Examination of Witnesses (Questions 40-54)
MR LAURENCE
BAXTER, MR
PHILIP CULLUM,
MS TERESA
PERCHARD AND
MS JENNY
HICKSON
21 DECEMBER 2004
Q40 Angela Eagle: Finally, can I ask
this. There is a dynamic that worries me going on in this market.
There may be people watching this who have cars and think, "It's
OK, I can get my own money out free because I can go round to
other machines that are free," but there is a dynamic here
that worries me which could lead to the end of free access to
cash for everybody if this substitution of the existing free networks
continues to happen either because banks decide to cut their costs
even more—and remember, they cut their costs in the first
place to get rid of branches and introduce cash machines free.
They are now seeking to cut their costs further. If they do this,
there is a possibility, do you think, within a few years—because
this has all happened from nothing in the last four years—that
we might lose free access to cash completely for everybody?
Mr Baxter: That is very realistic.
I think there is a fast scenario and a slow scenario. The fast
scenario is the LINK interchange fee. That is up for renewal in
December of next year. This time next year the LINK members will
be deciding whether or not to keep the LINK interchange fee, and
if that does not survive past next year, that will be a disaster
for consumers. The slow scenario is basically the non-branch network
progressively becoming more and more dominated by these charging
ATM providers, the Independent ATM Deployers will be buying more
and more machines, and eventually the free branch ATMs will be
literally surrounded on all sides by a non-branch network, virtually
controlled by the Independent ATM Deployers, charging, basically,
what they want. It will simply no longer be commercially viable
for anybody to hold a free machine anywhere, and then you will
start seeing the branch machines disappearing as well.
Q41 Angela Eagle: Once that happens,
of course, the charges could rocket.
Mr Baxter: Absolutely.
Mr Cullum: I think we are already
seeing signs of the banks abiding by the letter rather than the
spirit of their promises not to charge, so if you put your card
into a Royal Bank of Scotland machine at the moment it says "We
don't charge." Yes, that is true if you are using a Royal
Bank of Scotland branded machine, but not if you are using the
machines which they own via Hanco, which do charge, so there is
a blurring, and I think it does betray the mindset, of them seeing
this as a separate business which they can earn money out of rather
than as an overall service. Just to go back to one point that
you mentioned earlier and others have picked up on about subsidy,
I think you are right. I have a lot of sympathy with Teresa's
arguments about post offices and subsidising them and where they
are in rural areas they are the only. . .
Q42 Angela Eagle: Or urban areas like
Speke. This is not a rural area issue necessarily.
Mr Cullum: I think they are two
different things. I was going to say there are the rural areas
and there are areas where there are lots of people withdrawing
their benefits, but I think we need to be careful about the use
of the word "subsidy." What these are are networks.
We may have favourite machines that we use regularly, but there
will be machines which we will use only once in our entire lives,
but we depend on the idea that they are located all over the place
and that we can easily use them. So I am not sure it is about
subsidising the machines that lots of people use and the machines
that not so many people use. That is just a network benefit. We
all contribute to it. We are paying, and the costs are spread.
So we should be careful about describing that too overtly as a
subsidy.
Q43 Mr Plaskitt: Miss Hickson, you were
talking about the community in Speke. What sort of population
are you talking about? Roughly how many people?
Ms Hickson: Roughly about 15,000.
Q44 Mr Plaskitt: How many of those would
you say are on benefit or very low income?
Ms Hickson: Two-thirds of the
population would be on benefit.
Q45 Mr Plaskitt: So about 10,000 people
in the Speke area. What is the withdrawal charge generally of
the charging machines in the area?
Ms Hickson: They are £1.25
and £1.50. I do not think they go above £1.50.
Q46 Mr Plaskitt: You said that some people
would visit the machines two or three times a week to make withdrawals.
If my maths are right, in the course of a year, those 10,000 people
on low income are handing over £250 in fees to access their
own cash. So 10,000 people handing over £250 a year to the
charging companies. They are drawing quite a lot of money out
of the Speke community are they not? That is £2.5 million
a year from giving 10,000 people in the Speke community access
to their own cash. That is what is happening.
Ms Hickson: I would not know how
accurate the figures are.
Q47 Mr Plaskitt: What would £2.5million
do if it were invested in the Speke community?
Ms Hickson: I think it would make
a big difference. I do not know how to describe the community
any more. It is basically a post-war estate that has been built
on the south edge of Liverpool. The centre of Speke is a parade
of shops. The biggest name is Iceland. There is a convenience
shop, a little local shop, a post office and a credit union, and
that is basically all that exists in Speke, and around the outskirts
of that there may be another two or three convenience stores,
and you have to literally drive out of the area or get a bus out
of the area to access any kind of banking service. The nearest
branch is three miles away.
