New Legislation to Permit Cashback Without Purchase


April 2021

New Legislation to Permit Cashback Without Purchase

Britons will soon be able to receive cash in corner shops, pubs and cafes without having to make a purchase first.

The government is supporting an amendment added to its Financial Services Bill in the House of Lords by peer Chris Holmes. The amendment permits consumers to access cashback without a purchase, something ministers say is only possible as a result of Brexit.

The EU’s Payment Services Directive requires businesses wishing to offer cashback without purchases to be authorised or registered by financial regulators. In the UK, this would be the Financial Conduct Authority (FCA).

Cabinet Office Minister Lord True said: “That is a significant burden for even the largest of retailers let alone small local shops along the various high streets across the UK.”

The amendment removes this requirement, allowing consumers to access money at retailers' tills without paying a fee or buying so much as a pack of gum.

“Where the service is offered, customers will be able to walk into a local business such as a corner shop, a cafe or pub that wishes to participate and withdraw cash without having to make an accompanying purchase,” Lord True added.

The government hopes easing regulation around cashback will prop up the UK’s crumbling cash system. Already under threat as bank branches and ATMs have closed, the cash system neared collapse during the pandemic, with some retailers refusing to accept notes and coins due to coronavirus fears and cash-reliant consumers struggling to access money as banks limited their opening hours.

While more Britons are using debit and credit cards and online payments,
more than two million are still almost entirely reliant on cash in their daily lives, many of them elderly, vulnerable or living in rural communities.  

Lord Holmes said: “Cash still matters and it matters materially to millions. It adds to financial inclusion and more than that it adds to complete social inclusion.”

Cashback without a purchase is one solution that has been proposed to preserve communities’ access to cash, with campaigners and the government also mulling shared banking hubs, cashback ordering systems and strengthening the Post Office’s banking facilities.

Lord True said: “The Government’s view is that cashback without a purchase has the potential to be a valuable facility to cash users and to play an important role in the UK’s cash infrastructure.”

In 2019, cashback was the second most popular way to access withdraw money after ATMs.

The industry has welcomed the change. John Howells, chief executive of cash machine network Link, said the legislation will bring “much needed innovation” to the cash system.

“Link expects that free ATMs will continue to be the most popular method for withdrawing cash and will be a feature of high streets and supermarkets for years to come. However, as consumers continue to increase their use of digital or card payments, we need alternatives where ATMs may not be viable,” he added.

He noted that last year Link began a trial with PayPal allowing customers to withdraw cash from retailer tillers through the Link network without having to make a purchase or pay a fee. Since the trial began, customers have made more than 12,000 cash withdrawals and 2,000 balance enquiries at 12 participating shops in four communities. The average withdrawal is around £29.

Trade body UK Finance highlighted the benefits of purchase-free cashback for rural communities. Chief executive David Postings said: “Cashback without purchase will allow retailers to enable consumers to access cash at a time and place that is convenient for them and is a welcome development, particularly for those in rural communities.”