across the highlands and islands, and elsewhere in the country, of the rural penalty. Everything costs more and there are more barriers to accessing the services that they need. Do banks actually understand this?

I do not know that any bank would lightly dismiss a decision to close a branch. It is carefully considered and assessed, and you have seen some of the process that goes through. It is a regulated procedure. The question of connectivity and the wider infrastructure provision that creates some of that premium is something for the infrastructure providers to support you with. I am not clear on their plans necessarily to broaden or extend coverage.

In the same way that I asked whether connectivity is taken into account when a decision is taken to close a branch, equally, transport should be a very important factor. Rural areas have significant difficulties in being able to travel as well because of the decline in a lot of local bus services. I would argue that these factors need to be taken into consideration too, particularly when perhaps small businesses really rely on having that face-to-face contact. As my colleague Mr MacDonald said earlier, they may have to travel extensively to do that, and not everyone perhaps has the means.

When LINK undertakes its visits to locations, for example, those are certainly factors that it would take into account in the consideration of whether an alternative provision is warranted. Equally, for banks, clearly they will be empathetic to local circumstances. Those may differ in rural areas from more urban areas. That is part of the assessment that they would undertake.

Would you share with me the consultation for the closing of the Bank of Scotland in Gairloch, please? Could you get that for me?

I could certainly ask the Bank of Scotland to provide it to you.

Thank you. I have seen much of the consultation from people in the area, and I did not find anybody saying it would be a good idea to close that bank. As far as I can see, the consultation may as well be headed, “We will make more profit if we close this branch”. I cannot think of any other rationale for closing it, but, if you could share that with me, I would appreciate that.

As I say, I do not have that information, but we can certainly arrange for it to be sent to you from the Bank of Scotland.

Thank you very much.

Mr Leenders, historically bank branches have acted as anchor institutions on our high streets, driving footfall and customer spending. Do they still play that role?

It takes you back to the high street of a butcher, a baker and a pub, which were part of a local community. The pattern of high streets and the retail presence on high streets have fundamentally changed. The banking sector is no different in changing with that. Whereas perhaps many years ago a high street branch or branches would have been fairly evident on high streets, given the manner in which we shop these days, that has changed.

When communities learn of bank closures within the high streets, they feel that there is a real disconnect between the bank’s decision and how community groups, voluntary groups, the third sector and local councils are all working together in a real effort to revive the local economy. That may be put at risk simply by the banks withdrawing from high streets. There is reduced footfall for businesses and a sense of communities being downgraded, as well as a lot of those well-paid bank jobs and that spending power, and an empty building that is left in their high street that nobody can afford to take over or occupy. It is just another blight on the high street. When banks are considering closing a branch, what impact assessments are made in relation to the community and the high streets before closing that branch?

There is extensive outreach to local communities as a decision to close a branch is taken. That is part of the regulated requirement on banks as they consider closing their branches. The central point we keep coming back to, with apologies for being repetitive, is that the way that consumers are banking has fundamentally changed. We are trying to deliver for consumers the outcome that they are after to the conveniences, as your colleague has mentioned, across a range of different channels, rather than to persist with a bank branch that may not be, for the majority of the community, the solution that they utilise at all.

Do you believe that there is a negative impact on communities and high streets when bank branches are closed?

I believe that bank branches typically follow economic activity and do not necessarily lead it. The original purpose for a bank branch was to garner deposits, to take deposits from the local community and to provide that reassuring presence on the high street that your cash was safe in the high-walled architecture. That pattern of taking deposits has very much shifted. You still see it to an extent in the building society movement, I would argue, where you have more straightforward savings and loans, so you do not necessarily have current account propositions. It would be a slightly false premise to consider that economic activity is driven by a local bank branch.

How can banks be supported to keep high street branches open where there is evidence that they do contribute to high street activity?

We have seen a series of restructures that has taken individual branch estates to sizes that they feel are representative of the support their customers want. We may take issue as to the duration of the commitments that have been made, but, to your point, a number of brands have committed to sustaining networks at their current size for the medium-term future. That is reflective of how they feel they will support their communities.

Mr Leenders, you just mentioned extensive consultation with communities. Can you just confirm that that is after the decision is taken rather than before?

It is as a part of that decisioning process.

Can you give me any examples of where community consultation has taken place, a community has said very strongly that they need the bank to stay, and the decision has been to keep a branch open?

I can give you examples of where a decision has been changed off the back of consultation. LINK will be able to give examples of appeals that have been upheld where a decision for a hub, for example, has been taken. I do not have that fact base with me just now, but I am happy to provide it to the Committee.

I would be delighted to see that information. It was of great concern to my constituents, when I was a councillor in Whitburn, when the last bank there closed. I know colleagues will share those experiences where the last bank has closed and people have been left without access to in-person banking services. Despite huge consultation and several meetings, the decision was still final. I would really be keen to see the information that you have on where decisions have been changed.

The Committee would be very grateful for that information. I wonder whether you could give us an idea, even if it anecdotally, of what sort of percentage we are talking about in terms of the decisions taken not to close.

I am afraid I really could not be drawn. I do not have that insight to hand.

Chair, my question was very similar. We hear about consultation, but a lot of communities feel like this is just a tick-box exercise. It was really just to get information back about how often these decisions are changed.

