Memorandum submitted by PayPoint
INTRODUCTION
PayPoint is a major UK retail network for the
cash payment of household bills. PayPoint operates a network of
multi-function terminals situated in local shops offering customers
a free and convenient way of making a wide range of payments.
PayPoint was established in 1996 and has expanded to full national
coverage across Great Britain and Northern Ireland, providing
a strong urban and rural presence.
PayPoint believes that its services are relevant
to your current examination of the issue of financial inclusion.
Specifically, we are keen to outline our position in relation
to the issues of access to banking services and financial education.
The PayPoint network is based in local shops
at the heart of the community, including newsagents, garages and
convenience stores, usually within walking distance and open every
day from early-to-late.
PayPoint serves the cash economy, collecting
payments on behalf of over 700 organisations including utilities,
fixed and mobile telecommunications, local authorities, housing
associations and transport operators. PayPoint has recently appointed
as the BBC's exclusive over-the-counter collector of TV licence
payments and is the exclusive retail channel for the London Congestion
Charge. The popularity of the service is demonstrated by the exceptional
volume growth that there has been to over 320 million payments
a year, with consumers drawn from a wide spectrum of society.
The PayPoint transaction process is simple,
with customers identifying themselves with a bill, card or key
issued by their service provider. This is entered into the PayPoint
terminal by the retailer who collects the payment in cash. Customers
are able to use PayPoint terminals to make payments entirely free
of charge, with all costs being borne by their service providers
and utilities. For more information about PayPoint, please visit
http://www.paypoint.co.uk/
ACCESS TO
BANKING SERVICES
PayPoint recognises the value of initiatives
to tackle financial exclusion by improving access to banking services
such as the Post Office Card Account and basic bank accounts.
Nevertheless, there is also a need to ensure that the financially
excluded can continue to make payments in cash efficiently and
conveniently. PayPoint offers millions of consumers such a service.
Research by TGI shows that there is a strong general preference
across much of the adult population for cash payment, with over
24 adults "prefer[ing] to pay for everything in cash".
The National Consumer Council (NCC), for instance,
has published a paper on basic banking in which it states that
"cash based money management works for people on low incomes"
suggesting that low-income households benefit from managing their
money in cash because it gives them certainty and control over
their finances. The NCC also asserts that account based money
management does not, at present, offer the same level of control,
and as such that "monthly direct debits are not compatible
with budgeting on a low income". In particular direct debits
do not offer the flexibility which many low income households
need, especially as their income is relatively unpredictable,
creating a risk of becoming subject to financial pressure. Customers
drawn into overdraft, by being unable to control direct debits,
will suffer penalties far worse than the higher tariffs that sometimes
apply to cash based services.
PayPoint provides low income households with
access to a service which enables them to pay their household
bills in cash with ease or without stigma. By offering customers
the opportunity to pay their bills regularly, in cash, PayPoint
is catering both for a significant minority of customers who are
unbanked and indeed for millions of others who find cash puts
them in control. Direct debit payment of utility bills, for example,
is often unsuitable for households which need greater flexibility
and control. PayPoint meets these needs by enabling customers
to make smaller weekly cash payments towards their bills, an arrangement
more conducive to the effective management of their income.
The long and flexible opening hours of PayPoint
outlets allow poorer households to make urgent payments whenever
they need to. Many pre-payment meter customers of electricity
suppliers, for instance, depend on PayPoint for recharging their
smart keys or buying tokens. These customers value the opportunity
to make their regular bill payments in the same outlets where
they regularly shop and they also find the extended opening hours
of PayPoint outlets invaluable to keep them on supply, if they
run out in the evenings or at the weekends.
PayPoint outlets, being based in convenience
stores, are often open late at night and open over weekends and
public holidays when most other shops and Post Offices are closed
enabling customers to make urgent utility top-ups. Already, there
are over 15,000 PayPoint outlets and with this number still growing
there are, or very soon will be, more PayPoints than Post Offices.
The coverage and opening hours of the PayPoint network give customers
the most flexible choice of when and where to pay their bills.
As an illustration of this unrivalled convenience, PayPoint even
handled over 200,000 payments on Christmas Day 2005.
The reach of the PayPoint network is now such
that 98.2% of Acorn classification `F' consumers (hard-pressed;
representing the least well off 5 million households) live within
1 mile of PayPoint outlet in urban areas and 5 miles in rural
areas. Furthermore, PayPoint retailers are as vital to their local
communities as Post Offices and they manage to run successful
businesses even though they do not receive the same salaries or
subsidies of the sub-postmaster network.
