Lloyds starts retailer cashback pilot

Lloyds Banking Group, in partnership with Visa, has announced a new pilot scheme which will see local retailers paid to offer cashback to customers in their stores.

Currently, business owners do not receive a fee when providing cashback to their customers. The new fee will offer more support to retailers and increase the number of places where people can withdraw their money.

Lloyds noted that this is not a substitute for ATMs or branches, rather the scheme is aimed at creating more availability where access to cash is challenging and customers will still have the choice to pay with their cards and mobile devices as they do today.

Last week, Which? called on the government to appoint a regulator to protect access to cash, as a combination of bank branch and cashpoint closures risks leaving people struggling to pay for essential goods and services.

Figures from the consumer group showed that cashpoints disappeared at a rate of 488 per month between June 2018 and December 2018, with over 250 free-to-use machines closing monthly due to changes in the way the UK’s cash machine network is funded.

The Treasury Committee questioned the Payment Systems Regulator’s chairman Charles Randell about the future of the UK’s ATM network, with the admission that the whole system of access to cash needs to be looked at afresh.

For the vast majority of the population, cash remains easily accessible via more than 50,000 free-to-use ATMs, 7,000 bank branches and 11,500 Post Offices. However, for those looking to access cash in more remote or isolated locations, the options available to withdraw money are often less convenient.

Meanwhile there are tens of thousands of local high street shops which have the infrastructure in place to offer a cashback service but may not see it as a viable option - especially without a purchase - as they do not receive a fee for providing cashback.

Vim Maru, group director for retail at Lloyds Banking Group, explained: “The unlocked potential of cashback is obvious, as there are literally tens of thousands of local shops up and down our high streets that already have all the infrastructure in place to offer this service.”

Jeni Mundy, managing director for the UK and Ireland at Visa, said: “This is another important measure to ensure that nobody is excluded from the financial system and underlines our commitment to working with our partners to give people a choice in how they pay – be that with cash, cards, mobile devices or other means.”

The new cashback incentive scheme will work by retailers receiving a fee to process cashback transactions – the value of which will be set in due course.

Initially customers will still be required to make a purchase in line with current cashback rules, but the intention is that retailers will soon be able to offer cashback without the need for a purchase.

Merchants will also be supported to advertise the cashback service in their premises to increase customer awareness.

The focus of the scheme will initially be on those areas where access to cash has been identified as more challenging – these have been chosen based on assessments carried out as part of LINK’s Protected ATM and Financial Inclusion programmes.

Lloyds Banking Group will pay all cashback transaction fees, regardless of the cardholder’s bank. Following the pilot, the aim is that all merchants in the target areas will be able to earn fees for offering cashback.

It is estimated that there are more than 50,000 merchants in the target areas who may be eligible to participate in the cashback scheme, based on analysis by Lloyds and Visa.

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