It would be helpful to have that. I will take another intervention on this, but it will have to be the last one.

Is Nationwide one of your members?

Yes, it is.

How has it managed to commit to making no branch closures until 2030? Is it purely coincidental that its branch network is owned by its members and every other branch network is owned by shareholders?

This is a competitive differential. HSBC has made a commitment; NatWest has made a commitment. As I say, a number of the major high-street brands have committed to branch networks. There are a few examples. Nationwide has used that as a competitive differential and has emphasised it in a lot of its marketing.

Mr Leenders, that brings us to the end of our questions this morning. Thank you very much for your time this morning and for participating in this session. We look forward to the further information that you are going to provide to us. Thank you very much. Witnesses: Chris Ashton, Poppy Simister-Thomas and Jack Foden.

I now reconvene this session of the Scottish Affairs Committee. Good morning and welcome to our witnesses. I wonder whether each of you, starting with Mr Ashton, could say your names and what you do.

I am Chris Ashton, chief commercial officer at LINK. LINK is a public interest non-for-profit that protects access for cash in Scotland and the UK. We run the UK’s ATM network and we are the co-ordination body that undertakes access to cash assessment under the FCA access to cash rules that were introduced in September 2024 as part of the Financial Services and Markets Act.

I am Poppy Simister-Thomas. I am the chief strategy officer at Cash Access UK. We are the delivery body, which is the next step in the process after LINK makes an assessment around access to cash needs. We are a not-for-profit that is organised by the majority of the high street banks. We take assessments from LINK and we then find appropriate properties, and we build and run banking hubs in communities where they are recommended.

Good morning. I am Jack Foden, head of public affairs at Post Office. As you will know, we operate 11,500 branches across the UK and through the banking framework, with the banks, we provide access to cash in communities across all four nations.

As you will have heard from the earlier session, all members around the table have great concern about a number of issues in connection with banking and cash. Can I ask all of you what progress your organisations are making in protecting access to cash and banking? As bank branches continue to close, it seems to be something that we are all having to face on a weekly or monthly basis. It would be really interesting to know what you are all doing to protect access to cash and banking. I will start with Mr Ashton.

I have two hats as far as this is concerned: the ATM network and the assessments. If I can start with the ATM network, cash usage is down 40% since 2019. Saying that, £600 million per month is still taken out by Scottish ATMs, which is a significant number. Looking back over the last five years, the number of ATMs has reduced by 24% in Scotland, but the percentage of the population within 1 km of an ATM has remained static. In 2019, 90% of people in Scotland were within 1 km of an ATM. In 2026, 89% are still within 1 km of an ATM. A lot of that is done through our protected ATM scheme. We have a guarantee that we will ensure that there is an ATM within 1 km of a community. We protect 11% of ATMs in Scotland by paying enhanced premiums, even if they are not commercially viable, to ensure that people have free access to cash. I am happy to talk about that in a bit more detail later on. The second part is around assessments. Since September 2024 under the regulated scheme and for two years before that under a voluntary scheme, LINK has done an assessment wherever a bank branch closes in Scotland or if we have received a request from someone in a community, be that an MP, MSP, councillor or just someone who is interested in that local community. We have undertaken 233 assessments, to be precise, as of this morning following 200 closures, and we have recommended 33 banking hubs so far in Scotland.

At Cash Access, our role is to build and then operate the banking hubs that provide that access to cash and banking services for the communities and individuals who need it. As Chris said, we have 31 banking hubs open in Scotland already. There are two more in the works at the moment, as well as five cash hubs that specifically provide cash services in communities where that is deemed to be the need. While you are right, Mr Doogan, that the criteria focus on access to cash specifically, in reality those banking hubs have always been providing access to banking services on a voluntary basis as well. Those banking hubs have counters running cash services operated by Post Office, which customers can use any day of the week, but they also have community bankers on a rota basis from banks with a local market share so that customers can now walk into banking hubs and get help with banking needs, advice and some of the difficult life moments that Eric talked about. Those services are already, on a voluntary basis, providing a lot of the access to banking needs as well as cash.

In terms of access to cash versus access to banking, the wider post office network very much falls into the access to cash side of things. We are now in the fourth iteration of the banking framework, which has been extended out through to the end of 2030 so that communities can have confidence that they can access cash, whether withdrawals or deposits, in their local post office. At the same time, we are really proud of the role that we play in banking hubs as well. As Poppy alluded to, it is postmasters who sit behind the counter in banking hubs. They have a really key role in providing that access to cash. We are very mindful of trying to make it easy to get in and out of branches. We are in the process of rolling out a lot of bank-grade automation and technology in our branches, whether that is note counters, safes built into the counters or what we call multi-function devices, which take both withdrawals and deposits. More widely, we are very mindful that we need to make sure that post offices are sustainable and viable to run. The north star of the business at the moment is putting more money into postmasters’ pockets so that it is not only viable but attractive to run a branch.

From what you have all said, postmasters and postmistresses are running banking hubs, in effect?

They provide the counter service. When you go into a banking hub, there are essentially two elements. There is the counter, where you can do your cash withdrawals or deposits, deposit a cheque or make a balance query. That will be operated by a postmaster and their team. There is then a community banking room, which maybe Poppy could speak to.

