Examination of Witnesses (Questions 600-618)
MR PETER
MCNAMARA,
MR ASHLEY
DEAN, MR
RON DELNEVO
AND MR
MARK MILLS
1 FEBRUARY 2005
Q600 Angela Eagle: If you change that
arrangement so that you could double dip, I think they call it,
what would be to stop you keeping both of these?
Mr Delnevo: We have a screen on
our ATM waiting to show refunds from Banks and it shows exactly
what that refund is. We are still waiting after all these years
because there has been no refund of it, but it is there on the
screen, the customers would see it: "This what we charge,
this is the refund from the bank and that is your net payment",
but we have never had any of these refunds, have we? No.
Mr McNamara: Can I add one quick
comment on that? It is worth a bit of thought as to how such processes
could be put in place, because quite clearly we as deployers always
seek to get the best equation in terms of volume and fee that
we generate from each transaction, and clearly it would be in
our interests to have a lower fee if economically we can
make that make sense and that is very straightforward. It has
been under-utilised—shall we put it that way—the technology
that is capable of achieving that type of aim.
Mr Mills: If I may add, the issue
of somebody withdrawing a small amount that we face is that it
is a fixed cost relatively apart from the very last part, which
is the physical number of notes. So we have got the same fixed
cost pretty much whether it is £10.00 or £250, but in
all of our businesses—I am generalising slightly—the
average withdrawal is about £50.00. The average bank withdrawal
is about £60. By definition, if somebody does come and withdraw
£10.00 from one of our machines, somebody else has withdrawn
£90 to £100,000, that is how you get your average. We
are faced with a fixed cost transaction and we have no way of
determining somebody's choice to withdraw a small amount.
Q601 Angela Eagle: I understand that.
I suppose the worry from a public policy point of view is that
banks, as Mr Delnevo has already observed, have pulled out of
quite a few deprived areas and have not been present there, branch
closures, etcetera, that there is no other way for people
to get hold of their cash without paying a charge; and if, say,
they are on benefits or they are on a basic bank account, £1.50
out of £10.00 or £20.00 is a big fee to pay.
Mr Mills: You say that, but, with
respect, the retailer is perfectly entitled to do cash-back,
the supermarkets give cash-back.
Q602 Angela Eagle: But many of the areas
we are talking about, if you do not have a car, and there are
still people who do not, access to supermarkets is not easy either,
so your option is either to pay a high bus fare to go somewhere
where you can get cash-back or pay your charges perhaps for convenience?
Mr Mills: But that does not change
if our machines are there though, does it, because the banks have
not got a machine there. We put a machine in. People are still
perfectly entitled to take the bus at a higher cost and get a
free withdrawal, but when you give people the choice, they then
decide possibly to use our machine. The unfortunate thing, which
is a question presumably you are actually levelling to the banks
not to the independents, is that the banks' public policy should
include putting machines into deprived areas.
Mr McNamara: Could I make a suggestion
which you could explore, which is that it is perfectly possible,
because only the banks themselves know the circumstance of the
customer, for there to be an advantageous cost recovery for a
basic bank account customer withdrawing a small sum of money.
That is technically perfectly feasible.
Q603 Angela Eagle: Technically it might
be possible, for example, if you are a basic bank account customer
on benefits, because that is probably why you would have a basic
bank account, that it could be free?
Mr McNamara: Somebody has to pay
for the cost of the transaction at some point in time—
Q604 Angela Eagle: The transaction to
that person could be free?
Mr McNamara: —but clearly
the card issuer knows who their customer is and is able to recognise
that customer and recompense accordingly the cost of the transaction.
The system is designed to work that way.
Mr Delnevo: You have also mentioned
Post Offices.
Q605 Angela Eagle: There is another issue
with them, yes?
Mr Delnevo: The fact is that there
are often Post Offices around and you can withdraw with many banks
money free of charge at the Post Office counter, but there might
also be an ATM that charges. People go into the Post Office, they
see a queue of 20 to 25 people standing at the counter and they
opt to use their choice to use the ATM even though it charges,
even though they know if they stand in a big queue they can get
a free transaction, so we do come back to the choices. Whether
it is in housing estates or rich villages, the fact is that there
is a choice operating there.
Q606 Chairman: Mr McNamara, your submission
noted that the independent ATM deployers are either allowed to
receive the LINK interchange fee or to charge the consumer but
not both. What are the drawbacks of this approach for the consumer?
Mr McNamara: That approach was
put in place when the ATMs and the card issuers were all owned
by the banks, and clearly it was to stop the consumer being charged
twice, and that was the mechanism that was then put in place.
In our point of view, that scheme that now exists causes the charge
that we levy on our surcharging machines at low footfall locations
to be higher that in needs to be, because, in effect, the bank,
as was pointed out this morning, is paying nothing for those transactions
at remote locations, convenience stores or, in effect, where there
is a surcharge. Therefore they have, as you indicated this morning,
every incentive not to cover those sites.
Q607 Chairman: But your submission goes
on to note that if independent ATM deployers were allowed to receive
the interchange fee of 30, 31 pence, as it does at the moment,
then the charge to the customer could be reduced.
Mr McNamara: Yes.
Q608 Chairman: How can you convince us
that this would be the case? Is it not more than likely that one
would use the additional revenue to enhance profits rather than
reducing the charges to the consumer?
Mr McNamara: We have every incentive
to make sure that the volume of our transactions is as high as
possible, and clearly there is a price sensitivity. We have talked
about that. People are obviously reluctant to pay increasing sums
of money to withdraw cash, so the less they have to charge the
less sensitivity there is to paying a fee. Therefore smaller fees
mean more transactions for us, which is why we do not charge any
more than we need to. It is as straightforward as that. We obviously
always seek to get the best mix of volume and margin for each
transaction, and volume is very important to us.
