Memorandum submitted by Alliance &
Leicester
INTRODUCTION
1. Alliance & Leicester welcomes the
opportunity to contribute to the Treasury Committee's inquiry
into financial inclusion.
2. Alliance & Leicester is one of the
UK's major financial services groups. Our whole business approach
is based on delivering our four brand values to customers. We
aim to offer them "Better Value" products, to have "Simple
and Straightforward" products and processes, and to be "Friendly
and Approachable" to deal with, finally we aim to "Recognise
Existing Customers" by offering them access to better deals
for our products. Our "Simple & Straightforward"
and "Friendly and Approachable" values demonstrate our
commitment to providing clear financial information and ensuring
our customers understand our products.
3. As a result of our history and our product
range, Alliance & Leicester has a relatively small branch
network as a far higher proportion of our customers, in comparison
with many other financial service providers, bank with us through
the so-called "direct" channels of the internet, telephone
and ATMs.
4. Alliance & Leicester has an historic
link with the Post Office, having first formed a link with Post
Office branches in 1983 and subsequently through our purchase
of Girobank in 1990. Post Offices play an important role in financial
inclusion. Some implications of these points are covered in our
submission.
SUMMMARY
5. In our submission we seek to address
a range of financial inclusion issues including, universal banking
and Basic Bank Accounts, access to cash withdrawals, access to
affordable credit, financial education, savings, data sharing
and the promotion of financial inclusion.
— The Basic Bank Account is a step
forward in financial inclusion. By using a Basic Bank Account,
people can benefit from money security, from reduced transaction
costs through cheaper bill payment methods such as direct debits,
and also gain confidence in using financial services.
— Alliance & Leicester believes
that one of the best systems for provision of credit to those
on very low incomes is through Credit Unions and the Government's
Social Fund.
— There is a need for a co-ordinated
and sustainable programme of financial education initiatives provided
by the Government and supported, where appropriate, by industry,
the FSA, and others. Financial literacy also needs to become a
mandatory part of the National Curriculum.
— Alliance & Leicester supports
moves to encourage people to save more. We believe that people
need to be educated about the importance of saving for unforeseen
expenditure before many will even consider planning for the long
term.
— Alliance & Leicester believes
that over-indebtedness and the sharing of credit data between
lenders needs to be considered as part of financial inclusion
and that all lenders should move to sharing "full" credit
data.
ACCESS TO
BANKING SERVICES
6. Alliance & Leicester believes that
the Universal Banking project including the provision of the Post
Office Card Account and Basic Bank Accounts is a step forward
in financial inclusion. Further Alliance & Leicester, along
with the other banks and building societies, is committed to increasing
the number of people with bank accounts thereby helping achieve
the Government's goal of halving the number of unbanked within
two years.
7. Twenty-five years ago only 38% of the
population had current accounts and a third of all adults had
no account of any type. Now 93%[19]
of all adults have an account of some sort and this figure will
rise as more people open basic bank accounts. All the major high
street providers, including Alliance & Leicester, now offer
Basic Bank Accounts that can be accessed at the Post Office.
8. Basic Bank Accounts come with different
names from varying financial service providers, but they all have
similar features. Benefits and other credits can be paid into
the accounts; cash can be withdrawn across the counter and at
ATMs; direct debits are available, but not cheques or overdrafts.
People with a poor credit history can usually open them. Sixteen
banks now offer basic accounts that can be accessed through Post
Office branches.
9. The Alliance & Leicester Basic Bank
Account is called the "Basic Cash Account'. Alliance &
Leicester try to make the opening of a new account as easy and
hassle free as possible.
10. As part of the Money Laundering regulations
it is necessary for banks to verify a customer's identity and
address. To make this process as straightforward as possible,
we accept a range of identity and address verification documents
from potential customers all of which are listed in our application
pack (list in appendix in pdf format). To further assist our customers
they can have their identification certified by a recognised professional,
therefore, removing the need for and the associated inconvenience
of, original identification documents being sent in the post.
No credit reference footprint is left on the customer's record
when an application is made to open our Basic Cash Account.
11. To promote our basic bank account we
clearly display our Basic Cash Account application packs in all
Alliance & Leicester branches alongside all our other product
packs.