That is what Post Office is doing. We have heard that the number of ATMs has gone down at a time when the number of bank branches has also gone down significantly. How effectively can the services that your organisations offer fill the gaps that are being left by the high street banks, particularly in those areas that have a higher elderly demographic, that are more rural or perhaps that are less well digitally connected?

I will start with the ATM element of that. As I said, there were 4,800 ATMs in 2019. There are 3,670 in 2026, but the coverage as far as people being able to access those within 1 km has stayed the same. The reason for that is that we have seen cash usage go down. Where you may have had three ATMs on a high street, you now have two because cash usage has gone down, but there is still access. Where there is no ATM on a high street, LINK has a responsibility, under its protected ATM scheme, to ensure that there is one by paying extra premiums. If I look at that, 99.2% of Scottish high streets have free access to cash provided through either a free-to-use ATM or the post office service, which I am sure Jack will talk about later. As far as protecting cash is concerned, I can sit here and say confidently that we have things in place to support communities. As far as the assessment process is concerned, we call that a co-ordination body role. We are an independent body, away from the banks, that does assessments either when there is a bank closure or when we get a community request. The assessment is built through rules to make sure it is consistent. We look at urban locations and rural locations slightly differently based on their catchment areas, but the rules that sit behind it are consistent. We have four main vulnerabilities on there, some of which you have spoken about. The first is financial vulnerability. We know that people use cash to budget. That is one of the biggest reasons that people use cash. The second is digital vulnerability. That looks at both connectivity and things such as education levels. Unfortunately, we know that people with lower educational levels or who have a non-visible disability need to use cash more than others. Thirdly, we look at age. We look at the percentage of people over 65 in a local community because we understand that certainly elderly customers might have a preference or need to use cash. Finally, we look at proximity to the next provision. We look at where you have to travel to. We look at that in three ways: the cost to get there; the distance as far as the crow flies; and, more importantly, given some of the things that I have heard today, public transport times. That is built into the assessment process to make sure it is consistent. As I said, we have done 233 assessments and recommended 33 banking hubs so far in Scotland. We will continue to do that every time we get a branch closure notified to us or we see a non-designated cash solution close. If a post office closes, if an ATM closes, or if we get engagement from a local community, we do the same assessment.

Just to follow that up with you, Mr Ashton, before I go to the other members of the panel, I can give you a very local example in my constituency of Glasgow West. Anniesland is a local shopping street. The post office went, quickly followed this year by the Bank of Scotland, which was the last bank remaining. Two ATMs are situated in the local supermarket. There have been periods when both have been out of service and there has been nowhere for people to go for cash. That does not seem to be a very efficient way of organising a service, but it also does not seem to be a very fair way of organising a service for those people who are in those categories that we are discussing. I realise that things go wrong and break down, but it is a relatively common occurrence. Should there not be some way that we can make sure there is always access? Some people cannot just wait, travel a longer distance or borrow money from a family member or a relative.

I agree. I am quite happy to look at individual cases. My colleague Adam is here with me today. If we want to pick up individual cases, I am quite happy to. What is good about the assessment process is that it is not “one and done”. We do not do it once and then that is the assessment over and done with. We have a community request programme so that people from a local community can put in an assessment or ask us to do an assessment at any time. We have a 28-day appeal process after we have formally announced a decision for local representatives, including MPs and MSPs, to challenge our decision and give us more information, if they have it. We also have an independent assessor, who is completely independent from LINK, who can look at a location, if it has gone through our complaint process, to make sure that we have done what we said we were going to do. We have had examples where we have changed our decision as a result of feedback that we have had from councillors and MPs across the country, some resulting in banking hubs and some resulting in extra assisted cash solutions. Ballater and Selkirk are two that I pulled recently where, because of engagement that we have had, we have had a look at the decision again and changed our decision because we have had extra information that we did not have. There are a couple of points around ensuring that we do not undermine Post Office—we think it is a really important national network—and that anything we put in is sustainable and inclusive. I am sure Poppy will talk about that in a bit more detail.

I would go back to the issue about the older, more rural or less digitally well-connected population. How do they fare? Can your organisation help to fill that gap?

Where we have banking hubs, we have extremely high customer satisfaction. We hear that customers and communities are very fond of them. In Scotland, our customer satisfaction was at 77% year to date. That means 77% would recommend banking hubs to their friends and family, which is unusually high for the banking industry. That is in line with what we see across the rest of the UK. Some 93% of customers in Scotland so far in 2026 have said that they can complete what they wanted or needed to do in the banking hub. We feel like we are able to provide a very good service, providing access to cash and access to banking for those customers. The customers we see using hubs very much reflect the demographic criteria that Chris was talking about in the assessments. It is particularly older people who may be using cash and face-to-face services through habit or long experience. There are some who are deeply digitally excluded whether because of their own circumstances or because of connectivity, as the Committee has already talked about. We also see an awful lot of younger people, especially those on lower incomes, who are using cash as a budgeting tool or want to be able to talk someone through their finances because that is more challenging for them. We feel it is serving those customers very well. In terms of what makes up the gap, the 7% of customers who cannot complete what they need in the banking hub, some of those are unknown challenges that we are working with our banks to resolve, such as people wanting to print statements and recently customers of some banks wanting to deposit a cheque and not being able to do so. Some of those are more peripheral or less essential needs, such as accessing foreign currency. There will always be some gaps that people walk in hoping to do. In some cases, they want to buy stamps or post a parcel. We are very proud of the customer needs that we can serve and the path to filling those that cannot be served at the moment.

