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Can cashback without a purchase solve the access to cash crisis?
Corner shops, cafes and pubs will soon be allowed to give you cashback without you having to make a purchase first, under new government legislation.
The government has backed an amendment to its Financial Services Bill which has almost completed its passage through parliament, meaning it will soon become law.
Which? has long been calling for the government to take immediate action to protect cash access for the millions who rely on it, and this move is a welcome step forward.
However, appetite among retailers to provide the service is still uncertain - which is key to its success, and we believe cashback is only part of the solution; urgent action is still required for legislation to ensure the long-term future of the UK's cash system.
Why is cashback without purchase being introduced?
The government has been exploring ways to protect access to cash for some time, and in the 2020 Budget, following numerous calls from Which?, committed to introducing legislation to safeguard the future of cash.
In October last year, it finally launched a consultation setting out its legislative aims for the future of cash, where it proposed its cashback without purchase initiative.
It came after a tough year for cash. The UK's cash infrastructure has been under a lot of strain, particularly during the coronavirus crisis, with some businesses refusing cash and ATMs and bank branches closing at an alarming rate, leaving vulnerable people with no way to pay.
Our research shows some of England's most deprived areas - where people are more likely to depend on cash - have seen a significant shift from free-to-use cashpoints to machines that generally charge up to £2 per withdrawal in recent years.
Will the service help solve the access to cash issue?
We've already seen evidence that the scheme could help protect cash.
In October last year, ATM cash machine network LINK and in-store payment services provider PayPoint started a trial to allow customers to withdraw cash using the LINK network from retailers' tills without paying a fee or making a purchase. The trial is operating across 12 shops in four communities across the UK: Cambuslang (Scotland), Denny (Scotland), Hay-on-Wye (Wales) and Burslem (England).
Since launching, more than 12,000 cash withdrawals and 2,000 balance inquiries have been made with an average withdrawal size of around £29. The current trial is expected to end in October this year.
LINK will announce the next steps for a possible national rollout through the LINK Scheme in due course following engagement with its members. With the upcoming legislation in place, over time, potentially thousands of shops could begin to offer the service, Link says.
Even so, it's important to note that businesses will have the discretion to make the service available. So until it's clear who's on board, it's impossible to make assumptions about its success.
Further, cashback isn't the only solution to the access problem - we believe it must be part of a wider strategy that ensures people who depend on cash are not cut off from the money they need to pay essential costs.
We fear the government has deferred to this service to justify further delays in introducing legislation to safeguard access for cash-dependent consumers.
- Find out more: bank branch closures
What Which? wants the government to do
We believe it is vital that the government brings forward legislation to ensure the appropriate provision of local and free access to cash remains viable nationwide for the foreseeable future.
It's been over a year since the Chancellor committed to cash access legislation, but we've not seen much progress.
There is an urgent need for a clear timeframe for when legislation will be in place, so that industry and regulators can work with the government to ensure that cash is protected as a payment method.
Regulators and industry groups - such as the Financial Conduct Authority, Bank of England, and the Payment Systems Regulator, were also tasked with developing long-term solutions for the cash system but these have also failed to progress.
Earlier this year Which? chief executive Anabel Hoult wrote to eight UK banks outlining the fragile state of the cash ecosystem and asked them to make a pledge to help maintain cash access. Which? received widespread support from banks affirming the importance of providing a cash system that can serve those who depend on it.
Banks pointed to the importance of safeguarding the cash network for cash-dependent customers. There was general agreement that both LINK- the UK's largest cash machine network - and the Post Office have a crucial role to play in the short to medium-term future. However, all of the responses stopped short of explicitly committing to either scheme until legislation is introduced.
Sign our petition and help us protect cash
We believe that everyone should have the freedom to pay in the way that best suits their needs.
Check out our Freedom to Pay campaign to find out more about our mission to protect cash.
