Cashback could be widely available in shops without need to make a purchase

People will be able to get cash back from many shops without needing to buy anything under proposals to protect the UK’s cash system.

Measures being considered by the Government could result in cashback without a purchase being widely available from retailers of all sizes in communities across the UK.

A six-week “call for evidence” was launched by the Government on Thursday to seek views on how to ensure the industry continues to offer ways to withdraw and deposit cash, how to improve cashback, what affects cash acceptance, and where regulatory responsibility should sit.

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.

It now wants to hear views on this legislation from consumer organisations, businesses, financial institutions, ATM providers and payment services among others, through its call for evidence.

The proposals include putting the Financial Conduct Authority (FCA) in charge of ensuring that the cash system benefits both people and small and medium sized businesses, given the role that the regulator already has in protecting consumers.

Under the current system, several organisations have a role to play in maintaining the cash system. As well as the FCA, these are the Bank of England, the Payment Systems Regulator (PSR) and the Treasury.

The Government said there may be benefits to giving a single authority overall responsibility for setting requirements to meet the cash needs of consumers and SMEs.

There have been signs that the coronavirus crisis has accelerated the decline in cash use, with the payment limit on contactless cards, an alternative way to pay, having been raised to £45 in April. ATM use declined sharply around the start of the lockdown as people’s usual habits changed.

But many people still rely on cash for their everyday needs, and bank branch and ATM closures have fuelled concerns about communities being cut off from cash.

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 feels that offering cashback without the need to make a purchase could keep coins and banknotes widely available by reducing cash infrastructure costs.

It said that 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, shoppers 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.

The Government said 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.

It is considering scrapping these rules once the transition period ends on December 31 2020.

John Howells, chief executive of ATM network Link, said: “Access to cash, including from ATMs, is under great strain because people are choosing new ways to pay and as a result of Covid-19.

“But the UK is not ready to go cashless yet and Link welcomes the Government’s intention to legislate to support cash access.

“Link strongly believes that all communities should have free and convenient access to cash and we look forward to working with community representatives, regulators and industry to maintain this position for years to come.”

Natalie Ceeney, independent chair of the Community Access To Cash Pilots initiative, which is working with communities to ensure cash remains sustainable, said the issue was “increasingly urgent”.

She added: “Last year we warned that the UK was sleepwalking into a cashless society. Covid-19 has placed even greater strains on the whole system.”

Gareth Shaw, head of money at Which? said: “We are strongly supportive of the FCA taking responsibility for protecting cash, as current oversight of the cash system is fragmented with no one body accountable.

“While legislation protecting access is key, it risks being undermined if people cannot spend cash on the things they need. In its new role, the FCA should also look at the problem of cash acceptance.”