Consumers will be able to get cashback from shops without needing to buy anything under new Government proposals to protect the UK’s cash system.

Under the government proposals, cashback without a purchase could be widely available from retailers of all sizes in local communities/

Although cash use is declining, with people increasingly choose cards, mobile and e-wallets to make payments, it remains crucial for groups across the UK – including the elderly and vulnerable. Many find that cash is more accessible than digital payments methods or that it helps them to budget and manage their finances.

These proposals, which also include making the Financial Conduct Authority (FCA) responsible for ensuring the cash system benefits consumers and SMEs, are the latest step in the Government’s effort to support the millions of people and business who rely on cash day to day.

John Glen, Economic Secretary to the Treasury, said “We know that cash is still really important for consumers and businesses – that’s why we promised to legislate to protect access for everyone who needs it.”

“We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK’s cash system and make sure people can easily access cash in their local area.”

The Government announced at the March 2020 Budget that it would legislate to protect access to cash and ensure that the UK’s cash infrastructure is sustainable in the long-term. The Government is seeking views on its approach to this legislation from consumer organisations, businesses, financial institutions, providers of ATM and payment services and others through a call for evidence.

One proposal under consideration is cashback without a purchase, which could help to keep cash widely available by reducing cash infrastructure costs.

When local shops accept and dispense cash, it is recycled through local communities and there is less need to transport and distribute notes and coins via cash centres, which reduces the associated costs.

Last year, consumers received £3.8 billion of cashback when paying for items at a till – making it the second most used method for withdrawing cash in the UK behind ATMs.

Current EU law makes it difficult for businesses to offer cashback when people are not paying for goods and this has been a barrier to widespread adoption. The Government is now considering scrapping these rules once the transition period ends on 31 December 2020.

The government is also considering giving the FCA overall responsibility for maintaining a well-functioning retail cash system given its existing regulatory role and consumer protection objective.

At present, The Bank of England, Financial Conduct Authority, Payment Systems Regulator, and HM Treasury each have specific roles and responsibilities for oversight of the cash system. Close coordination between these authorities has been highly effective, particularly in managing risks to cash through Covid-19, but there may be significant benefits to giving a single authority overall responsibility for setting requirements to meet the cash needs of consumers and SMEs.

The call for evidence opens today (15 October 2020) and will run for six weeks. It will seek views on how to ensure industry continues to offer ways to withdraw and deposit cash, how to improve cashback, what affects cash acceptance, and where regulatory responsibility should sit.

Responding to HM Treasury’s plans Eric Leenders, UK Finance Managing Director of Personal Finance, said “HM Treasury’s consideration of the future of cash complements the community access to cash pilots supported by the banking and finance industry, and will work alongside the existing activity being led jointly by the Financial Conduct Authority and Payment Systems Regulator.  While less popular than in years gone by, cash is still an essential way to pay for many, and initiatives like cashback without the need to make a purchase will help customers who might be less confident using other types of payments.”

Vincent Reboul, MD of Hitachi Capital Consumer Finance said “This cashback plan will be a welcome development for consumers and businesses who still rely on cash for their everyday needs. However, it’s clear there has been a notable shift in attitudes towards cashless payments throughout society, with older demographics often considered to be left behind now also embracing a change away from handling cash.”

Our research found that two-thirds of over 55’s feel more comfortable using cashless payments since lockdown, whilst 55% of respondents living in rural areas feel ready to transition towards a cashless society.”

“More widely, 68% of consumers have become more confident in making online purchases or using contactless payments since the start of the pandemic.”

“As one of the UK’s leading retail point of sale providers, we’ve seen a significant increase in businesses of all sizes embracing online trading since lockdown, reflecting the shift by consumers towards cashless payments.”