Access to Cash Review makes fresh recommendations

19 November 2020   By Dr Lucy Brown, Editor

Access to Cash Review team highlight issues with more retailers offering cashback in consultation response.

The letter in response to the Treasury proposals confirms many retailers have to pay 3-4% for all transactions through their merchant, making the costs of cashback unsustainable.

The team also suggest the Post Office's banking and cash services should be brought under the Financial Conduct Authority's (FCA) regulatory remit.

At the same time, they agree the FCA should be appointed as regulator overseeing cash distribution but point out the Authority would need extra resources to take on the extra work.

money in back pocket
Credit: Barabas Csaba/

Cashback concerns

The potential for cashback to play a bigger part in the UK's cash distribution network was a key element of the Treasury's proposals to main cash access as the country moves towards a cashless society.

The Access to Cash Review team have responded to those proposals (published in October) by pointing out some of the barriers. They say:

  • Retailers are often charged 3-4% by their merchant acquirers on all transactions, and these don't usually differentiate between purchases and cashback - so retailers could end up out of pocket
  • There is no standard cashback offer (i.e. standard minimum purchases or maximum withdrawal limits), and this stops customers asking for cashback
  • Cashback as a service is poorly advertised
  • Some merchant acquirers prohibit retailers offering cashback even with a purchase

Taken together, these could be insurmountable hurdles unless they are tackled in the final proposals put forward by the Treasury.

The Review team suggest:

  • A review should take place into cashback charging and permissions
  • International card networks should agree a common code of practice
  • Merchants should be supported to offer cashback safely
  • Consumers should be helped to understand the cashback system

The idea of cashback without purchase is an attractive one but, as the Access to Cash team have demonstrated, it needs to be carefully thought through.

Other recommendations

The Access to Cash Review team agree with the Government that cash provision will need to move towards more of a utility model, and it should incorporate various channels including cashback and the services of the Post Office.

However, they highlight some key concerns here too:

  • Many tools to help the right system develop are currently only voluntary or too narrow in their remit
  • ATMs and other parts of the retail bank network could alter if the commercial interests of banks changed
  • The Post Office Banking Framework which helps the Post Office offer services is voluntary and timebound

On this last point, it's worth recalling the wrangling in late 2019 when Barclays attempted to unilaterally withdraw from part of the Framework before backtracking a few weeks later.

We've also seen numerous ATMs disappear from towns and cities thanks to bank branches closing, and even the Post Office is set to close 600 ATMs over the next 18 months.

So, overall, the Access to Cash team want greater certainty for the sector including legal obligations for banks, along with the Post Office being brought under the FCA's remit.

Accessing cash

There are some other important points raised in the team's response, namely their observations on cash usage and the role of the FCA is maintaining access to cash.

For instance, they suggest many people making decisions in boardrooms have little understanding of why some customers still need to use cash. They instead see cash handling as a quantifiable business cost which can be cut.

This isn't a new observation, yet more businesses have moved towards cashless operations due to the coronavirus crisis.

Finally, the Access to Cash team agree with the Government that the FCA should regulate cash distribution and deposits, highlighting their existing focus on consumer vulnerability and ability to innovate.

However, they caution that the FCA already has a large remit and limited resources. To work effectively as cash regulator, the team say, they must be provided with adequate resources.

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