Financial Services Bill Amendment: Cashback Without Purchase

On the final day of report stage (19 April 2021) for the Financial Services Bill in the House of Lords, I put forward an amendment similar to a previous amendment regarding a review for cashback without purchase. The new amendment was reworded but with the same aim – of supporting access to cash by allowing businesses provide cashback without purchase.

The amendment provides that, in certain circumstances, the provision of cash does not constitute a “payment service” for the purposes of the Payment Services Regulations 2017. Persons would no longer have to be authorised by, or registered with, the Financial Conduct Authority (FCA) in order to provide that service.

Full text of the amendment:

Insert the following new Clause—
“Payment services and the provision of cash
In Part 2 of Schedule 1 to the Payment Services Regulations (S.I. 2017/752)
(activities which do not constitute payment services), after paragraph 2
insert—
“3 (1) The provision of cash otherwise than through an automatic teller
machine does not constitute a payment service where—
(a) there is a transfer of a corresponding amount from a payment
account held by the recipient of the cash to a relevant person,
and
(b) the payment account is not provided by a relevant person.
(2) In sub-paragraph (1), “relevant person” means—
(a) where the cash is provided by a person (“P1”) through one or
more persons acting on P1’s behalf, P1 and each person acting
(directly or indirectly) on P1’s behalf;
(b) where the cash is provided by a person (“P2”) otherwise than on
behalf of another person or through one or more persons acting
on P2’s behalf, P2.
(3) The execution of the transfer referred to in sub-paragraph (1)(a), and
other services enabling that transfer, are not excluded from the meaning
of payment services by this paragraph.””
Amendment 37D, Report Stage Day 3, Financial Services Bill, House of Lords, 19 April 2021

I was delighted that the Government are actually supporting the amendment and it has now been added to the Bill. Speaking for the Government, Lord True said:

These amendments introduce an exemption for cashback without a purchase, such that it will no longer be a regulated payment service. Under the current legislation, which derives from the EU’s second payment services directive, if a business or its agent, such as a corner shop or supermarket, wanted to offer you cashback without requiring you to make a purchase, it would have to be authorised or registered with the FCA to give you cash from your own accounts. That is a significant burden for even the largest of retailers, let alone small, local shops along the various high streets across the UK.

This amendment removes this requirement; it will take effect two months after Royal Assent. From that point, industry will have discretion to make the service available across the United Kingdom. Where the service is offered, customers will be able to walk into a local business that wishes to participate, such as a corner shop, café or pub, and withdraw cash without having to make an accompanying purchase.
Lord True, Financial Services Bill, 19 April 2021

Cash still matters, and it matters materially to millions. It is a key part of what it means to have a cash-enabled, easily accessed economy across the UK. It adds to financial inclusion. More than that, it adds to complete social inclusion.

We all need to think innovatively about how we can do more to enable, empower and unleash true financial inclusion across the UK. It matters economically, socially and psychologically. If we can enable it, it can address so many of the issues that have dogged our nations for decades.

I thank all noble Lords who contributed to the debate on this amendment and and I thank, particularly, the Minister and Treasury officials for their support and making this important change to the Bill.

The Sun, New law to force shops to give cashback to customers without buying anything set to get go-ahead today.

This is Money, By Jeff Prestige for The Mail on Sunday, People could get cashback from local retailers without first having to buy something under new proposal.

Retail Gazette, Cashback without purchase to be allowed by shops after post-Brexit law change

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ACS, ACS: Government Supports Amendment to Introduce Cashback Without Purchase

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Money Expert, New Legislation to Permit Cashback Without Purchase