Examination of Witnesses (Question Numbers
16 MARCH 2010
Q100 Chair: But if they are intervening
on it and it is getting stopped that has to be a good thing per
Ms Quinn: But there is an investment
that goes with that.
Chair: Exactly, but it has to be a good
Q101 Ms Keeble: You probably heard
the previous witnesses talk about the DWP experience which still
left 40,000 clients reliant on paper payments. Do you not think
that this shows the difficulty of getting change and the fact
that you have been trying to abolish cheques but people do actually,
as I do, want to keep on using them?
Mr Smee: None of us is under any
illusion that this is a difficult and convoluted project.
Q102 Ms Keeble: Have you looked at
the DWP's experience and learned from it?
Mr Smee: Yes, we have, and we
have very good relations with the DWP. One of the key issues that
we are going to have to look at is whether there is a need for
a residual form of payment made through paper even after cheque
clearing has gone but it will be paper like a giro credit which
does not have to be cleared and go round the country in a van
as cheques do before they are cleared. The DWP are very interested
in this project, of course, because the cost of them issuing cheques
is considerably higher than other types of payments.
Q103 Ms Keeble: What you would actually
have is you would still have a cheque process but it would be
a simplified paper payment system, would it not?
Mr Smee: I would not call it a
cheque process; I would call it a payment process with paper involved.
Q104 Ms Keeble: A simplified paper
Mr Smee: Yes, that is one of the
Q105 Ms Keeble: Which to some people
would look like a cheque.
Mr Smee: Which people would treat
as a cheque but would not actually be done in the same way. I
think that would only be achievable if there were relatively low
Q106 Ms Keeble: The other thing I
wanted to ask about is that you have put in your list the groups
that you have consulted and in fact you did not consult the users,
you consulted the organisations. You talked to Scope, Toynbee
Hall, HM Prison Service and a care home owner. Do you think
that that was sufficient to deal with the complexity of these
issues because what I do not see in there is anything representing
younger disadvantaged people?
Mr Smee: One of the things that
we did do, we also did research and so we supplemented all these
contacts with research.
Q107 Ms Keeble: What research? Was
this the workshop with Leonard Cheshire Disability?
Mr Smee: We have done workshops
as well; this was some research we published from a reputable,
external research agency. What we are going to doand what
we have seen since the announcement is a much greater willingness
to from groups to get in touch with uswhen they do get
in touch we invite them into workshops where we can talk through
their very specific needs and come up or attempt to come up with
solutions to them.
Q108 Ms Keeble: The Government has
put a big focus on financial exclusion and those groups do not
necessarily come forwardyou have to go out chasing themand
there are major issues there, as we heard again from previous
witnesses, about the number of people who do not have bank accounts
and the difficulty of drawing them into the financial system.
How would you propose to do that, bearing in mind that you are
bearing down on one of the most immediately accessible forms of
Mr Smee: There is some evidence
that those who are financially excluded find cheques quite a difficult
mechanism. If they receive a cheque and they do not have a bank
account, for example
Q109 Ms Keeble: But you have to have
a bank account, for example, to use a mobile phone or something
to make a payment?
Mr Smee: Yes, but if you look
at the financially excluded I am not sure that they are the ones
who will be most affected by the withdrawal of cheques. When we
look at innovations and new ways of making payments we would certainly
take into account how we could actually improve the experience
of those in that position. I think innovation may well make it
a lot easier for consumers.
Q110 Ms Keeble: Do you not think
you would end up getting what the previous witnesses were saying,
that you would have a divide between a more high tech financial
service community, as it were, and then a cash economy, people
working with cash?
Mr Smee: If you look at international
comparisons I do not think that is necessarily the case.
Q111 Ms Keeble: Where are you looking
Mr Smee: I was thinking in particular
really of the M-pesa mobile phone in Kenya, where in effect the
transfer of money through that system
Q112 Ms Keeble: That is a completely
wrong comparison, is it not, because you cannot compare Kenya
with the UK; they are completely different countries with completely
Mr Smee: But the means of using
a mobile phone to make payment has been of great advantage to
the un-banked there and I think there were lessonsI would
not say there was a comparison.
Q113 Ms Keeble: In very restricted
circumstances, I have to say, having done some work with Kenya
Mr Smee: Right.
Mr Locke: Can I just add something
to what Paul said, I am very concerned that over the next year
or two the Payments Council devotes substantial resources to try
to develop research in the areas that you have been talking about
and particularly to understand the needs of consumers with particular
types of vulnerability. They are not an easy group to reach but
it is possible to reach them and it is very important we take
their views on board. What I would hope to see emerging from this
is indeed a landscape from which they have enormous benefits from
innovation because at the moment they do not necessarily benefit
from the cheque system at all.
Q114 Ms Keeble: But listening to
your discussion with Colin Breed, it was completely unclear as
to how many consumers you have reached. You talked about charities,
small businesses, big businesses, but I did not hear a great strategy
for engaging the financially vulnerable.
Mr Locke: Well designed research
either has to reach a representative sample or get into the in-depth
issues. Obviously you cannot reach millions of people but there
are ways in which you can learn to understand their concerns and
Q115 Ms Keeble: Have you done that
Mr Smee: We have done some of
it and we published it back in March last year but we are going
to have to do more. If we are going to develop our criteria in
the way that our memorandum to the Committee sets out and if we
are then going to apply progress against those criteria that is
going to be quite research intensive and I am very concerned we
do that properly.
Q116 Nick Ainger: Mr Locke, we have
had written evidence and oral evidence from Geoff Holland at BCCA
and he is saying that many small businesses find the most convenient
method of making and receiving payments is by cheque. But the
Payments Council say that the reason that many small businesses
are still using cheques is habit, tradition and inertiathey
are the key drivers of the continuing usage of cheques. You are
the Chairman of the Consumer User Forum, which includes small
businesses, have you made those representations?
Mr Locke: Actually the Consumer
User Forum does not include small businesses because there is
a separate one but I have attended meetings of the Small Business
User Forum. My personal view is that this area is under invested
and under innovated. I think there are major concerns that the
banks have been too slow in rolling out things that they have
done for their large customers to smaller customers and making
alternative methods of payment available to small businesses that
could benefit from them. One very good example is the dual authorisation
process where many organisations require dual authorisation in
order for a payment to be made. The big banks at the moment only
allow that electronically for large customers, and that sort of
thing has to be rolled out for smaller customers too.
Q117 Nick Ainger: But in the submission
that we received the Payments Council did not say that; it said
the reason that small businesses are continuing to use cheques
is habit, tradition and inertia.
Mr Locke: I think that some of
the habit, tradition and inertia may be on the part of the banks
and not necessarily the businesses.
Q118 Nick Ainger: That is not what
your submission said.
Mr Locke: I am independent; you
wanted my view.
Q119 Nick Ainger: You put it back
on the small businesses and said that the key drivers for them
to continue using cheques was habit, tradition and inertia.
Mr Locke: You asked for my views
and my view is that quite a lot of that habit, tradition and inertia
is on the side of the banks and I think there is a major issue
in ensuring that frontline staff in banks are aware of what innovations
are around already and aware of how customer needs are changing
and actually present those fairly and accurately to those who
need them. I agree with you; I think there is a problem for a
lot of small businesses. But this is just one concern among many
that they haveand probably a relatively small one because
payments are a small part of their activities. I think there is
a substantial scope for the banks to develop their innovation
in this sector and I am optimistic, and I think quite confident
that the way in which we have set the deadlines and the target
dates for the cheque closure will provide that kind of incentive
for the banks to improve their act.