Written evidence submitted by the Campaign
for Community Banking
EXECUTIVE SUMMARY
CCBS considers the decision of the banking industry
to force the demise of the cheque in just eight years from now
to be undemocratic and premature.
It will impose costs and obligations on others,
whilst reducing its own, not least in relation to a likely increase
in use of cash to provide some of the flexibility offered by the
cheque.
In the light of the above we would like to see
more consumer involvement in the interim appraisals of alternative
payment mechanisms and attention paid to the implications of increased
cash usage in the context of a diminishing availability of local
branches and what could fill that vacuum.
1. INTRODUCTION
1.1 The Campaign for Community Banking Services
(CCBS) is a coalition of 22 national charities and membership
organisations sharing concerns over the adverse impacts on individuals
and communities of bank branch closures. Its objectives include
finding alternative physical delivery methods for banking services.
1.2 There is no doubt that use of the cheque
is in permanent decline as evidenced by the industry data but
at c 1.4 billion cheque transactions a year it remains significant.
1.3 CCBS maintains that the natural rate
of decline in usage has been artificially accelerated by the decisions
of major retailers and service providers, such as the rail companies,
not to accept cheques. This has been an abuse of "complex
monopoly" power which individuals have been unable to challenge.
1.4 CCBS also contends that the deciding
body, the Payments Council, has acted as a monopoly in that its
board comprises an overwhelming majority of representatives of
banks whose economic interest is clearly in moving payments from
paper to electronic impulses.
2. IMPACT
2.1 Given where we are, the principal impact
of withdrawal of the cheque will be on small businesses, those
that are employed by them and their customers.
2.2 Organisations representing these constituencies
will have provided you with evidence and examples of how they
will be disadvantaged but the loss of flexibility that this payment
method possesses is to be regretted and will be experienced by
traders and customers alike especially re services provided in
the home from music lessons to tree felling, one-offs perhaps
more than regular.
2.3 In our view the biggest impact will
be in the increased use of cash which has all the flexibility
of the cheque, plus for some the advantages of no audit trail,
but provides no time buffer, lacks inherent security protection
and increases vulnerability to theft for both payer and recipient.
In the case of retail small businesses the holding of more cash
leads to higher insurance premiums.
2.4 The loss of the valuable protections
the cheque offers over cash is serious:
— for the elderly and housebound;
and is likely to lead to an increase in crime
and for convenient local cash dispensing and collecting facilities
at a time when, in the absence of progress with alternatives to
branded branches, many more communities will have lost their bank
branches and have only fee paying ATMs.
3. ALTERNATIVES
3.1 The industry's aim is reduce transaction
costs, apparently by dehumanising payment methods and make them
electronic as far as possible.
3.2 There are big advantages in this for
the banks, not least in cost, but also for consumers: wave and
pay at car park meters for example.
3.3 However there has to be a balance and
it is CCBS' fear that by setting a date as early as 2018 for
the effective demise of the cheque—the end of the cheque
clearing system will render the process of collection too expensive
for it to survive—gives too little time for satisfactory
alternative methods to evolve and, importantly, become familiar
to the population, especially the most vulnerable.
3.4 It is for others to analyse the alternative
instruments which have already begun to appear such as wave and
pay cards, pre-pay cards, mobile phone technology but all would
appear to have disadvantages and provide difficult challenges
for the most affected groups.
3.5 What is important now is for the development
and acceptability of the industry proposed alternatives to be
vetted and monitored in the intervening years by a body with much
more relevant consumer involvement than in the decision making
so far. CCBS would like to see this undertaken in the context
of the current trend of diminishing branch network reach and consideration
of how the resultant physical delivery and customer inquiry voids
might be filled; by shared branching, post offices, etc.
February 2010
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