Examination of Witnesses (Questions 200-219)
MR JOHN
HARDY AND
MR HOWARD
AIKEN
21 DECEMBER 2004
Q200 Mr Beard: So their interest is to
make these things as obscure as possible there, is it not?
Mr Aiken: You could construe that,
but the changes that we have made and the change we have just
made are addressing precisely that issue.
Q201 Mr Beard: Do you think this provides
a disincentive for operators to clearly communicate it? There
is no real reason why they should put these signs on at all, is
there?
Mr Aiken: Well, there are because
now they are mandated to under the LINK rules.
Q202 Mr Beard: You mentioned several
times your restriction by the arrangements with the Office of
Fair Trading, so your suggestion is that if these questions that
we are posing today were to be properly addressed, any solution
would have to be negotiated with the Office of Fair Trading? Is
that right?
Mr Aiken: I think if you are going
to interfere with the charging, yes.
Mr Hardy: I think it depends on
the nature of what you suggest, but potentially yes.
Q203 Angela Eagle: Some of the biggest
fees that we have come across on these cash machines are in fact,
I think rather unsurprisingly myself, found in pubs which often
charge up to £5. Does that worry you at all?
Mr Hardy: We do not have a view
on it because we are not supposed to have a view on it. It is
a retail charge.
Mr Aiken: We cannot say if a particular
location shall or shall not surcharge and we cannot say what the
amount of the surcharge is. We are forbidden from doing so by
law.
Q204 Angela Eagle: It does reflect on
your LINK system though, does it not?
Mr Aiken: But we have to comply
with the law.
Q205 Angela Eagle: What is the justification?
Is this the OFT that is telling you that you cannot have an opinion
on price?
Mr Hardy: Well, we are trying
to avoid the operation of a cartel. By definition, a payment system
is quite like a cartel because you have got competitors who have
to co-operate in order to operate the system.
Q206 Angela Eagle: Yes, but there are
benefits to that which is presumably the balance that we are talking
about here.
Mr Aiken: Yes, but the regulation
of the OFT applies to the interchange fees that flow between members
and we cannot, as a group of banks and others, get together to
fix the price of the customer charge in any way whatsoever.
Q207 Angela Eagle: No, I understand that,
but I am asking whether you have an opinion on the highest. It
is an interesting coincidence, shall we put it that way, that
in this system that is so untransparent with charging that the
highest fees that we have come across are actually charged in
pubs where people are perhaps even less likely than usual to be
clear about what the charges are likely to be, and £5 quite
often for the machines in pubs.
Mr Hardy: There is nothing we
can do about it. It is entirely up to the cash machine operator.
Q208 Chairman: So that is outwith your
responsibility?
Mr Hardy: Absolutely.
Q209 Angela Eagle: But you are saying
the OFT demand that you do not take a view on that because it
is the law?
Mr Hardy: We cannot, as a group,
regulate the charges.
Q210 Angela Eagle: I think that there
is a very, very interesting figure here and one of you, I think
John Hardy, quoted it earlier, that 97% of transactions are free
in cash terms and yet £66 million of profit was made last
year, charging people to have access to their own money.
Mr Aiken: I do not know where
the £66 million came from. It is not profit. That presumably
was an estimate that someone has made of the surcharges paid,
so that is income, I assume. I do not know where that figure came
from.
Angela Eagle: Nationwide, and they said
profit, they did not say income.
Q211 Chairman: I think the latest one
was £140 million.
Mr Hardy: But that is revenue.
It is not profit.
Angela Eagle: Well, £66 million
profit is what I have heard.
Q212 Chairman: I think it went £60-odd
million in 2003 and up to £140 million revenue in 2004.
Mr Hardy: I do not know where
the £66 million came from. I cannot verify it.
Q213 Angela Eagle: Even if it is revenue,
that means that 3% of transactions are making the vast majority
of the revenue for these charging and surcharging machines.
Mr Hardy: Yes.
Q214 Angela Eagle: And we have heard
from evidence earlier today that quite a lot of fees, and we will
wait to have a look at the map, are actually in the most deprived
areas in the country which means that profits are being made out
of the people that can least afford to give them over in conditions
where they have no real choice, as you or I would express the
meaning of that word. Is that not true?
Mr Hardy: I think there are undoubtedly
a number of areas of social depravation where there are very few
facilities and where the machines which have been installed
are operating on very few transactions, and really that is the
whole point, that the average surcharging machine operates on
a very small number of transactions per year. As I said earlier,
the cash machines are largely fixed cost and if there are only
a few transactions, by definition, the cost per transaction is
significantly higher.
Q215 Angela Eagle: So John Mann wants
a charging machine here, but is it not true that if we had a charging
machine here where there are lots of free machines already available,
it would make virtually no money? The charging machine in Speke
makes a vast profit because, as we heard earlier from the evidence,
those who have no real practical access to free cash machines
and who have to pay maybe a bus fare or go miles to get access
to cash, whose bank branch has closed down a long time ago and
who may have to go to the machine more than once a week because
they cannot afford to take out large amounts of cash at a time,
they are the people who are being squeezed by the charging system
as it is now, are they not?
Mr Hardy: I think they are, although
I strongly suspect that the figures that were quoted are probably
somewhat spurious. I have no doubt that the charge per transaction
is £1.50. Frankly, if a machine in an area like that that
was doing thousands of transactions per month, every other independent
deployer would be rushing in to put machines in to charge the
same amount. The fact that there is only one machine indicates
that there probably is not a great deal of traffic.
Q216 Angela Eagle: There are two machines.
Mr Hardy: Well, it would be interesting
to look at that machine and determine what the level of traffic
is, but I suspect that the volume is nowhere near what you were
suggesting.
Q217 Angela Eagle: But are you not worried
that that is the shape that the system is taking and that the
rational thing for these charging companies to do is to place
their machines in areas where people have no choice but to use
them and people are being charged a very high percentage of the
cost in charges for the size of their transactions? It is not
fair by any definition that I can think of.
Mr Hardy: But the independent
deployers are economic entities. They are supposed to make a profit.
Q218 Angela Eagle: Out of those who are
the poorest, so the poor have to pay for access to their cash
while people who have more choices do not?
Mr Hardy: Well, I think the lady
from Speke was pointing out that there are no supermarkets in
the same area and there are very few facilities indeed.
Q219 Angela Eagle: Well, lack of choices
tend to pile up on one another.
Mr Hardy: I entirely agree with
you and I am very sympathetic to it, but I think it would be unfair
to expect the independent deployers to have a social conscience
when you are not expecting supermarkets to.
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