Q609 Chairman: Some consumer groups have
suggested to us in the area of financial exclusion that a sliding-scale
of charges may be fairer for consumers. Would such a sliding-scale
be feasible and technology possible in your views? One of the
things we have been told is that people on lower incomes more
regularly withdraw smaller amounts of money, so the percentage
of money they are paying for the charges could be quite considerable.
If we had a sliding-scale, a certain percentage for a £20
withdrawal but much more for a £200 withdrawal?
Mr McNamara: There is, as I said,
a very high fixed element in each transaction that take place,
and the question is how you cover the cost of that fixed component
of the transaction. Obviously one of our suggestions is the interchange
would reduce that component, but there is no reason thereafter
why you could not make a variable transaction to cover those outturns.
Q610 Chairman: Mr Mills, would you agree
with that?
Mr Mills: It is technically feasible,
but I think Mr Higgins rehearsed the point this morning that the
starting point is actually quite high, so how much of an advantage
would there be?
Mr Dean: I think it is of interest
generally, because it may be an interesting competitive tool.
When you combine with some potential on the inclusion of the interchange,
or removal of the interchange from that fee, between the two things,
may make a significant difference to what somebody on a low income
might pay.
Mr Delnevo: I know you are fond
of yes, no answers, Mr McFall, so I will tell you.
Q611 Chairman: Because we have been here
three hours, that is why.
Mr Delnevo: Yes, it is time to
go then. You were asking about the interchange. I will make a
commitment. Anything the banks will refund to us in terms of that
interchange we will pass that on 100% to the customer and we will
not increase the prices on that ATM for a year, so the customers
will see the benefit. That is our commitment.
Q612 Chairman: I will ask you one question,
Mr Delnevo, and you can flour your answer. You have mentioned
this morning that it is not worthwhile for somebody spending a
few minutes searching around for a free ATM. If you make the process
more difficult by being less transparent, not displaying clear
notices in the amount of money you are making, you are not making
the market as efficient. I think your idea would be for consumers
to shop around, would it not be?
Mr Delnevo: No. Mr McFall, let
me make clear, I am not accepting that there is a serious lack
of transparency. I am not buying into this fact that people use
those ATMs in the pubs because they are fooled into thinking they
are free and they could use the free ones outside. They use them
because they choose to.
Q613 Chairman: That is fine in the market
as far as you are concerned?
Mr Delnevo: I believe that the
transparency in this market is better than in any other country
in the world at this moment.
Q614 Chairman: Mr Mills, your knee-high
consumers, can you see it going up the body in terms of the information
they get?
Mr Mills: Again, you have to look
at—
Q615 Chairman: We have had different
views on transparency here this morning.
Mr Mills: We have got the back-drop
of having built businesses where every transaction was free and
all the machines were free, and we have all got high repeat usages,
so I think it cannot be brushed away that our customers are voting
with their feet by coming to us rather than going away from us.
Q616 Chairman: Mr McNamara—the
rational voice of the IADs—you wish more transparency. Is
that correct? You could do better?
Mr McNamara: I think the right
to have the transparency is good. I just believe it has to be
universally applied.
Q617 Chairman: Mr Dean, you and your
stickers, you could go a wee bit further forward on transparency
as well, could you not? Use the Royal Mail and give them a break.
Mr Dean: Yes, although I would
ask you not to question my motives or question our enthusiasm
for maintaining our low cost base.
Q618 Chairman: I am just quoting from
your submission. I am treating you fairly. Could I sum-up some
of the points you have made to us this morning. The LINK the rules
regarding the transparency of charges you have mentioned you have
decided at a confidential meeting for secret votes, and I think
you could improve on that. That was the view I got from you this
morning[8].
Also the issue of enforcement being inadequate, and that is a
factor that needs to change as well. [9]None
of you seem to have any objections to all companies signing up
to the Banking Code and being subject to the provision of monitoring
and enforcement, which is helpful to us. [10]We
accept that there is an issue of consumer choice whether an individual
uses a free machine or whether they use a charging machine, but
consumers need to be provided with clear information regarding
the charges so that they can make an informed choice, and it is
that informed choice that is very important. Also what has come
out this morning is that generally the industry are not fulfilling
the responsibilities totally in this regard and there is progress
that can still be made on that. I know you signed up to the LINK
agreement on 12 December, but progress can still be made in that
area. There is still a need for clear signs showing the amount
of charging, larger signs, and on that point you have all agreed
with the principle this morning. [11]Is
that correct? Can I thank you for your attendance this morning.
It has been very helpful. It has been a mammoth session, but I
think we were getting more than yes, no answers from Mr Delnevo
whenever he had the opportunity. Thank you.
8 Note from Bank machine: In Q618, the Chairman
attempted to use the opportunity to sum up the outcome of the
discussions with the Independent ATM Operators. Bank Machine wishes
to make the following points :None of the Independents actually
agreed this in the meeting. Bank Machine certainly did not. Back
9
Note from Bankmachine: None of the Independents actually
agreed this in the meeting. Bank Machine certainly did not. Back
10
Note from Bankmachine: Mr Delnevo said in the meeting
that he would support signing up with the Banking Code if it assisted
in transparency. This remains to be established. Back
11
Note from Bankmachine: The Independents did NOT agree
to the need for larger signs with prices on. In particular Mr
Delnevo told the Committee that there is currently excellent transparency
in terms of ATM charges: in fact the finest in the world. Back
| 
