Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 240 - 259)



  240. Do you think ten days or more, which is what the survey evidence shows, is acceptable in this day and age?
  (Mr Sweeney) Let me turn to—

  241. No; you answer it. You represent the big four among other retail banks. Do you think that is acceptable?
  (Mr Sweeney) I think that what is—

  242. Is that a yes or a no? Is that acceptable to customers in this country?
  (Mr Sweeney) With respect, I am not going to give you a straight yes or no because it depends entirely—

  243. I think we shall draw our own conclusions from that. It is a very simple question: is ten days or more acceptable or not?
  (Mr Sweeney) If, with respect, you pause in your questions for one second and enable me to answer one before you move onto the next I might be able to give you a response.

  244. Try answering one.
  (Mr Sweeney) May I? Thank you.

  245. Is it acceptable?
  (Mr Sweeney) What is important is that the customer gets the service which is consistent with the mechanics which are required to effect the transfer. I do not know whether ten days is the amount of time needed to effect the transfer. If it is, then it is acceptable. If it is not, then it is not acceptable. That is a very simple answer.
  (Mr Tyson-Davies) We are talking here about a pilot project with a chunky, clunky paper-based system for transferring details of customers' direct debits from old bank to new bank. The ten days was felt to be an appropriate target figure while the pilot was running. This pilot is still running after some 15 months. One of the lessons clearly learned from this was that it took some of the major banks a significant time to get information from where it was scattered round their institution to the central point to hand it over to the new bank. That is the delay. It is that lesson which will be built in to the design of the new automated system which will come into force at the end of this year, which will make a significant difference, and meet the objectives of customers. What our customer wants is to change from bank A to bank B, he wants it to happen from next pay day so his salary goes to the new bank to be followed by all his regular bills. The new system will even have a redirection facility built into it so that if something gets lost and a direct debit company fails to act on the instructions it will get caught in the middle and sent off to the new bank. That is the service which we are designing and building for our customers and it is taking a significant amount of work within the major banks.

  246. How many days do you think it will take on average?
  (Mr Tyson-Davies) We are looking at a period from end to end of the order of three weeks. To say less than that would be to raise false hopes; within a normal monthly salary period is what we are looking for.

  247. The industry target is ten days.
  (Mr Tyson-Davies) This is for information to go from old bank to new bank followed by the activity to move the account.

  248. How quickly are you going to bring down the ten days?
  (Mr Tyson-Davies) That will be in the light of experience. It is the certainty customers want, not a rapid move. If you do not have any regular payments you can move your account tomorrow.

  249. It is certainly not a rapid move. Is it going to be more or less than ten days for the relevant details to be transferred under this regime you have helpfully described?
  (Mr Tyson-Davies) I understand that ten days will remain the target but that is not cast in stone and there will be some time for consideration before the system is activated at the end of this year.
  (Mr Pearson) I should also add, in case there is any confusion from the previous evidence, all banks are participating in the project to deliver automated transfer of direct debits and credits.

  250. All banks are.
  (Mr Pearson) All banks. The pilot is with a sub-set of those banks but the full system will be all banks.

  251. Just so I am clear about this, when will the new regime kick in?
  (Mr Tyson-Davies) At the end of this year.

  252. And you cannot give us an indication of whether ten days will be bettered or not.
  (Mr Tyson-Davies) No, not precisely at this point.

  253. Is there any particular reason for that?
  (Mr Tyson-Davies) Because they are still in the process of designing the new system.

  254. But can you give us the assurance that they will be working for a period shorter than ten days in the interests of the customers' needs and requirements?
  (Mr Tyson-Davies) I cannot give that assurance because I am not in a position to deliver it. The aim is to have it within a normal monthly salary period.

  Mr Ruffley: Those are very revealing answers. Thank you.

Mr Davey

  255. May I turn now to the money transmission systems and small businesses? One thing which was most worrying about the Cruickshank Report findings was the fact that in the UK the charges for transferring money for small businesses are amongst the highest in the developed world and indeed that if an excess of profits was being levied from the small business sector it was probably in the supply of money transmission services from the banks. That was one of the major reasons why Cruickshank was suggesting there should be a powerful independent regulator. Did you agree with Cruickshank's findings of those costs?
  (Mr Sweeney) The difficulty with a small business is that it is in front of the Competition Commission at the moment and that is being handled very rightly and properly by the individual banks. I am not privy to the numbers for individual banks and you would have to ask them whether they were satisfied that it reflected their market experience and the level of charges they are levying. I am not sure I can help you.

  256. The Association did not look at this finding from Cruickshank, which was quite an important finding and responsible for some of his recommendations.
  (Mr Sweeney) We did not because the members took the view that as the small business element had been remitted to the Competition Commission, this was not an industry issue it was a competitive issue and individual banks would respond directly to the Competition Commission and we had not been involved in that aspect of the work at all.

  257. Would APACS like to comment on that?
  (Mr Pearson) From the point of view of the central system which we operate one has to look at where costs fall. Some years ago APACS did a piece of work to look at the total cost of money transmission systems in the United Kingdom and that number at the time, three or four years ago, came out at £4.5 billion for the total cost of all payment transmission. The APACS cost, the central cost, if you take the entirety of the costs of BACS plus APACS, it comes to just under £70 million or about 1.3 per cent of the total. Therefore the question is not best directed at me, because the question should go to where the majority of these costs lie, which is in the banks.

  258. Do you have no view that the British money transmission system operated by the British banks is a particularly costly one for small business? Would you like to comment on that?
  (Mr Pearson) Mr Cruickshank was kind enough to say that in a lot of ways British payments systems are world class and he is quite right. They are highly efficient at what they do and they are highly scrutinised by the banks who own my company as to the costs of the central piece. Slipping off my real agenda, banks are also just as cost conscious in their operations. I would not say they are not efficient.

  259. Do you not think though that if there were a separate independent regulator like PayCom as originally proposed by Cruickshank it could answer some of those questions which clearly are important for small business, which does actually back up what Cruickshank says that they do pay some very heavy charges to the banks. If we had a regulator who had, in Cruickshank's words, a sustained dynamic focus on the banks, that would actually expose those costs and hopefully drive them down?
  (Mr Sweeney) I am in danger of repeating myself but I think the answer to that will rest in the Competition Commission conclusions. Some banks disputed some of the small business analysis in the Cruickshank study. Cruickshank himself admitted in the report that he had found it very difficult to decide how costs were allocated within the industry and to draw some conclusions on the numbers. The Competition Commission has a very vigorous study under way, absorbing a huge amount of time and absorbing a huge amount of information. It would be silly for me to try to anticipate the answers they might come up with or to get myself involved in trying to pre-empt their arguments and dispute them before they have even reached them. I am sure individual members would be very happy to return once the Competition Commission has produced its report, but the question you are asking is at the heart of what they are looking at.

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