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The end of Cheques? - Treasury Contents


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.

    Accepted by retailers.

    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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