The end of Cheques? - Treasury Contents

Examination of Witnesses (Question Numbers 100-119)


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 se.

  Ms Quinn: But there is an investment that goes with that.

  Chair: Exactly, but it has to be a good thing.

  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 payment process.

  Mr Smee: Yes, that is one of the options.

  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 volumes.

  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 do—and what we have seen since the announcement is a much greater willingness to from groups to get in touch with us—when 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 forward—you have to go out chasing them—and 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 financial service?

  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 at?

  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 different circumstances.

  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 lessons—I would not say there was a comparison.

  Q113  Ms Keeble: In very restricted circumstances, I have to say, having done some work with Kenya myself.

  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 their views.

  Q115  Ms Keeble: Have you done that research?

  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 inertia—they 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 have—and 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.

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