What to make of MasterCard’s cashback initiative?

From April 2020, retail merchants will receive a small fee of £0.12p if a customer collects cashback via a MasterCard debit card, so long as they make a purchase at the same time. The company says the initiative will boost the UK’s cash flow, acting as a counterbalance to dwindling ATM and bank branch numbers, while offering a new revenue stream to retailers.

MasterCard says: “Although cashback at shops has been a cash withdrawal option for bank account holders for some time, by providing retailers with this newly introduced fee, it will offer a new income stream to the high street and provide further incentive for local shops to offer the service.”

Not everyone agrees. Industry expert Ron Delnevo, executive director Europe at the ATM Industry Association (ATMIA), told Renovite:

“Meaningful innovation is to be encouraged. However, the underlying problem with cashback is that the card scheme rules - those of both Visa and MasterCard - do not allow cashback without a purchase. That is a real stumbling block to cashback becoming a bit more useful than it is today, where it amounts to only around 2.5% of the amount of cash dispensed by UK ATMs. You don’t have to buy products to get cash from an ATM!

“The big issue with cashback never changes though. The average UK ATM in a shop window dispenses about £400,000 a month these days. An averagely busy convenience store achieves around £80,000 a month in sales. If the ATM is removed, how can the store give £400,000 in cashback, from the £80,000 it takes in at the tills?

“This illustrates that cashback can never be more than a small augmentation of cash supplied through ATMs. The other issue with the specifics of the MasterCard service is that 90%+ of UK debit cards are Visa branded. So, the service will not be available to the vast majority of debit cardholders.”

However, Natalie Ceeney, chair of the Access to Cash Review supports the move.

She said: “This is a very positive and welcome initiative from MasterCard. Supporting local shops to offer cashback will help maintain access to cash, and benefit retailers and consumers alike. I’m delighted that MasterCard have taken this step.”

Broader markets

MasterCard intends to broaden the regional scope of its new cashback pledge beyond the scope of the UK and Ireland, if successful.

Rod Bungey is Renovite’s sales director in the USA. He offers his perspective on whether the move is likely to spill over in the US market. Under the current regime, where legacy technology continues to dominate payment architecture, he does not predict much uptake in US until that changes.

“It will be interesting to see if the cashback scenario MasterCard is offering in the UK will catch on in the US.  Mastercard has over 220 million debit cards in the US and, whilst the number of branches from the major Bank players is declining, the community bank model in the US is not showing branch closures to a similar extent.

“Retail ATM deployers have been successful. However, I’m sure the Mom and Pop retailers would jump at the chance to earn more money (albeit small amounts), reduce the amount of cash in the till and attract more people in the store without having to deploy any new technology.  Yet, given the more complex acquiring models in the US and some of the older payment technology still around it might take longer to deploy.  If they had more agile, cloud-native payment systems changes like this would be far easier, faster and more cost-effective to implement.”

We’d be interested to know what you think? Is this a genuine effort to improve access to cash, or is a case of ‘humble advertising’ from MasterCard?