Examination of Witnesses (Question Numbers
16 MARCH 2010
Q20 Mr Breed: Jane, in your submission
you express disappointment that the Payments Council have set
a target date for the abolition of cheques "without any real
development of acceptable alternatives that meet the needs of
people in later life". What approach do you think they should
Ms Vass: We said right from the
outset when we first started talking about this in, I think, 2007-08
that we accepted the need to manage the decline in cheques but
we were very clear that we would like to get some idea of what
the alternatives were before a target date was set, and that is
why, two years later, we are disappointed that there has not been
much formal development.
Q21 Mr Breed: What discussions have
you had with them in that intervening period?
Ms Vass: We have been members
of their user forum and they have brought discussions to us but
so far we have not yet seen specific, clear, fleshed-out alternatives
that we can test with older people to see if they are going to
Q22 Mr Breed: But you also say in
your submission that even if alternatives were on the horizon
you believe that the banking industry has not shown the will or
indeed the ability to deliver them in the timescale proposed,
so why do you believe that the banking sector is dragging its
feet? Why do you think they are doing that in developing viable
alternatives to cheques?
Ms Vass: One of the concerns we
have is that it is a competitive industry and the Payments Council
is a trade body that cannot compel its members to take particular
steps. In a competitive industry we are concerned that the pressure
will be to produce the minimum possible functionality at the lowest
cost to the bank. That is our concern, that those might not necessarily
meet the needs of older people.
Q23 Mr Breed: If they act together
to do what you have just said that is tantamount to a cartel,
is it not?
Ms Vass: What we would like to
see is at least some innovation coming in. For example, one of
the ideas we have been thinking about is whether it is possible
to have a second card on a current account which is still a single
account in one person's name but the second card would have its
own PIN and possibly a limit on it. That would at least enable
people to give the card to a carer to go shopping. I think possibly
this is an area where a strong public interest push is needed
to make sure that those alternatives are available broadly because
if you need these services you are in the worst possible position
to go out and find them. It is often a situation of crisis or
you may be socially isolated. That is why we are concerned that
a lot of the problems are being driven underground. We think some
sort of public interest action is needed.
Q24 Mr Fallon: Mr Holland, you said
that the Payments Council is probably the wrong body to make this
kind of decision because of its commercial vested interests.
Mr Holland: Yes.
Q25 Mr Fallon: Would you explain?
Mr Holland: If you look at the
make-up of the Payments Council, according to its website it has
28 members at the moment. I am not familiar with all the services
offered by every member but, on the other hand, from my basic
knowledge only about eight of those 28 offer current accounts
with chequebooks in the UK at the moment. It also includes the
likes of PayPal, Cash-Zone, American Express and Bank Machine,
all of which have a commercial interest in the demise of the cheque.
It just strikes me as odd that these organisations should have
a say in what happens to the domestic cheque clearing system in
Q26 Mr Fallon: Sure. Would you not
expect a decision like this to have been supported by the British
Mr Holland: The BBA is another
trade association. I would expect it would be supported by the
Q27 Mr Fallon: And it has not been.
Mr Holland: I do not know.
Q28 Mr Fallon: We have had no evidence
that it has been.
Mr Holland: I cannot comment on
behalf of the BBA because I am not aware of the position.
Q29 Chair: What criteria would any
replacement for cheques have to satisfy before you were confident
that they met the needs of the organisations and the people that
Ms Perchard: We have highlighted
four things in our submission to you. The first would be quite
difficult. It would require a very varied approach on behalf of
the industry, but the new products and services which are intended
to replace cheques should be suitable for all of those people
for whom the cheque was the best and preferred payment method
and it should not penalise vulnerable groups on low income. That
is the first thing. There needs to be good publicity about exceptions
and the extra help that is available for people who need extra
help in making payments, and good publicity about and support
for making the change. We have highlighted that the roll-out of
digital TV, the Digital UK experience, would be a good learning
point, and perhaps some of the investment in helping people open
bank accounts in the early days of the DWP programme to withdraw
benefit payment books would all be areas the Payments Council
could learn from. Finally, additional costs should not be imposed
on consumers that move to alternatives. It has been noted in some
of the evidence that there will be quite big savings to businesses
and banks and public services too, so we would be very concerned
about additional costs being imposed on consumers who need to
make a change from using cheques. Those are our four things.