PayPoint delivers benefits to bill issuers,
retailers and customers alike. For bill issuers PayPoint enables
economies to be made in the process of bill collection; for retailers
PayPoint terminals generate commission and help in raising the
footfall; and for customers, regardless of social or economic
status, there is the benefit to be gained from a free, high quality
and convenient service.
The importance and popularity of PayPoint to
the cash economy is emphasised by the fact that it now has over
6 million regular customers. The range of payments is extensive
from bills, through council payments to Congestion Charges and
TV Licenses. Independent MORI surveys illustrate that PayPoint
customers benefit from a quality service, with 97% of those surveyed
expressing their satisfaction (with 79% very satisfied). PayPoint
offers the financially excluded a simple product which is relevant
to their needs and preferences, fitting with the weekly budgeting
psyche of low-income households and enabling effective money management.
FINANCIAL EDUCATION
AND ACCESS
TO FINANCIAL
ADVICE
PayPoint has the capacity to offer the consumer
much more than bill payment, extending its services beyond payments
into more general information and service delivery. While PayPoint
retailers may not be qualified to play an advisory role in providing
financial education, they can be involved in delivering of financial
information.
In particular, PayPoint's experience of market
leading and innovative technology means that the network has the
potential capability to deliver a wide range of public services.
The PayPoint network, for instance with its strong national and
local network coverage, could be an ideal platform for the two
way information flow between public sector bodies and the general
public. Using broadband links, television screens and self service
kiosks can be installed to facilitate this interaction backed
up by digital printing capability for the distribution of information
and official forms. These may the broad range of government forms
including benefits applications, driving licence forms, road tax
documentation and passport application forms. The development
of PayPoint technology in this way could be a valuable tool for
the provision of financial information in an accessible and consumer-friendly
environment. The potential capability of the PayPoint network
was highlighted by a recent comment in the Financial Times
which stated "PayPoint has built a terrific infrastructure
across the country. Its markets are growing—mail order payments,
congestion charges and the television licence fee all pass through
the same terminal".
The future development of PayPoint's presence
in small shops is also potentially important in enhancing the
community role played by local retailers. At present, PayPoint
already provides convenience retailers with an expanding range
of electronic services which drive customer footfall, increase
sales and boost the local importance of small shops based in the
community.
The further potential development of PayPoint
technology to encompass wider public service delivery role will
further boost the small shops network. These are the very shops
that provide a vital community lifeline yet, unlike Post Offices
have to stand on their commercial merit without any subsidies.
Convenience stores already act as hubs for their local communities,
a role enhanced by PayPoint which boosts shop visits.
In contrast to the current decline in the scope
of the Post Office operations and its branch closures, PayPoint
offers a growing and viable alternative for offering local communities
the services they need at their convenience. Growing recognition
of this is illustrated by the BBC's decision, in March 2006, to
award PayPoint a six year contract as sole provider for the collection
of over-the-counter TV licence payments following a competitive
tender process. Responsibility for handling TV licence payments
will formally transfer from the Post Office to PayPoint on 31
July 2006.
In a recent statement, Pipa Doubtfire, Head
of Revenue Management at the BBC explained the BBC's decision
to switch management of the issue of TV licences to PayPoint—she
commented: "The ease of payment for customers was one of
the main considerations for awarding the contract to PayPoint.
It is an unfortunate fact that the Post Office has a declining
network; there are already more PayPoint outlets (over 15,000)
than Post Office branches across the United Kingdom (14,585),
with another 2000 PayPoint outlets expected to become available
by 2007. Furthermore, PayPoint outlets are open for an average
of 100 hours per week and 98% are open on Sundays. 79% of PayPoint
outlets are open from 9am to 8pm".
PayPoint projects are delivered successfully
on time to budget. In fact, the evidence is that our technology
and supporting operation delivers successful solutions at a small
fraction of the cost associated with some public sector programs
run by major outsourcing organisations or the Post Office. Furthermore,
not only is PayPoint able to offer a cost-effective and efficient
service, it is also developing the capability, through its convenience
store network, to develop the local shop as a viable alternative
to the Post Office in its role at the centre of the community,
in both rural and urban areas.
June 2006
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