Examination of Witnesses (Questions 120-139)
MR JOHN
HARDY AND
MR HOWARD
AIKEN
21 DECEMBER 2004
Q120 Mr Heathcoat-Amory: As I understand
it, almost all the IADs, the independents, use the LINK network.
Mr Hardy: Yes. By definition,
they have to because they do not issue cards themselves, so in
order to get access to customers, as it were, they have to be
part of the network.
Q121 Mr Heathcoat-Amory: To what extent
are the IADs a rising source of competition for the banks and
building societies? Do you see them in those terms?
Mr Hardy: No. In essence, the
banks and building societies have two roles in LINK as both issuers
of cards, so their customers use the network, and providers of
service and they have other ATMs that other customers can use.
The independent deployers essentially only act as suppliers, so
they do not make the cards, but they only supply machines. They
are paid, in essence, to provide a service to the other members
of the network.
Q122 Mr Heathcoat-Amory: But although
the number of free machines run by the banks and big building
societies is increasing, there is this very large increase in
the independents.
Mr Hardy: Yes.
Q123 Mr Heathcoat-Amory: Do you see that
the free machines will in time actually start to decrease in number
and switch over to the charge-type machines?
Mr Hardy: I see no evidence of
that. In the last year about 100 machines which were free became
charging machines, but, equally, about 100 machines which were
charging became free.
Q124 Mr Heathcoat-Amory: Now, if there
was intervention by government or by agreement in the market to
try and ensure the further spread of free machines, do you think
this would be workable or would we be the victim of unintended
consequences, heavy-handed, bureaucratic control mechanisms which
might have curious side-effects? What is your general attitude
towards being told to cross-subsidise, in other words?
Mr Hardy: I think it would be
very difficult to put into effect. There are approximately 41
or 42 organisations which supply cash machines in the UK and,
in essence, there are 41 or 42 competing institutions, all of
which are looking for the best sites. The result of that is that
at a micro level, ie, from the point of view of one of the supplier
institutions, they are effectively optimising their delivery system.
From the point of view of the system as a whole, the macro view,
the system is probably not optimised, to be honest, because too
many people are trying to gain transactions in the same place,
so you do get a relatively high level of over-supply in town centres
and in big shopping areas and you get a relative under-supply
in other areas where there actually are not enough transactions
to justify free machines.
Q125 Mr Heathcoat-Amory: So you do not
think it is workable that some central authority should deem that
a certain area is under-provided by free machines and should direct
this or do you think you could bolt that on to the system you
run?
Mr Hardy: I think it is not beyond
the bounds of possibility that you could do that, but it would
have to be a decision which existed at a macro level, if you see
what I mean. It would have to be a deliberate decision to say
that as an act of social policy, the collective of LINK or whatever
are required to provide X, Y or Z machines in A, B and C areas.
It is not entirely impossible, but it would be very difficult.
Q126 Mr Heathcoat-Amory: Could LINK do
that, and you know more about this network, or would there have
to be a separate regulator called `Ofcash' or something to do
it for you?
Mr Hardy: I think given direction,
LINK would be the logical organisation to do it. It would probably
breach competition laws, so there would need to be some Office
of Cash Regulation or whatever, Ofcash perhaps or Oflink.
Q127 John Mann: Mr Hardy, you, like me,
are not very keen on competition. To help me make a rational choice,
can you tell me, you said that one of your members voted against
improved signage, so which one was it?
Mr Aiken: I think that is confidential
to the LINK meeting.
Mr Hardy: To be honest, I cannot
actually remember.
Q128 John Mann: Perhaps you could send
us a note. It might be my bank and I would be keen to take it
up with them if it was the case. Do you not think I should have
the right to know?
Mr Aiken: I think it would be
a breach of confidence for us to discuss it here.[1]
Q129 Chairman: You cannot speak on behalf
of other people, can you?
Mr Hardy: No.
Chairman: That is the diplomatic way
out!
Q130 John Mann: Perhaps you could put
it to your committee that they should send us the minutes so we
can see who voted against because if it was my bank, I would like
to know. What arguments did that unnamed bank put against improved
signage?
