Expanding Cash Access for Europe

With access to cash threatened by bank and cash machine closures in the UK, the Government is trialling purchase-free cashback in local shops to secure continued, widespread availability of cash. Across Europe, cashback is also growing in prominence as it is introduced in more countries.

Providing continued access to cash serves people who value payment choice, the privacy and immediacy of physical money, its tangibility when budgeting, and the significant part of the population who is unbanked or underbanked and relies on cash. It also benefits small businesses with narrow profit margins, for whom the added transaction costs of cashless payment methods seriously impacts revenue.

Originated by British retail chain Tesco, cashback services were introduced to cash-loving France in 2018. This was a much-needed move, given there is an estimated 850 cash machines per million people there, compared with countries such as Luxembourg, Portugal and Spain where the figure is around 1,000. Austria was slightly ahead, with cashback introduced in early 2017.

In Germany, cashback in shops has become a popular form of cash withdrawal, supported by reductions in the required purchase amount over the past three years. The European Payments Council notes ‘cashback is a positive answer to improve the efficiency of the cash cycle by reducing the circuit of banknotes’.

In Britain, as in most countries, the distance people have to travel to access cash varies widely depending on where they live. A recent University of Bristol study showed Scots typically have to travel twice as far to reach a cash machine as Londoners. This leaves gaps in provision, especially for rural communities, that the UK Government is seeking to address.

Denny—a small town west of Falkirk in Scotland—used to be served by four banks, which have all closed. Selected as one of the trial sites for purchase-free cashback, its small, family-run shop now offers a service where customers can use a PayPoint machine to request a balance readout or cash from the till, free-of-charge and with no requirement to make a purchase.

Imran Hamid, whose family has run the shop for 50 years, says the benefit to him—in addition to providing a useful public service—is that people coming in to withdraw cash may also opt to make a small purchase, and it makes cashing up at the end of the day easier. Participating retailers receive a fee from the customer’s bank for each withdrawal.

A benefit specific to this new scheme is that customers can draw out any amount of money, no matter how small. This is of particular help to those on a tight budget, since if they only have a few pounds in their account, they can withdraw them conveniently and without charge. They are also not restricted to multiples of banknote denominations—£5, £10 or £20—as they would be when using a cash machine. The average withdrawal at present is £26.80 (approximately €30/US$36), which is around one third the amount typically taken out at a cash machine.

While this is welcome progress, Natalie Ceeney, chair of the Access to Cash Review warning of the dangers of a cashless society, believes the Government needs to go further. She is calling for banks to have a legal obligation to ensure customers can access their cash. Concerned that the COVID-19 pandemic could accelerate the loss of banks and cash machines serving rural communities, she is calling for immediate new legislation to protect cash access.

The trial, in which Mr Hamid and other small shops in remote communities across the UK are offering purchase-free cashback, is part of a larger program covering eight communities requiring enhanced cash access. Other trials include a financial hub set up in a Methodist church, and drop-and-go deposit points for small companies. Reports on the project’s progress are due to be published in summer 2021.