Government proposes no purchase cashback plan for shops to deal with rise of ‘cash deserts’

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Shoppers will be able to ask for cashback in stores without making a purchase, under government plans announced today to tackle growing concerns over access to money as bank branches and ATMs are closed.

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The proposals from the Treasury are designed to address the rise of “cash deserts” where communities have little or no access to spending money.

The government says that “although cash use is declining, it remains crucial for groups across the UK – including the elderly and vulnerable”.

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 believes cashback without a purchase “could help to keep cash widely available by reducing cash infrastructure costs”.

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

Currently, 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.

James Lowman, chief executive of the Association of Convenience Stores (ACS), said today: “We welcome the government’s focus on securing access to cash for the long term, as cash remains an essential and widely used method of payment for millions of people.

“Providing cashback without a purchase might work for some retailers, but may not be viable for everyone and cannot be seen as a replacement for the UK’s ATM network. We are watching with interest trials of new approaches to offering cashback.”

The government also wants the Financial Conduct Authority (FCA) to take control of securing the future of cash and to ensure the system benefits consumers and small businesses. Currently, this role is shared between several bodies including the Bank of England, the FCA and the payment systems regulator.

The government has today started a six-week process when it will seek the views of consumer organisations, businesses, financial institutions, providers of ATM and payment services and others “on how to ensure industry continues to offer ways to withdraw and deposit cash”.