Mr Cullum: One of the things that
is really interesting is that there is a parallel universe. There
is the one which has just been described, where people have to
pay to get access to their own cash, and then there are the ones
we mentioned earlier, where people have debit cards, where people
can easily pop into Tesco's or Marks and Spencer's or a whole
range of shops and they are desperate to give you money, and they
want you to take cash back because they know that it costs them
money to handle cash, and so they would much rather you took it
away and they got an electronic credit for it. So there is some
really odd dynamic going on where in one system, it benefits people
for you to take the money for free, and in another system you
have to pay to access it.
Q48 Mr Plaskitt: Was there ever a point
in the middle of the community in Speke where there was free access
to cash?
Ms Hickson: The last bank closed
in about 1998. The post office obviously is free access if you
do not use the cash machine, and the credit union if you have
your benefit or your wages paid directly into the credit union.
That is pretty much as open as a post office, but not outside
of 9-5 hours, no.
Q49 Mr Plaskitt: So for five or six years
there has not been free at the point of access cash dispensing
in that community?
Ms Hickson: The ATMs are new.
They have only been there two or three years.
Q50 Mr Plaskitt: The ATMs have been there
two or three years?
Ms Hickson: I would say about
two years, yes. I am not exactly sure of the timescale, but about
two years.
Q51 Mr Plaskitt: So they have sucked
about £5million out of the community so far?
Ms Hickson: Possibly.
Q52 Chairman: On that issue of credit
unions, would there be any initiative whereby banks could work
along with credit unions to put free cash machines into credit
unions?
Ms Perchard: In the context of
the recently announced financial inclusion fund, anything ought
to be possible. People in the credit union movement should know
that the Government is very interested in seeing a major investment
take place to improve the viability and services provided by credit
unions. We would be very pleased to see that sort of thing take
place.
Q53 John Mann: Mr Cullum said about supermarkets
reducing their overhead costs by not having to handle cash. Presumably
that is the same for a convenience store, where they would have
to go greater distances to transport the cash. Presumably there
is a comparable relative saving there for a convenience store
owner or chain of convenience stores owner.
Mr Cullum: That is right. Going
back to Teresa's point, I think the spirit of this is that there
clearly are issues about access to machines full stop, and to
free machines in particular. There is lots of innovative thinking
going on. There is a real opportunity to think a bit differently
about it. There are issues with people on low incomes less likely
to have debit cards, so that would clearly be something that would
need to be tackled, but you could imagine a system where you would
take more advantage of that and, rather than just using cash machines,
start to think a bit more innovatively like that about trying
to get people to get access to their own money for free.
Mr Baxter: Also, if I may add
to that, I think we must remember that there are other ways of
making a free cash machine viable. Some of the banks and building
societies are beginning to explore new ways of getting money out
of these things, for example, providing new services such as mobile
phone top-up and all that, and advertising on the actual machines.
These are alternatives to selling the machines off. I am not telling
banks how to run their businesses. However, we must remember,
following from Teresa's point, that banks have been given an implicit
social responsibility by having benefits and pensions—and
salaries and wages for that matter—transferred directly
into the current account. People have got to be able to access
these things. Banks have been effectively given an implicit
social responsibility, and so we have the commercial side of it
and we have ways of mitigating the operating costs, and on the
other hand we have a social responsibility.
Q54 Chairman: If I could sum up the points
that you have made, you still have an issue with transparency,
but you are not against charging machines per se. In terms of
convenience machines, it is a definition of convenience that you
are looking at there, and it is good if the consumer has adequate
information in order to exercise an informed choice. In terms
of a map, you would like a map from LINK to look at the issue
of equity and help establish if there were free machines in poorer
areas. The selling off aspect with the banks and others you have
suggested to us would be doubly advantageous in that there would
be a charge for the IADs but there would be no payment for the
banks to LINK, so that trend is something worth watching. In terms
of financial inclusion, you are suggesting to us that at a time
when the Government is encouraging people into the financial community,
this establishment and this increase in charging machines could
have a regressive effect on that, and particularly in relation
to the DWP and the Post Office. Lastly, on the charges, you consider
them arbitrary and something should be done to look at that. Is
that a fair summary of what you have told us this morning?
Mr Baxter: That is a very good
summary.
Chairman: Thank you very much.
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