Corner shops, pubs and cafes will soon be able to offer cashback without people having to make a purchase first.
The move comes after the Government agreed changes in the House of Lords to the Financial Services Bill, which has almost completed its passage through Parliament.
Hailing it as a 'welcome step towards protecting access to cash', ministers pointed out it was only possible as a result of Brexit.
The government's Financial Services Bill has passed through Parliament, which will see shops, pubs and cafes able to offer cashback without people having to make a purchase first. Picture: Stock
It follows concerns about the UK's creaking cash infrastructure, which has faced added strain with the coronavirus pandemic leading to the closure of thousands of ATMs and bank branches.
Peers heard that previously under EU law, a business wanting to offer a cashback service without requiring a purchase would have had to be authorised or registered with the Financial Conduct Authority (FCA) regulator.
Cabinet Office Minister Lord True said: 'That is a significant burden for even the largest of retailers let alone small local ships along the various high streets across the UK.
'This amendment removes this requirement and 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.'
He added: 'Where the service is offered, customers will be able to walk in to a local business such as a corner shop, a cafe or pub that wishes to participate and withdraw cash without having to make an accompanying purchase.
Minsters pointed out the change in policy would not have been possible without Brexit. Picture: Stock
'The Government does recognise widespread access to cash remains and will remain extremely important to the daily lives of millions of people across the United Kingdom.'
The minister pointed out cashback with a purchase was the second most frequently used method for withdrawing cash in the UK after ATMs in 2019.
Lord True said: 'The Government's view is that cashback without a purchase has the potential to be a valuable facility to cash users and to play an important role in the UK's cash infrastructure.
'This legislative change which is only possible now that we have left the European Union would both help to support the availability of cash withdrawal facilities across the United Kingdom, benefitting individuals access to cash and to support local cash recycling.
'These amendments are therefore a welcome step towards protecting access to cash.
'The Government is proud to support these amendments.'
Proposing the changes at report stage, Tory peer Lord Holmes of Richmond said: 'Cash still matters and it matters materially to millions.
The law changes follows concerns about the UK's creaking cash infrastructure, which has faced added strain with the coronavirus pandemic leading to the closure of thousands of ATMs and bank branches. Picture: Stock
'It adds to financial inclusion and more than that it adds to complete social inclusion.'
Welcoming the move, Labour frontbencher Lord Tunnicliffe said: 'It is beyond doubt that the Covid-19 pandemic has accelerated the transition to cashless payment, but this does not mean that cash is becoming obsolete.
'Many millions of people continue to feel most comfortable making physical payments.
'And whilst small businesses have access to low-cost options for taking card payments, many will still prefer to deal with cash.'
The Bill, which updates financial services regulation after the UK's departure from the EU, now returns to the Commons where MPs will consider other amendments made by the Lords.
The legislation amends existing laws in 17 areas, including on banking rules and benchmarks, and includes changes to help people struggling with problem debt and an extension of the maximum criminal sentence for market abuse from seven years' imprisonment to 10.
Ministers have said the legislation is an 'important first step in taking back control' of financial services regulation and will ensure the UK remains a 'world-class' financial centre post-Brexit.