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Why cashback can help you increase your customer loyalty

21 February 2017 Small Business Advice

What is cashback?

If you’ve ever used a debit or credit card at the supermarket or filled up your tank at the petrol station, you’ve probably been asked this question, “Would you like any cashback?”

Unfortunately, this isn’t an offer of free money, but a useful incentive for both consumers and retailers. Cashback was the brainchild of UK supermarket chain Tesco. They were looking for ways they could reduce how much cash they held in-store, realising that storing lots of cash on-site made them vulnerable to robberies and increased their fees when the cash was processed at the bank. Once introduced, cashback was a huge hit with consumers and other large retailers quickly adopted it, too.

How does cashback work?

It’s easy to process a transaction involving cashback, as it’s not that different to processing a regular purchase. As a retailer, you’re simply required to add the cashback amount to the total. For example, if the regular purchase is £30, this is entered first and if the customer then requests £20 cashback, your card machine makes the calculation for you, bringing the total to £50.

After it’s been calculated, the cash is removed from the till and handed to the customer. The receipt will say that the customer requested cashback, and it’s good practice to ask them to initial or sign the receipt to say they’ve received the cash (just in case there are any disputes later).

Is cashback easy to set up?

If you decide you’d like to offer cashback with purchases, it’s simple to do. All you need to do is sign an additional agreement with your merchant services provider. The agreement will include a limit to the amount of cashback your business can provide. Up until recently, the maximum cashback limit per transaction in the UK was £50, so this may be the limit on your current card machine. If so, get in touch with your merchant services provider and ask if they can upgrade you to the current limit of £100.

How can giving cashback benefit my business?

As mentioned, one of the biggest benefits of cashback is that it lowers the amount of cash you hold on the premises, making you less of a target for potential thieves. But most importantly, you’ll be offering customers a valuable service, which can help to increase customer loyalty. Customers are more likely to return to your store if they know they’ll be able to save both time and effort by asking for cashback when they buy something, rather than having to make a separate trip to a bank or cash machine.

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