12. Alliance & Leicester believes that
staff training is essential to ensure that staff continue to correctly
identify those customers who need a basic account and that accurate
information and support is given to these customers. As part of
our ongoing training of staff, we delivered specific training
on basic bank accounts to our branch staff in March 2005 and we
will be carrying out further training on basic bank accounts in
2006.
13. Alliance & Leicester currently has
over 170,000 Basic Cash Account customers. In 2005 we opened on
average over 1,500 new basic bank accounts every month and this
figure is continuing to rise.
14. The Banking Code Standards Board recently
produced a report on basic bank account opening compliance which
was based on mystery shopping exercises (in October 2005). The
report graded Alliance & Leicester green, the highest
award possible.
15. The report identified that Alliance
& Leicester has made considerable improvements in the availability
of Basic Bank Accounts with 89% of staff recognising the need
for a Basic Bank Account by the mystery shoppers. When opening
an account 87% of assessors were able to achieve their objective
to obtain relevant information or open a bank account without
difficulty.
16. Overall the Banking Codes Standards
Board findings were very positive about Alliance & Leicester,
indeed 81% of the mystery shoppers said that they would be prepared
to recommend Alliance & Leicester to others compared with
the all bank average of 67%.
17. This result demonstrates the real and
measurable improvements made in developing and delivering training
to our staff in the sale and support of Basic Bank Accounts.
18. Alliance & Leicester will continue
to seek to improve our service and delivery of Basic Bank Accounts.[20]
19. Alliance & Leicester believes that
there are currently a wide variety of ways in which Basic Bank
Account and current account customers can withdraw cash. All bank
and building society customers with a Basic Bank Account can withdraw
money at Post Office counters for free and use Automated Teller
Machines (ATMs).
20. In addition several UK banks and building
societies have now followed Alliance & Leicester's lead by
making arrangements with the Post Office network to allow current
account customers to also transact at Post Office counters for
free. This provides customers with access to 14,500 locations
where they can withdraw cash for free.
21. The degree of customer access available
through the Post Office network varies from bank to bank. Alliance
& Leicester's customers, through agreements with the Post
Office, are able to make a variety of free transactions at Post
Office counters. We have worked with the Post Office as they have
developed and deployed the counter technology which is now present
in all UK Post Offices. As a result of this Alliance & Leicester
current account customers are able to withdraw cash and perform
other transactions. In addition Alliance & Leicester savings
account customers with a plastic card are also able to make deposits
and withdrawals for free at the Post Office.
22. Alliance & Leicester pays the Post
Office a fee for each transaction carried out by our customers
at Post Office counters. In the financial year 2004-05 we paid
the Post Office around £10 million in fees for transactions
such as withdrawals, deposits and balance enquiries by our personal
customers at Post Office counters. These fees are just part of
the well over £100 million that we paid in total to the Post
Office for services in 2004-05. The Post Office provides access
to cash in a wide variety of areas, including those of social
or economic deprivation which are well supported by the Post Office
network.[21]
ACCESS TO
AFFORDABLE CREDIT
23. Alliance & Leicester believes that
one of the best systems for provision of credit to those on very
low incomes is through Credit Unions and the Government's Social
Fund.
24. Those on very low incomes tend to require
loans for relatively small amounts of money and repayment methods
that consider specific personal circumstances including variable
repayment time-frames and cash repayments. The nature of these
requirements means it is neither feasible nor practical for mainstream
financial providers to offer this service.
25. "Banks acknowledge that they are
never likely to provide mainstream finance in small amounts to
this client group, and therefore support Credit Unions and Community
Development Finance Institutions (CDFIs) in a number of ways,
including direct financial support and support in kind, such as
loan of premises and staff"(BBA).
26. Alliance & Leicester has given a
number of small donations to local Credit Unions to assist them
in their delivery of affordable credit to those on very low incomes.
Further Alliance & Leicester continue to support the Money
Advice Trust, the Citizens Advice Bureau and others in the delivery
of their services.
FINANCIAL EDUCATION
AND ACCESS
TO FINANCIAL
ADVICE[22]
27. In the UK there is a minority of people
who do not access even the most basic financial products. This
may be due to a previous negative experience, a lack of financial
literacy or active self-exclusion by the consumer. Therefore there
is a need for on going financial education to improve financial
inclusion in the UK.
