Enabling Enterprise

3.3. Protecting access to cash for businesses as banks disappear

Component RTE

However, Post Office’s value to SMEs goes well beyond mails products alone. Cash and banking services are increasingly important for SMEs in supporting vital access to cash, enabling businesses to continue to service all customers, irrespective of payment preferences. In fact, this research revealed that nearly two out of five SMEs (39%) believe that the availability of cash and banking services at post offices is important, with a 2021 survey of SMEs by YouGov (on behalf of Post Office) finding that nearly three in 10 (28%) small businesses use cash at least weekly.

Established in 2017, Post Office’s Banking Framework is a standardised framework for United Kingdom financial institutions, including 30 commercial banks, that allows 95% of business banking customers to use any post office for basic banking services – including withdrawing or depositing cash, paying in cheques, and obtaining balances. To illustrate the volume of banking services provided, Post Office facilitated around 9.1 million business cash deposits (worth nearly £11 billion) and around 1.2 million business cash withdrawals (worth nearly £300 million) in 2021. Since then, the volume and value of transactions have increased further. In fact, businesses have deposited over £1 billion in deposits over post office counters in nearly every month of 2022.

Post Office’s provision of banking services has become increasingly important for SMEs in the context of wider
bank branch closures. Across the United Kingdom, more than 5,000 bank branches have closed since 2015,
with many localities no longer having access to cash and banking services in the absence of a post office. To
illustrate the point, in September 2022, there were eight parliamentary constituencies with no commercial bank branches (with a total number of resident adults in the region of 797,000¹⁴) and 27 constituencies with just one branch (representing 2.59 million adult residents), with more than half (347) of all constituencies having lost at least half of their branches (Which?, 2022).

These closures have a particular impact on small businesses, with the 2021 YouGov research showing that nearly one in four SMEs would struggle without the ability to use cash, that nearly a third have been directly affect by bank closures and that seven in 10 feel cash is important to the future of the United Kingdom’s
high street.

With physical banking infrastructure declining across the United Kingdom, Post Office’s network of more than 11,500 branches has become critical in proving access to cash for small businesses and supporting economic growth across the country. The importance of banking services for SMEs was reflected in the results from the 14 See Barton (2021) for mid-year 2020 population data by constituency. 2022 SME survey. Cash and banking was the second most-used service by SMEs and was ranked as the second most-important service by SMEs (behind postal services). Nearly one in two SMEs has used cash and banking services at their local post office, with around 15% using these services at least once per month.

SMEs also gave their second-highest valuation to cash and banking services, around 2.5 times the value of the next most highly valued service. The valuation was particularly high for small enterprises (10 to 49 employees), who valued their availability at over £10 per month. The high valuation for cash and banking services probably reflects the lack of alternatives to Post Office for banking services: only two in five SMEs felt that they had convenient alternatives to Post Office for cash and banking.

Post Office also addresses key preferences of SMEs when it comes to fulfilling their basic banking needs. More than three in four SMEs responded that they found it important that basic banking services were provided close to their home or workplace, which is only currently guaranteed through Post Office’s wide network, particularly in the context of bank branch closures. Despite the rise of online banking, nearly three in five SMEs find face-to-face provision of banking services to be important. Post Office also facilitates access to banking services alongside other business services (such as postal services), which is considered important for just over half (54%) of SMEs.

¹⁴ See Barton (2021) for mid-year 2020 population data by constituency.