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Major UK-based bank Lloyds is partnering with Visa to pilot a program that will increase cash accessibility through cash back at registers at local retailers.
The firms will pay retailers a fee to support cash back to incentivize participation, which can increase the number of locations where customers can access cash and promote shopping locally. For context, prior to this program, retailers wouldn’t normally collect a fee for offering cash back.
This pilot comes as rapid ATM and bank branch closures in the UK are causing outcry from authorities and consumer advocacy groups.
Cash accessibility in the UK has been shrinking as more banks tighten their physical networks. Lloyds highlighted that this pilot is not meant to act as a substitute for ATMs or branches, but rather is intended to create more cash availability in areas where it hasn't been as accessible.
However, the service is being introduced at a time when cash access is lowering throughout the UK, so it's likely that Lloyds could be using this pilot as a way to compensate for its own ATM and branch closures — it's shuttered more than 400 branches since 2014 — in a way that's more cost-effective than operating its own ATMs.
Beyond Lloyds, the UK’s ATM network shrunk 5% in the last six months of 2018, with 488 ATMs closing monthly, including more than 250 fee-free ATMs, in addition to 3,300 bank branches closing since the beginning of 2015.
But ensuring cash accessibility is still necessary — and this service can be an effective strategy in doing so. Several factors like a lower reliance on cash among many consumers — cash makes up only 3 in 10 transactions in the UK and is expected to account for just 1 in 10 transactions by 2026 — and a higher uptake in digital banking were influential in banks' decisions to shutter many of their ATMs and branches.
And UK consumers have been abandoning cash in favor of other payment methods — primarily contactless cards, which made up 51% of transactions in June 2018 to become the most popular payment method. But rapid ATM and branch closures have sparked both regulatory and consumer intervention: This month alone, members of UK parliament and consumer lobbyist group Which have addressed the alarming rates at which access to cash is lowering, as cash is still a necessity for 25 million people in the UK — 17% of whom said it would be impossible to live without access to cash — including the unbanked, the elderly, or disabled people, among others.
This service can ultimately allow Lloyds to continue serving customers who are reliant on cash in a cost-effective way.
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