I very much echo the pride we feel and the role we play in the 30 banking hubs. There are 1,200 branches of post office in Scotland. As I mentioned earlier, we operate those and provide cash through the banking framework, which means 99% of consumers and 95% of small businesses can access cash at their local post office. In terms of what that looks like in Scotland, each month about £280 million is transacted over post office counters. That is just under £3 billion a year, so there are some really significant volumes there. We know that in Scotland around two in five people use cash services at a post office at least monthly and around a third say that they would struggle to manage their personal finances without their local post office. We know it plays a really important role in communities. Your original question alluded to the gap that is created by a bank branch closing. I have outlined our role in access to cash. There is a broader question around what more post offices could do in the access to banking space. We published a report just last week, which felt quite fortuitous in terms of its timing, with the Treasury’s review on the post office’s role in banking. We found that there is consumer appetite to see more at their local post office. That is certainly something that we are very mindful of. There was a Green Paper consultation last year on the future of Post Office, and one of the outcomes of that in the Government’s response in February was that there was encouragement to explore what more we could do at post offices on that front.

That suggests to me that what people really want is the post office and the bank to be one and the same.

There are some instances where we co-locate banking hubs with post offices. That is something that we are really supportive of. It is a sustainable and more cost-effective way of delivering access to banking, access to cash and the other services that the post office provides all under one roof. It is certainly something that we are really keen on.

In turn, it also suggests that people still want banks, ironically.

Can I take you up on that? You said that 77% of people in Scotland would recommend it. The Highland council area is 230,000 people. There are only two places with over 10,000 people. One is Fort William and one is Inverness. I think there is a requirement of over 10,000 people for you guys to consider a banking hub.

That would be better put to Chris. He is an expert on the criteria.

There is only one banking hub in the highlands of Scotland out of 230,000 people, which is in Wick. It does one day a week for TSB, one day for Royal Bank and one day for Bank of Scotland. Post offices are closing all over the highlands. We are not getting a banking hub. I would say that 77% of people in my region would say, “What the heck is a banking hub?” There are statistics and statistics, but it is not working for the north.

Chris is better placed to speak to the criteria. Cash Access delivers them where they are recommended and ensures that, where we do have banking hubs, the service is high quality and can serve as many needs for customers as it can. I do not know whether you wanted to come in on that, Chris.

It is fair to say that in urban locations that figure of 10,000 population is probably there or thereabouts. Our process does not have a minimum number or a minimum number of shops, but that is fair if you look at urban locations. I say “urban locations”. ONS describes retail centres or communities, as we know them, as urban or rural. When we look at urban locations, we have a set of rules. We need to look within 1 mile of those to see what the population is. In rural locations, it is 3 miles, but we look wider than that because we look at catchment areas. The vulnerability measures that I spoke about earlier also fall into this. It is not just about size of location. That is a common view that is not correct. We look at the vulnerability measures. We look at the size of the location, the population and the number of SMEs. There are all sorts of things. We look at the post office provision, the ATM provision and what banks have been there historically and closed. All sorts of things go through the assessment centres. Again, I will go back to it. In rural locations, LINK’s role is to protect free access to cash. We do not want to undermine either the ATM facilities that are there or the post office, and therefore the assessment is built in that way.

I understand that, but your organisation is not considering the difference between rural and remote. South Skye is remote. It is 40 minutes from my house to the nearest shop by car. That is remote. The area is very remote and we are not being serviced. I must say, though, that free Cashline machines are excellent and widely available. I really appreciate that. There are certainly not any banking facilities. The post office is a fraction of what it used to be in remote areas.

Mr Foden, there are 11,500 post offices currently across the UK. What was that number five years ago?

It would have been 11,500 as well. We have had a stable network. Around 2010 or 2011, after a period of closures, that number was fixed at 11,500. Last year, as I alluded to, there was a Government consultation on the future of Post Office, which reviewed the network requirements. There are essentially two network requirements for Post Office.

Importantly, are they the same 11,500 post offices?

No. As you might expect for a branch network of that size, there is always an element of churn as people retire or resign, and so on. The underlying mix of branches has changed. Where we do see branches close, we see openings as well. In the last year, we have opened more branches than we have closed. At the latest, there are just shy of 11,700 branches.

That would be my concern, Mr Ashton. When you make your assessment, you make it—you have to; you have no option—in the here and now. You cannot look at the past or project forward to the future. Nobody knows the future. In Pitlochry and the whole Atholl and Breadalbane community up and down the A9 corridor, the last bank shut and no banking hub was required by your assessment because we have a post office in Pitlochry with a cash machine and a deeply challenging, difficult to get to and dark ATM away up the hill at the Co-op. That is what banking in Pitlochry is now. If anything happens to the post office in Pitlochry, which I sincerely hope it does not, what does LINK do? Do you have a loop back? Do you rely on the public saying, “Hold on a minute. The post office is shut”?

