Written evidence submitted by Age Concern
and Help the Aged
INTRODUCTION
1. Age Concern and Help the Aged welcome
the decision of the Committee to set up an inquiry into the end
of cheques. Our view is that cheques should not be removed before
acceptable alternatives are available. It is clear, from the correspondence
that we have received, that the Payments Council's announcement
of a target date for the end of cheques has caused a great deal
of concern among older people, those who support them and charities
and other groups working with them.
2. Age Concern and Help the Aged are been
members of the Payments Council consumer user forum and responded
to the consultation on the National Payments Plan in February
2008. The consultation followed the decision by several major
retailers, and most supermarkets, to stop accepting cheques. With
this in mind, we said that we accepted the need for a plan to
manage the decline in cheques, but we did not support the setting
of a target date. We said that new payments methods must meet
the criteria of convenience, trust and low cost, and we said that
there should be alternatives that do not penalise those with particular
needs.
3. Two years on, we are extremely disappointed
and concerned that the Payments Council has set a target date
without any real development of acceptable alternatives that meet
the needs of people in later life. Even if alternatives were on
the horizon, we believe that the banking industry has not shown
the will or the ability to deliver them within the timescale proposed.
The "faster payments" system was the first new payments
system launched in 20 years. The infrastructure was launched in
May 2008—after a delay announced in July 2007— but
by January 2010 some banks had still not fully implemented it.
4. This submission covers:
— the needs and attitudes of people in
later life;
— alternatives to cheques;
— delivery and implementation issues; and
— the impact on charities.
5. Unless otherwise stated, the quotations
in this submission come from research in 2007 among middle-income
pensioners (Making the money last, Age Concern 2007); a
small web-based 2007 survey on attitudes to cheques; Financial
exclusion among older people, (Help the Aged 2007); and
the many letters, emails and phonecalls we have received on this
subject.
THE NEEDS
AND ATTITUDES
OF PEOPLE
IN LATER
LIFE
6. Although there are many older people
who are financially excluded, or who continue to operate largely
in cash, 89% of households headed by someone aged 65-74 have a
current account, falling to 85% at 85+1.[19]
Since most current accounts have in the past offered cheque books
as standard, most of these older account holders might be expected
to have a cheque book. Even those account holders who still operate
largely in cash may have an occasional need to use cheques:
"Even those with a bank account often don't
know how to use them. Southwark Pensioners Centre is often asked
by people for help with writing cheques."
7. According to the Cheque market research
published by the Cheque and Credit Clearing Company in 2009, people
aged 65 and over were the most frequent users of cheques. Less
than half of consumers (of all ages) thought there was a convenient
alternative for the reasons why they used cheques; 57% that it
would be a problem if they were not able to write cheques, and
21% thought that it would be a major problem. Although the percentages
are declining (25% thought it would be a major problem in 2007,
for example), the data is not broken down by age and we would
expect the problem to be greatest for older people who have more
limited access to alternatives.
8. Following the announcement of the 2018
target date, we have have heard from many older people who are
concerned about the potential loss of cheques.
C is very concerned about the Payment Council's
decision to abolish cheques as a method of payment. She lives
in a rural area and all the local businesses take cheques—some
won't take cards. If she has work done at home eg a plumber she
pays by cheque so she doesn't have to keep lots of cash at home.
She feels cheques allow you to keep a clear record of what you
are doing with money and they enable you to send money to grand-children
through the post, for example, without having to risk sending
cash.
9. The reasons why people are fearful of
the loss of cheques are:
— Distrust of alternative methods of payment—"Not
happy to use plastic until I can be sure it is secure. A local
garage has just been caught copying card information". (Male,
55-74.)
— Unsuitability of alternative methods
of payment—for example, only 36% of people aged 65 and over
have ever used the internet.[20]
Although telephone banking is an option, some people have difficulty
remembering passwords or have limited dexterity with keypads:—"A
man trying to use telephone banking had problems using his bank's
automated telephone system, and when his account was locked, he
was unable to reinstate it because his signature had changed.".
— Cheques allow you to keep control of
your expenditure if you cannot use the internet or telephone banking:
many older people refuse to use direct debits because they do
not want to risk overdrawing. "I don't like direct debits
and things because if you haven't got the money they charge you
and you're in a bigger hole than when you started".
— Cheques provide an accessible audit trail,
particularly important for people with memory loss or people acting
under a power of attorney. Some local authorities offering direct
payments for care allow only cheques to be used to pay for services
because they give a clear audit trail.
— Cheques offer a simple way of reimbursing
or giving money to other people, without this needing to be pre-arranged.
