The end of Cheques? - Treasury Contents

Examination of Witnesses (Question Numbers 20-36)


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 have taken?

  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 be workable.

  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 the UK.

  Q26  Mr Fallon: Sure. Would you not expect a decision like this to have been supported by the British Bankers' Association?

  Mr Holland: The BBA is another trade association. I would expect it would be supported by the BBA.

  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 you represent?

  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 OFT originally.

  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 saved.

  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 us.

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