The move prompted fury from customers earlier this month when it was the only one of 28 banks and building societies that didn’t agree to fully participate in the three-year Post Office Banking Framework.
The decision meant that while Barclays customers could still deposit cash at Post Office branches around the country, they would not be able to withdraw any.
But for many people in local communities that have seen branches and ATMs shut in recent years, local Post Offices can often be their only means of accessing money.
A major rethink
This month Barclays had unveiled the launch of an alternative scheme, which allowed customers who did not live within 1km of a branch or ATM to get cashback from local businesses.
While that scheme will continue, Barclays has now reached a cash-withdrawal agreement with the Post Office too.
The bank’s chief executive Jes Staley acknowledged that the public outcry had persuaded the bank to change its position.
"Our decision provoked a great deal of public and private debate,” he said.
“We have listened very carefully to points that have been made to us by ministers in the government, by MPs, and by interested charities and consumer advocates.”
"Ultimately we have been persuaded to rethink our proposals by the argument that our full participation in the Post Office Banking Framework is crucial at this point to the viability of the Post Office network."