If a post office permanently closes, it will go through an access to cash assessment. It is exactly the same process as a bank closure. We have had retail centres or communities that have lost their post office where we have done assessments and recommended assisted cash solutions to replace that post office. That is part of our process. The Post Office is a non-designated firm as far as it comes to access to cash. It is only a proportion of the banks that are designated. We do that on a reactive rather than proactive basis, but we have that process in place. I agree around the difference between access to cash and access to banking, which you and many of your colleagues have pointed out. I welcome the conversations that you personally have had with LINK over the last couple of years. We do hear in lots of rural locations that the issue is not access to cash; it is access to banking. We recognise that. We welcome the access to banking review that is happening at the moment in the Treasury. As you would expect, we have submitted evidence to that. Most of our evidence is based on the assessments that we have been doing for the last four years, which have highlighted the issue that rural locations are raising with us that access to banking is an issue. We believe that, going forward, access to banking reviews—I do not know what the review is going to say—should be done alongside the access to cash reviews so that we can look at a community as a whole.

I will direct my question to you, Mr Ashton. The number of free-to-use ATMs in Scotland has reportedly declined by a quarter since 2018. Can you tell me what LINK is doing to tackle this problem?

As I said earlier, I agree with your statistics. The number of ATMs has gone down about 24% in Scotland since 2019. As I said earlier, the proportion of population within 1 km remains static. That is due to the fact that we have the protected ATM scheme in place, where we guarantee that any high street has free access to cash within 1 km. If the last ATM disappears from a high street, in effect, LINK will replace it. We will pay subsidies if needed. Financially, we will pay a little more to make sure it goes in, if it is not commercially viable. If you look at the number of ATMs in Scotland that are protected, it is 11.3%. Over one in 10 ATMs is protected in Scotland. That is higher than the rest of the UK, which comes in at just over 9%. That recognises the rurality that we have been speaking about today.

Thank you for that. In what circumstances might LINK commission the installation of new free-to-use ATMs?

Whenever we get a community request through, we will look at a community using our assessment process. If we have a look at that community and there is an access to cash deficiency that is a withdrawal deficiency only, we will put that through our direct commissioning process, which is how we go to the industry to say, “An ATM is needed in X location”. That process can take a period of time. It takes about 12 weeks for us to get someone to say, “Yes, I will take that community on and deliver an ATM”. That is dependent on planning commission, getting broadband and everything you need to put an ATM in. There is a process. Again, if there are any individual sites that anyone wants to speak to me about, if you have anywhere where you think there is an access to cash deficiency, please put a community request in or speak to me directly and we will investigate that for you.

The Government set a target of 350 banking hubs by the end of this Parliament Session. How many can we expect in Scotland? You mentioned 33 earlier, but over the next few years how many will it go up to?

We are on track—it seems a bit of a weird thing to say—to achieve 350. Just to be really clear, I am the executive responsible for the co-ordination body in LINK. We do not have a target of how many we should or should not achieve. We are not going to get to 350 and suddenly stop. If there is a need for access to cash facilities, whether that is a banking hub or an ATM, we will fill that need. As far as forecasting is concerned, it is a bit difficult to say, if I am honest. I am not trying to avoid the question, but it is dependent on what the firms do as far as closing bank branches. Clearly, we will do an assessment only if the last bank in town closes. It is a bit of a chicken and egg question, really. As Eric said in the previous session—he was representing the banks; I am not representing banks—it depends on what their commercial decisions are.

The Government set the target of 350.

They set a minimum standard of achieving 350 by the end of the Parliament.

How many have they achieved so far?

We have recommended 274. I have had a week’s holiday so that may have gone up by a couple, but it is around 274.

We have lost 700 branches in Scotland, but there is no real target of how many banking hubs we should have. Is that right?

It is a needs-based assessment process, as I said earlier. We look at all sorts of things: residents, businesses, size of population, number of businesses locally, what access to cash provisions are there and vulnerabilities including digital, financial and age. All those things come in. It is needs-based. What I am saying is that there is no limit. If there is a need that meets the regulatory requirements, LINK will recommend one.

If it is needs-based, would that change dramatically if the criteria changed from access to cash to access to banking?

Again, it depends what the access to banking review comes out with. First, we need to define in-person banking. I am not sure that has been done. Richard Lloyd is chairing that access to banking review. It is one of the questions that he has asked in his consultation. Whether or not it is legislated off the back of that I do not personally have an opinion on, as far as LINK is concerned, because we are an independent not-for-profit, but, if it does get to a point where access to banking reviews need to happen, I believe they should be happening at the same time as access to cash reviews so that we can look at the ecosystem as one.

Excuse me for not knowing, but what are the timescales around that? I am thinking of places such as Cults in Aberdeen South, which has no bank anymore. They feel like there is a need for a banking hub. What is the timescale for that review? When might things change?

The review is finishing in October this year. I do not know the timelines. I am not on that committee or that review, but those are the timelines. LINK will keep an eye out for the outcome of that and respond where needed. We will carry on doing access to cash reviews as part of our regulatory requirement. As I said earlier on, one of the things that I am most proud of about the assessment process is that it is not “one and done”. We will reassess places because we know communities change. Houses get built; people move there; industries change; vulnerabilities go up and down. That is why we do reassessments. It is not just one time and then it is done. We will revisit. As I said earlier on, in places such as Ballater and Selkirk we have done reassessments and changed our decisions.

