Examination of Witnesses (Questions 240
TUESDAY 16 JANUARY 2001
240. Do you think ten days or more, which is
what the survey evidence shows, is acceptable in this day and
(Mr Sweeney) Let me turn to
241. No; you answer it. You represent the big
four among other retail banks. Do you think that is acceptable?
(Mr Sweeney) I think that what is
242. Is that a yes or a no? Is that acceptable
to customers in this country?
(Mr Sweeney) With respect, I am not going to give
you a straight yes or no because it depends entirely
243. I think we shall draw our own conclusions
from that. It is a very simple question: is ten days or more acceptable
(Mr Sweeney) If, with respect, you pause in your questions
for one second and enable me to answer one before you move onto
the next I might be able to give you a response.
244. Try answering one.
(Mr Sweeney) May I? Thank you.
245. Is it acceptable?
(Mr Sweeney) What is important is that the customer
gets the service which is consistent with the mechanics which
are required to effect the transfer. I do not know whether ten
days is the amount of time needed to effect the transfer. If it
is, then it is acceptable. If it is not, then it is not acceptable.
That is a very simple answer.
(Mr Tyson-Davies) We are talking here about a pilot
project with a chunky, clunky paper-based system for transferring
details of customers' direct debits from old bank to new bank.
The ten days was felt to be an appropriate target figure while
the pilot was running. This pilot is still running after some
15 months. One of the lessons clearly learned from this was that
it took some of the major banks a significant time to get information
from where it was scattered round their institution to the central
point to hand it over to the new bank. That is the delay. It is
that lesson which will be built in to the design of the new automated
system which will come into force at the end of this year, which
will make a significant difference, and meet the objectives of
customers. What our customer wants is to change from bank A to
bank B, he wants it to happen from next pay day so his salary
goes to the new bank to be followed by all his regular bills.
The new system will even have a redirection facility built into
it so that if something gets lost and a direct debit company fails
to act on the instructions it will get caught in the middle and
sent off to the new bank. That is the service which we are designing
and building for our customers and it is taking a significant
amount of work within the major banks.
246. How many days do you think it will take
(Mr Tyson-Davies) We are looking at a period from
end to end of the order of three weeks. To say less than that
would be to raise false hopes; within a normal monthly salary
period is what we are looking for.
247. The industry target is ten days.
(Mr Tyson-Davies) This is for information to go from
old bank to new bank followed by the activity to move the account.
248. How quickly are you going to bring down
the ten days?
(Mr Tyson-Davies) That will be in the light of experience.
It is the certainty customers want, not a rapid move. If you do
not have any regular payments you can move your account tomorrow.
249. It is certainly not a rapid move. Is it
going to be more or less than ten days for the relevant details
to be transferred under this regime you have helpfully described?
(Mr Tyson-Davies) I understand that ten days will
remain the target but that is not cast in stone and there will
be some time for consideration before the system is activated
at the end of this year.
(Mr Pearson) I should also add, in case there is any
confusion from the previous evidence, all banks are participating
in the project to deliver automated transfer of direct debits
250. All banks are.
(Mr Pearson) All banks. The pilot is with a sub-set
of those banks but the full system will be all banks.
251. Just so I am clear about this, when will
the new regime kick in?
(Mr Tyson-Davies) At the end of this year.
252. And you cannot give us an indication of
whether ten days will be bettered or not.
(Mr Tyson-Davies) No, not precisely at this point.
253. Is there any particular reason for that?
(Mr Tyson-Davies) Because they are still in the process
of designing the new system.
254. But can you give us the assurance that
they will be working for a period shorter than ten days in the
interests of the customers' needs and requirements?
(Mr Tyson-Davies) I cannot give that assurance because
I am not in a position to deliver it. The aim is to have it within
a normal monthly salary period.
Mr Ruffley: Those are very revealing
answers. Thank you.
255. May I turn now to the money transmission
systems and small businesses? One thing which was most worrying
about the Cruickshank Report findings was the fact that in the
UK the charges for transferring money for small businesses are
amongst the highest in the developed world and indeed that if
an excess of profits was being levied from the small business
sector it was probably in the supply of money transmission services
from the banks. That was one of the major reasons why Cruickshank
was suggesting there should be a powerful independent regulator.
Did you agree with Cruickshank's findings of those costs?
(Mr Sweeney) The difficulty with a small business
is that it is in front of the Competition Commission at the moment
and that is being handled very rightly and properly by the individual
banks. I am not privy to the numbers for individual banks and
you would have to ask them whether they were satisfied that it
reflected their market experience and the level of charges they
are levying. I am not sure I can help you.
256. The Association did not look at this finding
from Cruickshank, which was quite an important finding and responsible
for some of his recommendations.
(Mr Sweeney) We did not because the members took the
view that as the small business element had been remitted to the
Competition Commission, this was not an industry issue it was
a competitive issue and individual banks would respond directly
to the Competition Commission and we had not been involved in
that aspect of the work at all.
257. Would APACS like to comment on that?
(Mr Pearson) From the point of view of the central
system which we operate one has to look at where costs fall. Some
years ago APACS did a piece of work to look at the total cost
of money transmission systems in the United Kingdom and that number
at the time, three or four years ago, came out at £4.5 billion
for the total cost of all payment transmission. The APACS cost,
the central cost, if you take the entirety of the costs of BACS
plus APACS, it comes to just under £70 million or about 1.3
per cent of the total. Therefore the question is not best directed
at me, because the question should go to where the majority of
these costs lie, which is in the banks.
258. Do you have no view that the British money
transmission system operated by the British banks is a particularly
costly one for small business? Would you like to comment on that?
(Mr Pearson) Mr Cruickshank was kind enough to say
that in a lot of ways British payments systems are world class
and he is quite right. They are highly efficient at what they
do and they are highly scrutinised by the banks who own my company
as to the costs of the central piece. Slipping off my real agenda,
banks are also just as cost conscious in their operations. I would
not say they are not efficient.
259. Do you not think though that if there were
a separate independent regulator like PayCom as originally proposed
by Cruickshank it could answer some of those questions which clearly
are important for small business, which does actually back up
what Cruickshank says that they do pay some very heavy charges
to the banks. If we had a regulator who had, in Cruickshank's
words, a sustained dynamic focus on the banks, that would actually
expose those costs and hopefully drive them down?
(Mr Sweeney) I am in danger of repeating myself but
I think the answer to that will rest in the Competition Commission
conclusions. Some banks disputed some of the small business analysis
in the Cruickshank study. Cruickshank himself admitted in the
report that he had found it very difficult to decide how costs
were allocated within the industry and to draw some conclusions
on the numbers. The Competition Commission has a very vigorous
study under way, absorbing a huge amount of time and absorbing
a huge amount of information. It would be silly for me to try
to anticipate the answers they might come up with or to get myself
involved in trying to pre-empt their arguments and dispute them
before they have even reached them. I am sure individual members
would be very happy to return once the Competition Commission
has produced its report, but the question you are asking is at
the heart of what they are looking at.