You’ll soon be able to walk into your local corner shop, pub or cafe and get cashback without making a purchase. This is after the government agreed changes in the House of Lords to the Financial Services Bill, which updates financial services regulation after the UK’s exit from the EU.
Here’s everything you need to know about the new policy including its implications for consumers and small businesses.
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Cashback without purchase: what do I need to know?
Cashback at retailers’ tills is the UK’s second most popular method of cash withdrawal behind ATMs. In 2019, shoppers received approximately £3.8 billion in cashback when paying for purchases at a till.
However, EU law has historically made it difficult for small businesses to offer cashback to consumers without purchases.
Businesses wanting to offer a cashback service without requiring a purchase needed to be authorised or registered with the Financial Conduct Authority (FCA).
The UK’s exit from the EU has provided an opportunity to change the rules to make cash more accessible to people, and the government has now seized the opportunity. The legislation change eliminates previous burdens imposed by EU laws, such as the requirement to register with the FCA.
Once the bill becomes law, consumers will be able to simply walk into a corner shop, cafe or pub and withdraw cash without having to make a purchase first.
Why the need for cashback without purchase?
The move comes at a time when the UK’s cash infrastructure is under severe strain from the Covid pandemic. Some shops are refusing cash, and a significant number of ATMs and bank branches have ceased operations.
While the Covid-19 pandemic has hastened the transition to cashless payments, cash continues to play an important role in the economy.
Many people still prefer to pay with cash when purchasing goods. This is also true for some businesses. There are many that prefer to deal in cash despite having access to a variety of low-cost credit card payment options.
In a nutshell, there is a need to find ways to protect access to cash. Allowing cashback without making a purchase is one way to do so.
Commenting on the issue of cashback without purchase, David Postings, chief executive of UK Finance said, “Cashback without purchase will allow retailers to enable consumers to access cash at a time and place that is convenient for them and is a welcome development, particularly for those in rural communities.
“This new legislation will complement the industry’s existing work to maintain access to cash, including the recently launched Community Access to Cash Pilots.”
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How does cashback without purchase benefit consumers?
In general, getting cashback from your local corner shop means you don’t have to waste time finding an ATM or trekking to a bank to get cash.
It also means that you don’t have to spend money to get money. You can withdraw the exact amount you want without having to top it up with a purchase.
What’s the benefit to small businesses?
One main benefit of offering cashback without purchases is that it can help increase customer loyalty. When choosing where to shop, for example, customers are likely to feel more loyal to the same shop that allows them to withdraw cash without having to buy anything.
Furthermore, it will now allow businesses to offload even more physical cash from the premises. This reduces the amount of money that needs to be transported and deposited at a financial institution.
What’s the maximum amount of cashback I can get?
Traditionally, the most cashback you can get from a business is between £50 and £100 depending on the size of the business. At Tesco, for example, the maximum cashback limit is £100.
These limits are likely to remain the same even with the legislation change. However, this doesn’t mean that they won’t change in the future; we’ll just have to wait and see.