28. Financial education equips people with
the knowledge, advice and confidence to enable them to take greater
control of financial decisions that affect their lives.
29. We also believe that financial education
and advice is not just good for the customer it is also good for
the financial service provider. Financial education helps people
choose a financial product that best suits their needs and their
ability to repay.
30. There is a need for a co-ordinated and
sustainable programme of financial education initiatives provided
by the Government and supported, where appropriate, by industry,
the FSA, and others. Financial literacy also needs to become a
mandatory part of the National Curriculum.
31. Alliance & Leicester invests considerable
time and money into financial education, not just for our customers
but for society as a whole. For example during 2004 Alliance &
Leicester made charitable donations of £690,000 a core part
of which was focused on improving educational standards and general
financial literacy among young people. Alliance & Leicester
activity included supporting numerous financial literacy initiatives
in schools and developing a website on financial capability for
use by teachers, as part of the Citizenship elements of the National
Curriculum. The website contains information and assignments for
pupils on how to prepare and use a budget, the site can be found
at: www.mymoneymatters.info. The website has received accreditation
from both PFEG (Personal Finance Education Group) and NGFL (National
Grid for Learning) and we have received positive feedback from
teachers and pupils.
32. Alliance & Leicester also recognises
that the financial services market is viewed by some people as
"diverse and complex". It is for this reason that Alliance
& Leicester developed its brand values of being "simple
and straightforward" and "friendly and approachable"
to help improve the clarity of financial information and the understanding
of customers.
33. Alliance & Leicester places a high
priority on every customer understanding our products. We produce
comprehensive product information, including explanations of terminology,
guidance through the application process, product features and
interest rates. We also provide an internet banking demonstration
and loan repayment calculators. We have recently appraised our
website for accessibility and user-friendliness too.
34. Alliance & Leicester provides welcome
packs for all our new customers to help customers understand how
they can make the most of their new account. These packs include
"jargon busters" to help customers understand financial
services terminology.
35. We know that some people have additional
needs in order to take full advantage of financial information
and advice. For customers who are deaf, hard of hearing or have
speech impairments, we have a fully qualified sign language interpreter
that is available on request. Customers can also use a Typetalk
operator—a national telephone relay system allowing hard
of hearing or speech impaired customers with a textphone to communicate
with us via our standard telephone system.
36. For customers with visual impairments,
we make our documents easier to read by printing brochures, letters
and statements in larger print, or providing them in audio or
Braille format. We also can help customers fill in our forms more
easily, and offer our customers a Braille or large print template
to help with cheques, deposit slips and credit card payment slips.
We offer customers a signature template to help signing debit,
credit and cheque guarantee cards. We also aim to make it easier
to order goods and services over the telephone by supplying card
details in Braille.
37. Alliance & Leicester has a Customer
Disability Support Unit that is dedicated to providing our customers
with disabilities the support necessary for them to operate their
account like other customers.
38. We are a subscriber to a nation-wide
disabled access register, DirectEnquiries, which is accessible
via www.directenquiries.com . All of our branches are listed on
the register, together with the facilities available to our customers
with additional needs. Our new and refurbished branches are designed,
wherever possible, to make them more convenient and accessible
for our customers. Features include automatic doors, level access,
low-level counters and more accessible cash machines. All our
branches are now fitted with fixed or portable hearing loops.
Alliance & Leicester currently spends over £500,000 each
year in providing services for our customers who have additional
needs.
39. As verification of payments moves from
signature to Chip and PIN (Personal Identification Number) Alliance
& Leicester has issued extensive communications to our customers
containing clear and concise information on using Chip and PIN
and educates consumers as to how to get the most from using Chip
and PIN. As a result Alliance & Leicester has one of the lowest
levels of PIN by-pass (ie reverting to signature) of any bank
in the UK.
40. Alliance & Leicester customers with
a disability including blind, partially sighted, visually impaired
or people with dexterity, memory/recall difficulties are entitled
to receive a chip and signature Debit or Electron card on request.
Chip and signature cards can be used in Point of Sale terminals
in shops. A marker on the cards chip will indicate that the customer
is authorised to use a signature.