Ms Weatherhead: I agree with Teresa
that those sorts of criteria seem to be perfectly sensible. Our
submission sets out similar things in the sense that one of the
criteria would be that it is initiated by the consumer, that the
consumer needs to have control. Whether it be a small and medium
enterprise or whether it be someone in a home or whatever, there
needs to be control. The design standards are really important
and we have seen in other places that there are consistent design
standards for processes like ATM machines and others, which has
not happened here and I think we need to have a look at those
to make sure they are accessible for everyone. There needs to
be real-time processing. The delays and the lack of clarity about
when things are processed leads to problems with people managing
their budgets, so we would like to see real-time processing, and
it has got to be without hidden costs.
Q30 Chair: Teresa, is this another
example of a non-level playing field between the commercial institutions
and the consumers?
Ms Perchard: Is it another example?
Q31 Chair: Yes.
Ms Perchard: The group of consumers
for whom the cheque is really their only realistic payment is
small in number and very dispersed in our population. They are
not all older people so they are not easy to herd together and
see as an interest group, and so they do not have a lot of power,
which is why it is very important that this programme does look
properly at not just who they are but what they need to make payments
for and to whom, the type of payments. The 2018 date I do not
see as a definite date. There are the 2014 and the 2016 dates
that the Payments Council has set to measure progress in identifying
alternatives, and, as the Payments Council say in their evidence,
by 2014 alternatives will need to be in place for all of the major
areas where cheques continue to be used and there will need to
be widespread awareness of them. That is a lot to achieve by 2014,
so the ball is in their court now to show that they have understood
properly consumers' needs and businesses' needs and have ideas
about how those can be addressed with a payment method that is
other than a cheque.
Ms Richards: I do not want charities
to be forgotten in all this because charities do have special
needs, particularly if you are talking about local charities,
community groups. A lot of charities are run by volunteers, thousands
across the country. We really must take into account their special
needs. If there are alternatives being produced what does that
mean in terms of resources for those charities which have to set
up databases because a lot of them do not have them. There are
the costs of processing, all the rest of it, and we would not
want those not to be taken into account. We have offered to test
out new systems. We think any new proposed alternatives could
be tested out by the charities to see whether they are practical,
whether they work, whether they put donors off.
Q32 Mr Tyrie: I just want to give
Mr Holland the opportunity to elaborate on his request that the
Treasury Committee investigate the failure of the Payments Council
to implement the OFT's recommendation in their report that their
board structure be changed.
Mr Holland: It goes back a bit
further than that. The Payments Council came about following a
report by the Payment Systems Task Force which was run by the
Q33 Mr Tyrie: May I just ask a very
short and clear-cut question. What exactly would you like us to
do? I am sympathetic to the point you have made but what do you
want us to do?
Mr Holland: The OFT made a recommendation
on the constitution of the Payments Council board. The Payments
Council effectively rejected it and nobody asked any questions
as to why.
Q34 Mr Tyrie: We are asking now.
Mr Holland: Yes, that is what
I would like you to do.
Q35 Chair: Actually, I like my chequebook.
I have got it here. I do not really want my cheques taken away.
Are we not just giving in here? That is the worry. We are looking
for compromises. Why do we not damn well keep it?
Ms Perchard: The fact is that
many traders are saying to you now that they will not take your
cheque and that is why having a managed programme of actively
looking for alternatives and perhaps in that highlighting the
importance of the cheque is a good idea. Only by getting the spotlight
on it might we save your chequebook in the future.
Q36 Chair: I want the chequebook
Ms Perchard: We had a 91-year
old woman who came to the CAB for help to pay her insurance renewal
because the insurance company would not take a cheque. She had
got a bank card and, trying to do it over the phone, she could
not read the number on her bank card, so she came to us and we
did that for her. We rang them up and read out the number. That
blockage in her making a payment is encouraging a situation where
it is less secure perhaps and this exercise might mean that we
save the cheque rather than just see it wither on the vine.
Chair: Okay; let us give that a bash
then, eh. Do not give up without a fight. Thanks very much and
we will have our second session to see if they are listening to