Could cashback without a purchase be on the cards?

The government may allow shops to give cashback at the till without a purchase in order to help those who need to use cash.

Proposals open for consultation until 25 November 2020 could see cashback without a purchase made widely available from retailers of all sizes in local communities across the UK. This would make them like banks and other payment institutions.

Although the use of cash is declining, accelerated by the Covid-19 pandemic, it remains crucial for many people, including the elderly and vulnerable.

The government says that many people find that cash is more accessible than digital payments methods or that it helps them to budget and manage their finances.

In the March 2020 Budget it was announced that there would be legislation to protect access to cash and ensure that the UK’s cash infrastructure remains sustainable.

In its consultation, the government is seeking views on the legislation from consumer organisations, businesses, financial institutions, providers of ATM and payment services and others.

A key proposal under review is cashback without a purchase. According to the government, local shops accepting and dispensing cash ensures that it is recycled through local communities, meaning there is less need to transport and distribute notes and coins via cash centres, reducing associated costs.

Official statistics reveal that 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 after ATMs.

EU rules

Under EU rules it is difficult for businesses to offer cashback when people are not paying for goods, so the government will consider scrapping these rules once the Brexit transition period ends on 31 December 2020.

Unlike cashback with a purchase, cashback without a purchase is not explicitly exempted from the definition of a payment service under the EU’s Second Payment Services Directive.

Cashback without a purchase constitutes a regulated payment service and generally only suitably registered or authorised businesses such as banks and payment institutions are permitted to provide payment services in the UK.

Without legal changes, the provision of cashback without a purchase would require that retailers are registered or authorised to provide the regulated service, or act as an agent of a payment service provider, such as the acquirer or the customer’s card issuer.