This is particularly important for people who need someone else
to draw cash for them.
10. There are some people who are particularly
dependent on cheques because they have no alternative. They cannot
get out of the house to draw cash, they are reliant on other people
for support, they cannot manage the security systems needed for
telephone banking and they do not have internet access (and even
if they did, they could not use it to draw cash). In such cases,
many people rely on cheques to pay other people or reimburse them
for cash or shopping. A local Age Concern referred the following
case to us:.
"C's carers buy her food at a major supermarket
using a signed cheque. C has an agreement with the supermarket
that they will countersign the cheque and that the carer can only
spend up to £50. The supermarket has written to C to say
that they no longer accept cheques so this arrangement will come
to an end. They suggest three alternatives: (1) sending C's debit
card with the carer but this would mean revealing the PIN; (2)
A `chip and sign' card—but either C would need to be present
or the carer would need to be given authority to sign which could
be difficult as there are lots of different carers; and (3) Payment
by cash—but as C now has her pension paid direct to her
bank account, she has little access to cash".
In the event, the supermarket agreed to carry
on taking cheques at the customer service counter (which involves
extra time and cost, as carers are paid by the hour), but only
after the client had spent some time paying for her shopping with
vouchers that she could order over the telephone. Although the
Post Office Card Account does offer the valuable option of a second
card that a carer can use, this is not suitable where (as in this
case) there is no regular carer.
11. We are very concerned that people in
this position are reduced to giving carers their debit card and
PIN, invalidating the terms and conditions of their account and
exposing them to theft and abuse.
ALTERNATIVES TO
CHEQUES
12. We accept that new payment methods could
be beneficial for people in later life, particularly thosewho
find it difficult to collect cash. However, people are only likely
to embrace new payment methods if they see some benefit in it
for them, for example increased security:
"I pay for my groceries with my debit card
because it's about £50-£60 and I don't want to carry
that amount of cash around with me" Male aged 75+.
13. We believe that any new payment methods
should meet the following criteria:
— Easy to use—particularly
for those with cognitive impairments, dexterity problems, hearing
or sight impairments and other disabilities.
— Accessible—without the need
for special equipment. Although internet usage is growing among
people in later life,they are unlikely ever to be at the cutting
edge of new technology and there will always be some who are no
longer able to use special equipment or who cannot afford it.
— Operable from home (ie including
a paper-based option which can be posted). People should be enabled
to maintain their own financial independence, rather than forced
to become dependent on other people.
— Allows payments to individuals
(including by post).
— Controllable—people on tight
incomes need payment methods where they can control the timing
and the exact amount, where there is no risk of overdrawing, and
where they can track spending without needing access to special
equipment.
— Secure, and perceived to be secure—but
with security features that are easy to use.
— Protected—some alternative
payment methods might emerge from outside the normal banking market.
Consumers should not be forced to use products with reduced protection.
— Difficult to abuse—any solutions
must take account of how easy is it for third parties such as
family, friends or carers to abuse the system. For example, is
there a clear audit trail for spending?
— Easily available—a cheque
book is currently accessible on most accounts without having to
take special action. Someone who needs non-standard provision
is often in the worst possible position to manage the process
of getting one: they need first to know what alternatives are
available and then persuade the bank to provide one. For example,
chip and signature debit cards are an important option but mystery
shopping by the RNIB[21]
found that in a third of cases shoppers were told that there was
no option other than a PIN.
— Suitable for people on low incomes—two
million older people are living below the poverty line. It has
been Government policy to encourage them to take up banking. It
is essential that they are not penalised by having to bear extra
costs as a result.
14. Although alternative forms of payment
methods may provide some of the facilities listed above, none
matches up particularly well.
15. The debit card is widely used, but many
people remain concerned about security, and some people find them
difficult to use. It is difficult to keep close track of spending,
and although they can be used for internet and a limited range
of telephone shopping, they cannot be given to someone else to
draw cash or shop on your behalf without the PIN. Their usefulness
for people who are housebound would be greatly increased if all
banks were to offer the option of a second card on current accounts,
with a separate PIN, without requiring the account to be held
in joint names. This would mirror the "second card"
option of a Post Office Card Account (POCA). Banks would need
to make customers aware of their option to have a second card.