Mr Hardy: I genuinely cannot remember
who it was, but you are in a sense jumping to a conclusion and
assuming it was a bank. It may not have been.
Q131 John Mann: What argument did this
institution of whatever kind put against improved signage?
Mr Aiken: I cannot remember. I
think it could have been along the lines that it did not go far
enough.
Q132 John Mann: Perhaps you could take
back a two-tier option, one being that you send us the full minutes
and the second being to send us the full minutes with the institution's
name blanked out, a kind of partial disclosure, so we can see
what the arguments were against improved signage.
Mr Aiken: It could be death by
boredom!
Q133 John Mann: We are patient people,
so perhaps you could take that back to your committee and let
us know their response on that.
Mr Aiken: I think the point on
signage is that that has now been superseded. We have now moved
on from that to this additional signage which has now been agreed
and what I did not get a chance to complete was that also we are
going to commission mystery shopper-type exercises where we will
choose an area.
Q134 John Mann: I was coming on to that
and obviously I want to offer to assist you in that, but we would
be keen to get those minutes, so perhaps you could take that back.
I am taking a little break and I am going to Snowdonia. I have
not been there for a long time, so I have no idea where the cashpoint
machines are. I will be going on Thursday, so when I go to try
to draw out cash, how am I going to find out which machines are
free and, of those which charge, which are the cheapest for me
to draw cash out from?
Mr Aiken: At the moment you will
have to do that by using the machine and then seeing what the
amount of the charge is.
Q135 Angela Eagle: Right at the end of
the transaction.
Mr Hardy: Yes, there is an important
reason for that. In an effort to be transparent, we actually built
a system which is unique. I am sorry, I need to be a bit technical
here, but, in essence, there is the potential for two types of
retail charge. The cash machine can raise a surcharge, ie, which
goes to the ATM-owner, or the card-issuer can also raise a charge
and in the case of credit cards, which are used in the LINK system
too, they will because they are advancing cash. We agreed with
the Government in 1999 that there would never be a case where
two charges, two retail charges, were applied to the same transaction.
Now, in order to do that, that implies that when the card is put
into a surcharging machine, the machine knows it is going to charge
£1, but it has to determine whether the card-issuer is also
raising a charge, so as part of the message, asking for authorisation,
the card-issuer is asked, "Are you going to raise a charge?".
Then because of internal LINK rules, one of the charges is disabled,
so it is actually because the machine has to communicate with
the card-issuer before it knows the full picture.
Q136 John Mann: But I am looking at a
much simpler scenario because I am a rational consumer, I am not
going to draw money out on my credit card because I know the charges,
well, I do not know the charges, but I know there will be charges,
although they will not tell me what the charges are overall, but
I know there will be charges, so I can make a partially informed
decision that I will not be drawing money out on my credit card,
but I will be using my debit card. So what you are saying is that
if there are in the village I am staying in, let's say, two machines,
one at one end of the village and one a mile down the other end
of the village, what I have to do is go and put my card into both
machines to determine which of the two machines I should use to
be an informed consumer?
Mr Aiken: I think it is two things
actually.
Q137 John Mann: Is that what you are
saying?
Mr Aiken: You could look on the
LINK website and that would tell you.
Q138 John Mann: No, hang on a minute,
look on the LINK website? Where I am staying I suspect does not
have Internet access and I will not be taking my laptop with me,
so, as a fairly average consumer, I would suggest, therefore,
who does not have, visiting an area that I do not live in, a computer
readily available, am I going to have to stick my card into these
two or more different machines to work out which is the cheapest
or the free one?
Mr Aiken: Well, the answer is
that at the moment you do and from June of next year you will
not because the up-front screen on the ATM before you put your
card in will tell you what the amount of that charge is likely
to be.
Q139 John Mann: So the improvement which
one of you was against, but the rest were in favour of was for
the screen before I put my card in?
Mr Hardy: With effect from next
June, the machine will say, "This machine will charge you
up to—"
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