Government plans to ensure cash remains available

The government is holding a six-week consultation on plans to protect access to cash throughout the UK, which would include offering cashback at shops without consumers having to make a purchase

The call for evidence follows the commitment announced at the March 2020 Budget to legislate to ensure that the UK’s cash infrastructure is sustainable in the long-term.

This has assumed particular importance as cash machine numbers continue to decline, while the measures introduced in response to Covid-19 have seen an increasing trend to contactless and online payments for goods and services.

Although cash use is declining, with people increasingly choosing cards, mobile and e-wallets to make payments, it remains crucial for groups across the UK, including the elderly and vulnerable, who find that cash is more accessible than digital payments methods or that it helps them to budget and manage their finances.

Now the Treasury is seeking views on how the government can ensure the UK maintains an appropriate network of cash withdrawal and deposit-taking facilities over time through legislation, including the potential role of cashback; the factors affecting cash acceptance; and whether the government should give a single regulator overall statutory responsibility for maintaining access to cash.

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.’

Under the government proposals, cashback without a purchase could be widely available from retailers of all sizes in local communities across the UK.

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

Current 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.

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 legislative 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.

The consultation also looks at the issues around giving the Financial Conduct Authority (FCA) overall responsibility for maintaining a well-functioning retail cash system, given its existing regulatory role and consumer protection objective.

At present, the FCA, Bank of England, Payment Systems Regulator, and the Treasury each have specific roles and responsibilities for oversight of the cash system.

Currently, they coordinate closely through the Joint Authorities Cash Strategy (JACS) Group, but this is not a decision-making body, and it remains the case at present that no single authority has overall responsibility for overseeing the maintenance of a well-functioning UK cash system for the benefit of consumers.

The consultation closes on 25 November.

Access to Cash: Call for Evidence

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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