41. For the minority of customers who get
into difficulties repaying their debt Alliance & Leicester
supports the work of the Money Advice Trust and Citizens Advice
Bureau and we direct customers who are experiencing difficulties
towards Payplan and the Consumer Credit Counselling Service (CCCS),
two organisations that specialise in managing debt repayment difficulties.
Alliance & Leicester has supported the latter two organisations
with donations of over £480,000 over the past two years and
has also committed further financial support to the Citizens Advice
Bureau and Money Advice Trust for their "Towards a National
Support Service for Money Advisors" project.
INCENTIVES AND
BARRIERS TO
SAVING FOR
PEOPLE ON
BELOW AVERAGE
INCOMES
42. Alliance & Leicester supports moves
to encourage people to save more, and recognises the current low
levels of saving by people in the UK as a concern for lifecycle
and retirement needs.
43. We believe that people need to be educated
about the importance of saving for unforeseen expenditure before
many will even consider planning for the long term.
44. Indeed, research carried out for Alliance
& Leicester in July 2005 showed that only one in six (17%)
UK adults see savings as a necessity for their financial future.
In addition, a quarter (25%) of those surveyed said that they
would struggle to pay out for an emergency costing a "mere"
£100.[23]
People often feel that there is something better to do with even
a small amount of spare money, rather than putting it aside into
a savings account. Among those people questioned that are saving,
almost half said that their main reason for saving was for security.
45. To promote the need for saving, Alliance
& Leicester uses advertising and generates news items including
publishing the findings of our research into consumer attitudes
towards saving.
46. Alliance & Leicester provides a
range of savings plans including ISAs which offer competitive
rates and a choice of ways to save. All of our savings accounts
are available to those on below average incomes and customers
can open a savings account with us with a minimum balance of just
£1. Our savings accounts are available to anyone aged 16
and over and accounts can be held on behalf of a child (up to
the age of 16) by an adult aged 18 or over.
47. Money can be deposited to a customer's
savings account through our branches, Post Offices, on the internet
and now through some of our ATMs . Our saving account products
provide customers with a LINK card that also gives customers easy
access to their money through ATMs.
48. Our savings accounts offer very competitive
rates, for example our branch based savings accounts pay between
2.60% and 3.15% AER. While our online saver accounts pay interest
of between 4.05% and 10.0% AER (correct at time of writing).
49. Having some money put aside in a savings
account gives people security and peace of mind and there is an
onus on government, financial service providers and interested
parties to promote the benefits of saving.
THE ROLE
OF GOVERNMENT,
THE FINANCIAL
SERVICES AUTHORITY
AND OTHER
BODIES AND
ORGANISATIONS IN
PROMOTING FINANCIAL
INCLUSION
50. The Government has rightly made financial
inclusion a key issue and all stakeholders including financial
service providers have a role to play in promoting inclusion.
51. One area that we believe needs to be
considered as part of financial inclusion is over-indebtedness
and the sharing of credit data between lenders. It is clear from
the tragic cases which occasionally appear in the media and also
from the work done by organisations such as the Citizens Advice
Bureau, that over-indebtedness is a real and important issue for
a minority of people.
52. Alliance & Leicester is firmly of
the opinion that the lending industry can help this situation
by moving quickly to ensure that all lenders share credit histories
on all credit accounts. This data is provided by lenders, under
firm guidelines, and disseminated by the credit reference agencies.
53. There are essentially two sorts of credit
data about a person—"negative" data—which
in essence is that a customer is in default on some form of credit
arrangement, and "full" data—which notes that
the customer has a particular line of credit and whether or not
it is in default. Currently, the vast majority of lenders share
"negative" data, but the sharing of "full"
data is not as well established. Indeed, some of the traditional
clearing banks with sizeable shares of the market are lagging
behind in this process.
54. Credit data is shared on the basis of
"reciprocity". This means that if Lender A shares "full"
data, but Lender B does not, then any transfer of data between
the two will contain only the lowest common denominator—ie
just "negative" data. In effect, Lender B's decision
not to share "full" data affects the ability of all
of its competitors to lend responsibly.
