Examination of Witnesses (Questions 100-119)
MR JOHN
HARDY AND
MR HOWARD
AIKEN
21 DECEMBER 2004
Q100 Mr Plaskitt: What do you think its
generally accepted meaning is?
Mr Hardy: I think the general
meaning is that there are machines which are in sites which are
convenient to some consumers and where the volume of transactions
we would anticipate is relatively low. A full, through-the-wall
cash machine typically operated by a bank would cost about £26-27,000
a year to run. Providing it achieves a certain throughput of transactions
measured in the scores of thousands of transactions per year,
that machine can operate sensibly on an interchange fee basis.
There are only so many sites which will generate that kind of
traffic from a cash machine. Most convenient machines operate
on perhaps 8,000 or 10,000 transactions per year. They have very
much lower traffic levels and generally that is what we understand
by a "convenience machine".
Q101 Mr Plaskitt: How do you respond
to the situation which we heard described in evidence earlier
this morning that you can find non-charging machines almost adjacent
to charging machines in some areas of the country? Does that not
suggest to you that there is a problem with the concept of convenience
machines?
Mr Hardy: I do not think it does
actually.
Q102 Mr Plaskitt: Why not?
Mr Hardy: For a start, LINK has
no ability to determine where the machines are. That is a decision
which is entirely down to the machine-owner. I would suggest that
in normal circumstances, if there is a charging machine adjacent
to a free machine, and remember there are labels on all machines
and you cannot complete a transaction at a charging machine without
specifically agreeing to pay the fee, then the free machine is
either going to be very inconvenient for some reason, ie, it is
across the road and you do not want to cross the road, or it is
going to go out of business.
Q103 Mr Plaskitt: Does LINK have a policy
decision on external signage on cash machines?
Mr Aiken: Yes, we do. As we said
earlier, a rule came into force six months ago that required surcharging
ATMs to have, in addition to what has always been there and has
already been mentioned, that in the transaction you are told the
precise amount of the charge and you have to specifically accept
it or reject the charge. Because of the concern that was expressed
that people might start to use the machine and, in essence, waste
their time and suffer inconvenience through not being told before
they insert their card, we introduced the rule which said that
there had to be an up-front sign which warned that the machine
will charge and that had to be either by means of an on-screen
message or labelling on the machine which was clearly visible.
That came into effect six months ago. We have recently, just a
week ago, reviewed how that is working and in fact the Network
Members' Council of LINK has voted and with effect from June of
next year, all machines must have an on-screen message which says,
"This machine will charge you", and then it will give
the amount of that charge and it will probably say up to the amount
because in terms of the charges that the members levy, they can
levy those in any way they like. It can be an ad valorem
charge or it can be a fixed charge and the rules of the OFT require
that we cannot dictate the method in which people levy the charge.
Q104 Mr Plaskitt: Are all of your members
compliant with the rule that you established from April of this
year about signage?
Mr Aiken: I do not think they
are, but we notice machines that are not properly labelled and
we bring it to the attention of the member. In other cases other
members of LINK notify us and indeed I noticed that in your invitation
for evidence to this Committee, you did ask members of the public
to submit information of machines and we would be very happy to
receive such returns as you have got.
Mr Hardy: It is worth mentioning
that two national newspapers ran articles suggesting that members
of the public notify us when they saw machines which were not
properly labelled and over a period of six months we had 15 individual
notifications and one of those was actually about a machine in
Cyprus, which had nothing to do with LINK at all.
Q105 Chairman: Yes, but I think the thing
is that it sounds as if there is an ad hoc element to this
rather than a systematic approach. For example, I have just got
an email which says, "An interesting example is the northbound
service area at Warwick on the M40. This service station long
had a free NatWest ATM on an outside wall. Two machines then appeared
inside, both requiring payment to withdraw money. Recently a third
has appeared, and the free ATM has been removed. The new machines
now carry small stickers saying, disingenuously, that the user
`may' be charged." Now, here you are, I am not involved in
the LINK network, but just sitting as the Chairman of the Treasury
Select Committee and people email me, so it is an ad hoc
approach rather than being systematic.
Mr Aiken: That rule has been in
effect for six months, just over six months. We have reviewed
that and we had decided a number of things. One is—
Q106 Chairman: Well, this email was dated
the beginning of December.
Mr Aiken: I understand, but the
Network Members' Council agreed at a meeting last week that there
would be a number of changes to that which take effect from June
of next year. One of them is that there will be an up-front screen
which says the amount of the charge.
Q107 Chairman: Well, I would suggest
on the way back home if you are passing Warwick on the M40 that
you get it sorted tonight. Okay?
Mr Aiken: Well, thank you for
telling us about one, but, to continue, in addition there will
be signage on the machine which will say, "This machine will
charge you for cash withdrawals".
Q108 Mr Plaskitt: As an organisation,
do you have any sanction over any member who is non-compliant?
Mr Aiken: Indeed we do.
Q109 Mr Plaskitt: What is it?
Mr Aiken: That is a part of the
agreements that were reached last week.
Q110 Mr Plaskitt: At the moment what
sanction have you got over a member who is non-compliant with
the rules?
Mr Aiken: In the extreme, we can
expel them from the network.
Q111 Mr Plaskitt: How many have you expelled?
Mr Hardy: We have not expelled
any.
Mr Aiken: None, but the point
is that in every case where we have brought this to the attention
of the member, they have redressed the matter.
Q112 Mr Fallon: If I can just be clear
about the market itself, if you add LINK members to the independents,
what share have you got of the total?
Mr Hardy: The total cash machine
operators?
Q113 Mr Fallon: What share have LINK
got of the total market?
Mr Hardy: In terms of the number
of machines deployed, it is so near 100% that it does not matter.
There are 54,000 cash machines in the country and all but seven
of them are in LINK. In terms of the volume of transactions which
properly—
Q114 Mr Plaskitt: You are misunderstanding
me. If you put the LINK members against the new independent deployed
machines, what percentage has LINK got?
Mr Aiken: But the independents
are part of LINK.
Q115 Mr Plaskitt: I know, but what percentage
have the original members got who are not independent?
Mr Hardy: Perhaps I can readdress
the question because you are confusing us with the terminology,
I suspect. Are you asking what percentage of the total network
do the large banks, building societies and financial institutions
have?
Q116 Mr Plaskitt: Yes, what percentage
have you got?
Mr Hardy: About 60%. It is not
us, it is them. We are the network sitting in the middle. There
is no difference between the independent deployers and the banks.
Q117 Mr Plaskitt: But had the cartel
not been broken up earlier, there might have been. We might in
fact have had lower charging machines, might we not?
Mr Hardy: I am not quite sure
which cartel you are talking about.
Q118 Mr Plaskitt: Well, Cruickshank presumably
wanted the LINK arrangements loosened and liberalised, which is
what has happened.
Mr Hardy: And we were entirely
in favour of that.
Q119 Mr Plaskitt: Well, you were then
when he told you to do it, but if it had been done earlier, presumably
we would have had more independents and probably a freer and more
rational market, would we not?
Mr Hardy: I think that is probably
unlikely actually. Independents as a concept only really started
to emerge in America in 1996 or thereabouts. It is a relatively
recent idea that non-banks should put out cash machines and charge
for access to them.
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