Britain’s shops to offer cashback without purchase to protect access to notes and coins

Declining use of cash amid the pandemic an issue for those without a bank account

Last year, consumers received £3.8bn of cashback when paying for items at a till – the second most-used method for withdrawing cash in the UK behind ATMs. Bloomberg

Britain’s shops will offer cashback without consumers making a purchase as the government looks to protect people’s access to notes and coins amid dwindling demand during the Covid-19 pandemic.

Under the plans, retailers of all sizes across the UK would act as ATMs, to ensure groups such as the vulnerable and the elderly could still access physical money at a time when digital payments are on the rise.

“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,” John Glen, economic secretary to the Treasury, said on Thursday.

“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 declining use of cash is an issue for sections of society reliant on the payment method, including the more than a million UK adults who do not have a bank or building society current account.

However, running the cash system is an expensive process for both taxpayers and businesses, a September report from the National Audit Office (NAO) found, with the public sector cost of producing and issuing notes and coins coming in at £143 million ($185.54m) in 2019-2020.

Allowing cashback without a purchase could help to keep cash widely available by reducing infrastructure costs. When local shops accept and dispense cash, it is then recycled through local communities reducing the need to transport and distribute money via cash centres and, in turn, reducing the associated costs.

Last year, consumers received £3.8 billion of cashback when paying for items at a till – the second most-used method for withdrawing cash in the UK behind ATMs.

Current EU law prevents businesses from offering cashback when people are not paying for goods – with the British government now planning to scrap these rules once the transition period ends on December 31.

With the coronavirus pandemic accelerating the shift towards card payments, as consumers avoid touching notes and coins and the contactless limit was increased to £45, the UK finance ministry’s new move is a way to protect access to cash.

Under the government proposals, which are subject to a six-week consultation, the Financial Conduct Authority would oversee the new cash system to ensure it benefits both consumers and small to medium enterprises.

There was a 71 per cent drop in demand for notes and coins from cash centres between early March and mid-April as a result of the outbreak, according to the NAO, with some businesses, including hospitality venues and retailers, refusing to accept cash payments in an attempt to help contain the spread of Covid-19.

The UK's Royal Mint said last month it would stop producing 2 pence and £2 coins for at least 10 years as dwindling demand for cash has created a coin mountain.

Paying by card or contactless device is now the norm in the UK, particularly for the younger generation, who now face an increase in unemployment in the coming months as the effects of the crisis take hold.

Britain's unemployment rate rose to 4.5 per cent in the three months to August, according to the Office for National Statistics. The latest figures show there were almost 700,000 fewer people on the payroll than in March before the lockdown, with about 300,000 of those out of work aged between 16 and 24, representing about 60 per cent of the fall in employment.

British fashion retailer Asos said on Wednesday that its 20-something customer base will see their disposable incomes hit.

Despite the company reporting a quadrupling of 2019-20 profit on the back of strong demand for online shopping during the crisis, it said it was cautious on the outlook for consumer demand, and would remain so until lifestyles and financial stability for its 20-something customers start to normalise.

"Unemployment is going to be a problem, we feel, for our customers. The brunt of it will fall in the 20-something audience," Asos chief executive Nick Beighton said.