55. Alliance & Leicester—in common
with some other lenders—shares "full" data. The
sharing of data is made under the reciprocity guidelines set out
by the Standing Committee on Reciprocity (SCOR), which we believe
continues to work well.
56. We have three principal concerns about
the current arrangements. Firstly, some lenders have chosen to
share only limited information on their customer's accounts, secondly,
some lenders believe they are unable to share data on all their
accounts because they believe historic data protection "Fair
Processing Notices" have not sought consent wide enough to
give them the right to do so, and thirdly, information on debt
owed to organisations such as the Student Loans Company and Local
Authorities is not shared.
57. We believe each of these problems should
be addressed.
58. We believe that the whole financial
services industry should move to "full" data sharing.
This can be achieved by forcing those financial service providers
that choose not to share their data to move to "full"
data sharing. Secondly there needs to be a change in data protection
laws to allow the sharing of the portion of data currently not
shared under historic "Fair Processing Notices" and
finally the Government needs to share information on debts owed
to organisations such as the Student Loans Company and Local Authorities.
THE BENEFITS
OF FINANCIAL
INCLUSION AND
THE EXTENT
TO WHICH
FINANCIAL INCLUSION
MEASURES CAN
CONTRIBUTE TO
COMBATING POVERTY
AND REDUCING
BARRIERS TO
EMPLOYMENT
59. In the last 20 years more and more people
have been introduced to financial services and have come to see
them as part of normal life.
60. It is clear however that there is not
a "one size fits all" solution to financial inclusion.
Increasingly it requires the efforts of many disciplines working
together to solve problems, such as financial inclusion. In conclusion
banks can only be one of the parts working in partnership with
the consumer groups, with the regulators and with the leadership
of Government.
January 2006
APPENDIX 1
61. In May 2001 the Government reached agreement
on the provision of Universal Banking Services with all of the
main banks in the UK.
62. Universal Banking Services provide the
mechanism that ensures that benefit recipients and pensioners
can continue to have their money paid over the counter in cash
at their local post office as the Government moved to automated
credit transfer in April 2003.
63. The scheme aims to give the estimated
three million people currently without any banking facilities
access to a new post-office based card account or one of the banks
basic bank accounts through the 14,500 strong Post Office network.
64. Alliance & Leicester signed up to
the Universal Banking Services project and to this end Alliance
& Leicester like many other banks and building societies,
contributed to the costs of running the Post Office Card Account
(POCA). The banking industry pledged in total £182 million,
over five years, to fund the setting up of the Post Office's Universal
Banking. The then Secretary of State for Trade and Industry, Stephen
Byers, commented that "This is a major step forward both
in ensuring the future of the Post Office network and in tackling
financial exclusion."[24]
65. Basic Bank Accounts give people the
benefit of money security, reduced transaction costs through cheaper
bill payment methods such as direct debits and enable people to
gain confidence in using financial services.
BASIC BANK
ACCOUNTS
66. Our Basic Bank Account—the Basic
Cash Account—is available for people without banking facilities
who need an account for benefit payments. It is also suitable
for customers who do not want (or are unsuitable for) credit facilities
for example overdrafts or access to cheque book facilities.
67. Customers who request a "basic"
account or who are deemed suitable for a basic bank account will
receive a prospect pack from our branch staff which contains clear
and simple information on key features of the account, how it
is opened and what identification and address verification is
required.
68. Opening an Alliance & Leicester
Basic Cash Account is a simple and straightforward process. It
involves completing a simple application form which is then sent
together with certified copies of identity and address to our
central processing centre for account opening.
69. Features of Alliance & Leicester
Basic Cash Account:
— Customers can pay money into the
account by automated credit transfer, cash or cheques.
— Customers can pay bills by Direct
Debit. Direct Debits can be paid on a frequency as determined
by the debtor eg weekly, monthly, bimonthly, yearly.
— Free banking offered when the account
is in credit.
— Overdrafts and chequebooks are not
available.
— There is no minimum amount required
to open an account.
Access
— Access to any cash machine in the
UK[25]—withdraw
cash and pay in cheques and cash (notes only) at Alliance &
Leicester branch cash machines.
— Pay cheques and cash in and withdraw
cash at any Post Office branch in the UK.