This is really to Poppy. We are looking at post offices and banking hubs that do not offer the full range of services that are available in bank branches. Are more comprehensive models possible in places particularly far from the nearest bank? I can think of a post office in my constituency, Mid Dunbartonshire, where they would like to have a LINK cash machine, but they do not have one at the moment. In fact, I can think of two post office locations like that. Bank closures are creating particular difficulties for high streets around depositing cash and that sort of thing. How effectively can post offices and banking hubs mitigate this impact?

I will let Jack speak to Post Office in a minute. Banking hubs are not identical to bank branches, but they provide almost all the same services as are available in bank branches. What we have to do and what we try to do at Cash Access UK is find the balance between being consistent in our services and providing the scope for our participating banks to differentiate themselves. That is an important way in which they can serve their customers and sell themselves as an organisation. Our banks decide what services their community banker provides when it is their rota slot. As I say, they are mostly the same as in a bank branch, but there are some slight differences. As an organisation, though, we are innovating to make it easier for banks to provide broader and more consistent services. We have been piloting having printers in banking hubs, which not only helps customers to print statements but means that those community bankers can provide services that are, in some cases, still reliant on scanning signatures or printing forms. We have been piloting having video links in banking hubs so customers can speak to a specialist who can help them with their particular need rather than solely having more general advice. We have also been piloting having Cash Access employees in banking hubs, who can be there five days a week to help customers with banking needs and be a consistent community and high street figure who can help customers often deal with lots of their access to banking needs there and then or, where necessary, help them to connect to their banks. That could be helping them to get through the phone system or the ID process, which is where some vulnerable customers fall down. The customer satisfaction figures that I quoted earlier about how many of our customers can meet their needs are something we are really proud of. We think we are providing a very good service at the moment, but we are working on these innovations so that we can give our banks the ability to meet more customer needs in an effective way, including in locations where, as you said, Mr MacDonald, it might be very difficult to send a community banker in person just for one day a week. Jack, did you want to pick up on Post Office?

Yes, sure. Post offices are not designed to be like-for-like replacement for banks, as you will know. We provide cash services. We try to make it as easy for customers and small businesses to get in and out as quickly as they can. That means rolling out technology, as I alluded to earlier, so that postmasters can count cash quickly. We are also exploring and have many dedicated banking queues so that people can come in and out. If you are a small business with thousands of pounds that you want to deposit, you do not have to stand in the queue of people with Evri returns and that sort of thing. You can get in and out really quickly. In terms of mitigating the impact of a bank branch closure, where it works really well, we have that connectivity with the local bank branch manager. I have heard some good stories of them even identifying vulnerable customers and connecting them with the local postmaster so that, at least in terms of the everyday banking services, they are signposted really clearly to the nearest post office.

This is more directed towards Mr Foden and Ms Simister-Thomas. You had mentioned the issues with printing and the ability to pay in cheques. They are two very different issues. Perhaps one is more around the partnership model, the constraints of that model and considerations such as security. The issue with cheques was raised with me by staff in a local post office within one of the banking hubs in my constituency of Bathgate and Linlithgow. That issue was more to do with a particular bank and its processes. To what extent are the partnership model and the decisions by individual banks hampering your ability to deliver a full range of services to people in areas where there are no banks left?

We are not a separate body from our banks. We are the banks working together. We try to preserve their ability to make different decisions in how they serve their customers. As I mentioned earlier, we did see negative customer feedback around cheque deposits, as you said. With our banks, we are constantly gathering feedback from our customers. We have tablets in banking hubs where customers can feed back. We look at this data regularly. We send out colleagues to talk anecdotally or do particular research studies. We can understand a lot of what customers are seeing and what they are telling us in banking hubs. We can share that information back with our participating firms, particularly around those vulnerable customer segments. We have a real concentration of those sorts of customers and we can perhaps provide particular insight into that. It is publicly reported that Lloyds has changed that decision now around depositing cheques. It is going to re-enable cheque deposits.

There is also the issue around printing statements. Not everybody has a computer at home. The point I am making is that it is not a like-for-like service that is being delivered to people where the last bank has closed.

We have been working with our banks to find the facility to be able to print statements in hubs and, as I said, to enable some of the other journeys that depend on printers. As you referenced, it is more complicated than it might appear because of the need to get appropriate data security to guard against customer data being shared when a printer malfunctions and the customer data is left there. We have worked really hard with our banks to create a model that can do that. We have printers in several pilot locations, including three of the hubs in Scotland. We are working with our banks over the next couple of weeks of discussions to look at how we roll that out more broadly.

Jack, this is one for you. Many post offices in my area in remote Scotland have closed. The reason that they have closed is that they are not viable. I understand that half of all post offices are not profitable at the moment, yet we are expecting post office outlets to pick up the challenge of supplying cash services for rural Scotland when a post office does not make any money. Yet we are happy to let the big banks, which make tens of billions, not provide cash services. Is there an unfair demand on post offices to be the bankers for rural and remote Scotland?

