Cash use has tumbled in recent times as free-to-use cash machines have also declined as digital payments grow in popularity.

However, many older, low income and more vulnerable people are heavily reliant on cash and it helps them budget and manage their finances.

Last year, £3.8bn of cashback was received when shoppers paid for items at the tills, making it the second most used method for withdrawing cash in the UK behind ATMs.

But current EU law makes it difficult for businesses to offer cashback when people aren’t paying for goods as it constitutes a ‘regulated payment service’ which requires further authorisation.

The government said this has been a barrier to widespread adoption but with Brexit, it would be possible to scrap these laws once the transition period ends on 31 December 2020.

In a bid to protect the UK’s future cash system and ensure people have easy access to cash, the government proposes for Brits to be able to get cashback from retailers of all sizes in local communities, without having to make a purchase.

Further, the watchdog, the Financial Conduct Authority would also be given overall responsibility for the UK’s retail cash system to protect consumers and SMEs.

At present, The Bank of England, Financial Conduct Authority, Payment Systems Regulator, and HM Treasury each have specific roles and responsibilities for oversight of the cash system.

The government said that while close coordination between these authorities has been” highly effective, particularly in managing risks to cash through Covid-19”, there may be significant benefits to giving a single authority overall responsibility for setting requirements to meet the cash needs of consumers and SMEs.

‘Harness creative thinking’

John Glen, economic secretary to the Treasury, said: “We know that cash is still really important for consumers and businesses – that’s why we promised to legislate to protect access for everyone who needs it.

“We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK’s cash system and make sure people can easily access cash in their local area.”

It comes after the government announced in the March 2020 Budget that it would legislate to protect access to cash and ensure the UK’s cash infrastructure is sustainable in the long-term.

The call for evidence on the proposals will run for six weeks, closing on 25 November 2020.

‘Cash is still essential for many’

Eric Leenders, UK Finance managing director of personal finance, said: “HM Treasury’s consideration of the future of cash complements the community access to cash pilots supported by the banking and finance industry, and will work alongside the existing activity being led jointly by the Financial Conduct Authority and Payment Systems Regulator. While less popular than in years gone by, cash is still an essential way to pay for many, and initiatives like cashback without the need to make a purchase will help customers who might be less confident using other types of payments.”