— 24 hour internet banking, 365 days
a year.
Eligibility
— Basic Cash Account holders must be
aged 16 or over and be UK residents.
— Applications are subject to status.
— We do not offer any products to undischarged
bankrupts.
— No credit reference footprint is
left on the customer's record when an application is made to open
our Basic Cash Account.
APPENDIX 2
70. Unlike many other high street banks,
Alliance & Leicester operates many more ATMs than we have
branches—currently we have more than 2,500 ATMs and just
over 250 branches. As a result of our history and our product
range, a far higher proportion of our customers bank with us through
the so-called "direct" channels of the internet, telephone
and ATMs than the UK average. The provision of a comparatively
large ATM network provides our customers with convenient and free
access to their accounts, and also provides a service for the
customers of other banks. All Alliance & Leicester ATMs are
free to use for all Alliance & Leicester customers.
71. Alliance & Leicester is committed
to providing ATMs free of charge to all users wherever possible.
However, our view on the principle of charging for ATMs is in
line with the Government's and the Treasury Select Committee's
in that charging ATMs are a legitimate business model.
72. All Alliance & Leicester ATMs are
free to use by Alliance & Leicester customers. Alliance &
Leicester only charges a fee to non-Alliance & Leicester customers
at ATMs where it would not be economic for us to offer these services
to these customers based on income from interchange fees alone.
73. When considering potential locations
to site ATMs, our preference is to operate a "free machine".
Our decision does, however, reflect the cost of installing and
maintaining the machine, taking into account the requirements
of the host retailer, the rental fee to the host site owner and
the expected transaction volumes, which depend on the specific
location involved and matters such as the proximity to other ATMs.
74. When a potential location is such that
the costs of siting a "free machine" are not economic,
we will consider the option to site a "surcharging machine".
If we did not consider this option, we would simply not site any
machines in areas where the economics are marginal. We believe
siting machines in such locations increases customer choice, particularly
for our own customer base, but also for any other users who may
wish to have the convenience of a machine in their area.
75. In addition all users are able to check
their balance on their accounts for free at all our ATMs.
APPENDIX 3
76. Further details of Alliance & Leicester
work on financial education:
77. Working in partnership with Soar Valley
School in Leicester, as part of the DfES Specialist Schools Programme,
£50,000 was provided to establish Soar Valley as a specialist
maths and computing school. Alliance & Leicester also works
with the school on its financial capability education. A team
of graduate trainees from Alliance & Leicester delivered two
one-day workshops to 120 students. The workshops were designed
to bring business studies to life by offering the students the
opportunity to take part in a number of business-focused challenges
and help prepare them for the world of work.
78. Marvellous Maths—an Alliance &
Leicester funded project in association with Conkers (part of
the National Forest Visitors Centre). The project involves interactive
indoor and outdoor experiences for children based on numeracy,
with both ranger- and teacher-led activities.
79. Over the past five years, donations
totalling £240,000 have been made to the Leicestershire Learning
Zone—a scheme that provides one-to-one teacher coaching,
parent link workers and literacy consultants.
80. Alliance & Leicester also sponsors
the Hamilton Trust, an educational charity working in partnership
with schools to raise educational attainments.
81. Alliance & Leicester, through its
corporate community investment programme, has invested over £365,000
in local community events and programmes and in addition contributed
£180,000 of employee time to support the community investment
programme in 2005. Alliance & Leicester continues to support
staff who volunteer to help primary school children improve their
reading through the Right to Read Scheme, over 150 of our staff
are involved in the scheme.
19 British Bankers Association (BBA) 2004. Back
20
See Appendix 1 for further details on Alliance & Leicester
Basic Cash Account. Back
21
See Appendix 2 for further details on access to cash withdrawals. Back
22
See Appendix 3 for further details on Alliance & Leicester's
work on financial education. Back
23
Research conducted by YouGov, 22-25 July 2005 with a sample size
of 2,299 UK adults over 18. Back
24
(ref: http://www.gnn.gov.uk/environment/detail.asp?ReleaseID=26291&NewsAreaID=2&NavigatedFromDepartment=True) Back
25
Cash withdrawals from all Alliance & Leicester cash machines
and all LINK non-surcharging machines are free. Back
| 