It is a good question. The viability of post offices these days is very much dependent on our cash business. Banking makes up about 40% of our revenue these days. Without providing these cash services, some post offices would not become viable. I take your point around viability being a real challenge. As I alluded to in my opening remarks, it is very much the north star of the business at the moment. We have a five-year transformation plan to 2030. One of the really core elements of that is to improve postmaster remuneration by about £250 million. At the start of the plan, it was £400 million. We have an objective to get to £650 million. Last year, we did a 20% year-on-year increase; it was a £92 million increase. We are set to do another £40 million this year. There is still further to go—I want to be really clear about that—to make sure postmasters are fairly paid for the work that they do, but we have made some really good progress towards ensuring that existing branches are more viable. When it comes to a branch closing or someone retiring, we hope that local retailers will increasingly look at how attractive it is to run a post office and say, “Do you know what? That is a business that I want to run”.

The UK Government launched their access to banking review last month. What outcomes would you like to see from that that would help to address gaps in banking provision in Scotland?

I am happy to kick off. As I mentioned earlier, we published a report on banking last Monday where we looked at the demand for in-person banking support both today and into the future. We found that there is still strong demand particularly in the really complex moments of life. When something goes wrong, whether that be a scam or a fraud, or something going wrong with your bank account, people want face-to-face support. One of the really surprising things that we found was that, despite an expectation that this would be particularly high among elderly, vulnerable and digitally excluded people, we saw really strong demand from younger people as well. That was in the 18 to 24 category, which I personally found quite surprising. Clearly, there is a lot of demand. In that report and in the submission that we will be making to the Treasury’s review, we will call for minimum standards around in-person banking, potentially with geographical criteria attached, much as we have around access to cash. We are just working through what exact services we are talking about. The challenge here is being really specific about what is in scope as a need, and what is not in scope and is more of a want. Getting the distinction between need and want right is quite tricky in policy terms.

Perhaps to build on what Jack said, we really welcome the review. Five years or so into the banking hubs existing, it is a great opportunity to take stock and look at how effectively that model is working and the full range of needs that it serves. We feel quite comfortable as an organisation. As I talked about earlier, we have been voluntarily providing an awful lot of access to banking already, far above and beyond what a strict interpretation of the access to cash rules requires. There are perhaps two points that I would want to be understood as part of this. First, in the same way as Eric talked earlier about not preserving in aspic a historical model of bank branches, we want to preserve flexibility for the current model of banking hubs to evolve. I mentioned earlier some of the innovations that we are looking at. We are helping customers speak to banking advisers through our customer liaison officers five days a week; we are helping customers to access services through assisted video and assisted telephony. That is going to be a really important part of how customers can continue to access banking services into the future. We want that to be the case. Secondly, it is important to understand that, at least from what we hear from our customers, cash and banking needs are different. While I completely agree with Chris’s point that we want to assess these things together, when we do behavioural research with customers, especially the further into banking you go, as opposed to cash, customers are driven a lot more by emotional and behavioural needs as opposed to pure functional needs. Customers tell us that they like banking hubs because they feel like trusted environments; they feel like banks. They are environments where you can be vulnerable and talk about very difficult circumstances. Any future model has to preserve the ability for customers to feel safe and comfortable in a banking space, which often needs to have privacy. It needs separate rooms. It will need to feel like a dedicated environment. That will be important to consider and it is different from how you might serve cash needs, which can be more functional for a lot of customers.

I would agree with what Jack and Poppy have said. I have said it already a couple of times. When we look at the queries or questions that we get from elected officials, 80% of them are probably around access to banking rather than access to cash. We have fed that back. When I listen to Eric and others talk about what happens in a bank, if 75% of those transactions are cash transactions, that means that 25% are not. LINK is really keen to see what comes out of the access to banking review, but the figures around the queries that we get and the services that are done in banks point to the fact that, if you are going to do an access to banking review for a community, you should do it at the same time as an access to cash review. We also believe that those should be done by someone independent. There has been quite a lot of power in LINK having that role over the last couple of years because we have been able to engage elected officials, MPs, MSPs and local councillors, to support communities.

What recommendations could the review make that would help to address the specific challenges involved in access to banking in more rural and remote parts of Scotland?

The simple one for me is the definition of what in-person banking means. Without that definition, we do not have a measure to work from. It is as simple as that.

Building on that and echoing my point earlier, we need to preserve the space for Cash Access UK and other organisations to innovate in how we can serve customers so that we can make it operationally feasible to serve very remote communities and give customers the service that they need.

I would very much echo both of those comments. In addition to being really specific about services, what do we mean by reasonable access? We need to ensure there is an equitable outcome for all consumers and small businesses across the UK. That might involve setting geographical criteria around what that might be. In practice, the criteria will probably not be as small or short as the requirements around access to cash. It might be more like five miles or 10 miles in practice. In order to arrive at a really fair outcome for everyone, there will be a clear definition of reasonable access.

Mr Ashton, accepting that you have to work to the criteria you are given by the FCA—this is not a reflection on you—as part of the review, would you like to see the as-the-crow-flies criteria bend off so that you do not end up saying things that frankly do not put LINK in a great light? For example, when the last branch in Pitlochry closed, the report noted that customers could access the bank in Blairgowrie away over the mountains in east Perthshire rather than down the road to Perth on the A9. You had to say that because it is the criterion that you measure, but it makes no sense to local people because it is not how people behave; it is not in step with how communities work. When something like that jars with a community, it does not help them have any confidence in the process. Would you like to see that in the review?