16. Payments through mobile phones are often
suggested as the way forward, but to date we have not seen any
firm proposals and there are likely to be many concerns about
security. We do not think mobile payments are likely to be an
acceptable replacement for cheques, because of the cost, security
and useability difficulties. Ownership of mobile phones also falls
markedly with age. Although 54% of people aged 75+ say they "personally
use" mobile services, 93% of these people have them on a
pre-pay basis (compared to 57% for the total population), suggesting
that use is not heavy.[22]
17. Direct debits are resisted by many older
people because of fears about control and security. They can create
difficulties if people go into hospital or forget to cancel a
direct debit for another reason. We understand that a one-off
direct debit can be initiated, using a paper form that could be
sent to the consumer's bank. This might deal with fears about
the open-ended nature of the commitment, but we question whether
it would offer anything more than is already available with a
cheque. The form would presumably have to be ordered specially
or initiated by the payee.
18. Pre-paid cards or vouchers that could
be ordered and topped up over the phone and delivered by post
would have the advantage that they could be given to carers for
shopping, or used over the telephone or internet. Some models
(such as the cards used for school lunches) could provide a print
out of spending to provide an audit trail. However, without the
option of a print out on demand it is not easy to keep track of
spending, so the user risks losing a small remaining balance.
They are also extremely costly and require payment up-front. Some
local authorities are already offering them for direct payments
for care (for example Kent offers the `Kent Card') but in this
case the authority pays the cost.
19. The most realistic alternative for many
older people is likely to be cash, and we expect this to become
more important if cheque usage dwindles further. However, there
is a significant security risk. Some people are also in the position
of not being able to get to a bank, post office or ATM in order
to draw cash, or having to pay for a taxi because there is no
accessible transport.
20. It is often pointed out that in many
European countries cheques are unknown. However, this does not
mean that they have abolished paper-based systems. So, for example,
in Belgium and Norway a trader presents an invoice with their
bank details which is sent to the customer's bank.
DELIVERY AND
IMPLEMENTATION ISSUES
21. We do not see any existing payment methods
that meet our criteria for change, and although there are some
possible ways forward, the benefits are unclear, the costs uncertain,
and the process very difficult. The Payments Council can only
work in a collaborative way, and will not be in a position to
require members to offer certain payment methods. We cannot see
that, in a competitive market, most firms will be prepared to
offer more than the minimum functionality, at the lowest possible
cost. Even if an effective replacement for cheques is developed,
our fear is that it will not be offered as a core part of the
service. The risk is that people will either have to move to a
special account to get it or pay a significant fee. We know that
UK consumers of any age resist switching bank.
22. We do not see a "special"
facility for disadvantaged people as an appropriate solution,
unless there is guaranteed accessibility, funding and support
to help people switch, and no extra cost. In making any decision,
the Payments Council must bear in mind that even if cheque use
is very low, the remaining users may be very heavily dependent
on cheques. If they are expected to bear the costs of a "special"
service, it could cause hardship.
23. One of the costs will be education and
support for individuals affected. The Payments Council has stated
its intention to carry out educational work through partnership
with other agencies. Although Age Concern and Help the Aged have
considerable experience in supporting people in later life in
adjusting to change, some people need individual support. A leaflet
alone is not enoughDetailed, practical solutions also need to
be available before educational campaigns can begin.
24. As this suggests, implementation costs
are likely to be substantial, and will involve costs for consumers
and support agencies, as well as business. We are concerned that
there has been no cost-benefit analysis that takesthese costs
into account. While there may be significant savings to banking
institutions if cheques are abolished, the costs may simply be
shifted on to consumers, and in particular the poorest, most socially
isolated individuals.
25. We recommend that a full cost-benefit
analysis, taking into account the costs and benefits for consumers,
is published for consultation before any decision is taken on
the future of cheques. We question whether the cost of change
is likely to prove economic, or whether it would be more efficient
simply to continue cheques until suitable alternatives develop.
We do not believe that the timetable set by the Payments Council
is workable.
THE IMPACT
ON THE
CHARITY
26. Unless giving habits change rapidly,
the impact on Age Concern and Help the Aged as a charity will
be significant. 71% of cash gifts are made by cheque; the next
most common payment method, the credit card, accounts for only
9%. Payment by cheque rises by age,, and people in this age group
are by far the biggest donors.
27. In addition, there are currently many
local Age Concerns around the country that are established as
independent charities. These will be affected in terms of donations,
but possibly also as providers of services directly to older people.
March 2010
19 Family Resources Survey, 2007-08. Back
20
Internet Access 2009 Households and Individuals, ONS, August 2009. Back
21
http://www.rnib.org.uk/getinvolved/campaign/yourmoney/chippin/Pages/mystery_shopping.aspx£H2Heading3 Back
22
The Consumer Experience, Ofcom, 8 December 2009. Back
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