When we are looking at proximity, I would agree. It cannot just be as the crow flies. It has to look at other things. There are already some things in place. As I said earlier, travel time and costs are also included. We have some discretion around geographical barriers that we try to use as often as possible. One reason that I have a field team who visit locations is that every community is different. Until you have a boot on the ground, to use a phrase, you do not know whether the bus stop is on top of a hill or the ATM is in a dark or secluded area that you might use at 4 o’clock in the afternoon but you would not use at 8 o’clock at night when it gets dark. We have things like that. We also have catchment areas. It is not just a circle of 1 km or 3 km around it. I always say that it looks like a fried egg, in effect, when you look at it because people travel in different ways. We try to use something that I have not mentioned today called the milk test. If you are in a really rural place—Mr MacDonald, you talked about being in a remote place earlier on—where do people go to buy milk? That allows us to understand where people travel to. We can then see whether some of these smaller towns have a much bigger catchment area because people are traveling into them to buy milk. I agree that there is some work to do on that, but we are already looking at some stuff in the assessments.

Poppy, you mentioned technology changing in terms of banking hubs. Where are we going in that direction? Are we talking about more video conferencing for people so that it is not just one day a week when they can get to their main bank and it can be more open?

Nothing is set in stone yet, but some of the things that we are piloting are exactly as you say. We are testing innovation in terms of the staffing model, so that you can have a consistent Cash Access UK colleague there five days a week. We are trialling that in some locations, including one in Troon in Scotland. That means customers are not confined by the day of the week that their bank is present. Exactly as you say, we have been trialling customer liaison officers helping customers connect to their bank via phone and to navigate the call centre, which even those of us who are more confident sometimes find challenging as well. We also have video screens up. From the feedback so far, customers are saying that they really like that because they feel like they are talking to a person. That also enables them to talk to the right specialist in their bank as well, which is very difficult. As Eric was saying earlier, even in bank branches, you do not often have a specialist for all needs there in person. We are piloting lots of those things at the moment. We will see how those pilots go and what the feedback looks like.

As you know, our inquiry is about high streets. As we discussed earlier, we often regard banks as being part of what anchors a high street. Can banking hubs and post offices provide those kinds of anchors too?

We absolutely see that in banking hubs. Our own research has shown that 92% of respondents talked about banking hubs as being extremely important to the local community and 88% talked about the seeing a wider value and wider reach of that facility as well. That is true in what customers tell us. It is also true when you go into banking hubs. When you go in there, you will see repeat customers. People know the name of the banking hub operator, the community banker or the customer liaison officer. For personal customers, it provides a lot more of that wider value of humanising the high street in a world where the direction of travel for so much is more anonymisation. For businesses, we are providing that convenience such that they can continue to accept cash, deposit it in hubs and thus be able to serve the high street and keep it vibrant.

I would very much echo that. We did some work with a consultancy a couple of years ago to try to measure the value of post offices to high streets. In Scotland, we found that spending in post offices and neighbouring businesses contributes an additional £250 million a year that otherwise would not have occurred. We are bringing people to high streets to use the local post office as a one-stop shop for a range of services, be that mail and post, banking and financial services products or even government services, but, when we bring people to post offices, they go on to spend on the high street. We see that really clearly. Just to build on the trust point for postmasters in both banking hubs and post offices, we know that people trust their local post office second only to the NHS. We have that really strong trust of communities thanks to the amazing work that postmasters do.

If we were considering a particular area for a potential banking hub, would the viability of that high street be taken into consideration? What might the impact of the banking hub be in terms of that viability?

As far as the assessment process is concerned, we look at small businesses. We know that cash is important to them. If you look at the regulation, it talks about ensuring free access to cash for small businesses and consumers. It is about withdrawals, deposits and coin recycling. From that point of view, we consider the number of small businesses and needs of small businesses alongside consumers when we are doing an assessment.

If you had a hypothetical high street in a smaller and more rural community, and it did not meet the criteria for a banking hub, are we not going to be putting that small shopping area in some jeopardy, if it is not going to be suitable for a banking hub?

If I can go back to where I started, there are a couple of things. First, access to cash is the remit that we are working on currently. I have said that a few times, so apologies for repeating myself, but it is important for us to remember. When we were looking at the scheme under the voluntary element, which is now regulated, we did not want to undermine the post office. It plays a really important role for businesses that can deposit, withdraw and get coin recycling. We also did not want to undermine the ATM network that people utilise. As I said, in Scotland £600 million per month is taken out through ATMs. That is a high number. In smaller locations, we do believe that it is an important starting place to consider what is already there.

If I may, building on Chris’s point and the question that Ms Jones asked earlier about what good recommendations from the Treasury’s review would look like, from our point of view one potential recommendation would be to think about the existing infrastructure that we have already. The post office network is a publicly owned network of branches in virtually every community. We have to meet certain access criteria to make sure people have reasonable access. As we look to the future and think about how we extend the range and reach of in-person banking support, a central tenet to think about is what more we could do with the post office network as existing infrastructure in communities.

Ms Simister-Thomas, Mr Ashton and Mr Foden, thank you very much for your evidence this morning. It has been very useful to us and I am sure it will be reflected in our eventual report. Thank you very much.