 Ddechірdiا. Welcome to the 21st meeting of the Economy Jobs and Fair Work committee for 2018. Can everyone present to turn electrical devices to silent? We have received apologies from committee members Gordon MacDonald and Gillian Martin—I will start by asking Willie C Futhi to declare any relevant interests. Thank you, convener. No relevant interest. I am şuethe owe yn my register. i gyd ddynt. Argymau iawn i gefnwyr ddeulogau cwmwythau i gyd-dwyedd omfawr i ddwyngol 15, 6 i 7 i gyd. Rwy'n gorfod ar hyn. Rwy'n gorfod i gyd ddeulogau i ddeulogau i gyd ddyddol o angen aethol. Rıyst i ddweud aeth y gallwn ni'n gweithio'r mae ddeulogau, ddysgwysiameth Yr Cynulleg, Professor Russell Griggs, ac Thomas Docherty, gallen nhw'n symud i ddeulogau ei ffaithfawr o'r rei, felly rydw i'n fawr. I would like to start with what is a fairly general question before we move into some detail and just what has been the impact of bank closures in your view on individuals, the local economy, local customers, what are the impacts both positive and negative? Who would like to start, Professor? It's interesting. When I did my work, which is now two years ago, and went back and spoke to the communities that had lost their banks, if I can put it that way, there is no long-term empirical evidence just now to show that there's any effect. If you go back and speak to a lot of the communities, like most communities do, they've moved on, so they find other ways to do things, etc. While there was a heavy impact at the time, the communities, businesses, etc. have found other ways of doing what they were going to do. In fact, one of them, when I went to see them, said that it's pointless having the discussion because we've all moved on now and we don't want to go back to where we were. I think that it probably has a short-term effect, but the evidence that I saw as I went round and visited probably 20 or 30 places across the whole of the UK looking on this is that it settles down again and people go back to doing what they used to do, but just in a different way. It's interesting that they don't tend to move banks, so I remember being not in Scotland but down in England, and I sat for an hour and a half and got lambasted by a group of customers about their bank, and I asked them at the end about how many had changed, and they all said, oh, we're not changing. It's a really good bank. We like the bank. It's just that this wasn't a particular thing that we wanted them to do, and they had just found different ways of doing it. The view set out the detailed findings regarding this somewhere. You can read my one-year-on review, the Access to Banking protocol, and you can find it on the UK Finance website. Your view is that there are immediate impacts but no long-term impacts? Not from the evidence that I have seen to date. Thomas Docherty, do you share that view? The first thing that we would say is that we don't object to the principle of bank branch closures. It has to be a commercial decision. An example that we were talking about earlier on was, if you remember, four or five years ago, after the nationwide had taken over the Dunfermline Bill and Society and two other Bill and Society spaces in England, at the end of the five-year moratorium there was a closure process. For example, on Dunfermline High Street, it was indefensible from a commercial point of view that you had a nationwide brand and Dunfermline brand 270 yards apart and nobody, not the MSPs, would say that that was sustainable. The problem is that there hasn't been a proper study done by anybody of what those longer-term impacts would be of the rate of closures. By the end of this year, in Scotland, more than 250 branches will have closed in the last four years, starting in 2015. It was 43 branches closed in 2015, 44 closed in 2016, and 83 last year and 84 are scheduled to close by the end of this year. When you start to get that scale of closures, somebody should be stepping up and carrying out that proper investigation that Professor Griggs has talked about. The people who are most likely, of course, to be affected are older customers and customers who are more vulnerable. Yes, online banking is growing, but only 56 per cent of customers according to UK finance currently use online banking. What is happening to the other 44 per cent? How are their needs being serviced? As some of you know, I have just finished doing 26 consultation meetings for another part of my life in the south of Scotland. At 650 people, the issue of bank bank closures did not come up at all across all the 26 meetings other than in one place. It was Melrose. One of the people in the audience asked if the building was going to be free to be used for something else once it had been closed. The communities that we went around did not raise any issues at all. What were those meetings about? This is about the new economic development agency for the south of Scotland and what business can do and what the issues were that business were having at the time across the whole of the south of Scotland. It was wide open for anybody to say anything. I do not dispute what Professor Griggs is saying. All I would observe is—all of you will know this—the nature of people who attend meetings are not by their nature the vulnerable customers. I think that that is the problem with anecdotal-based decision making. There needs to be that robust evidence gathered. Do you say that there is an impression among people that it makes no difference what they say, whether the banks close their branches or not, and therefore why would they raise the subject? Turn to Dean Lockhart now. Good morning to our guests. I would like to move on to a question about the alternatives available to banks and how suitable and viable they are. We have heard from different witnesses about the services available from the post office, mobile banking units, credit unions, building societies. I would like to get your views on how those alternatives might plug the gap where bank branch closures have happened in a local community. In your answer, if you could talk perhaps about the different demographics affected, so retail, the elderly and possibly small business? If I could start with the post office. I think that the challenge with the post office is that the post office in itself is so diverse. You have everything from normal post offices to little branches in Nisa and places like that, and that is the challenge. It is not at the moment as good as it could be and it should be, but I know that the banks are working to try and make it easier. For example, if you are a post office employee or indeed a Nisa employee who has to listen to the post office, there are eight different ways that depending on the bank you have that you can pay and take out money, which to me has always seemed a bit over complicated. I think that in terms of the post office, the banks could do a lot more to make it simpler. I think that in terms of business, if it is done properly it can resolve a lot of the issues that business are talking about in terms of cash in and cash out, but again it has got to be made simpler. Part of the challenge is about the amount of money that each of the post offices will take, so they are not all legally bound to take the same amount of money. It depends on the situation and whether they have the appropriate instruments to do that. In terms of the other mobiles, I have a mobile in my own community. I have them sankered down into Freeson Galloway, so we have one branch that is open for days a week now, and they are all bank coming, a mobile van every week, and it seems to work quite well for those who want to use it. In terms of the others, there are a lot of people looking at not just credit unions but whether community banking would be a way forward. Outside of London at the moment, I have not seen any examples of where that has happened, although I know that there are one or two franchises beginning to look at it down in the south-west of England. To me, the biggest issue is that I know that the banks are working on it. Is it to make people aware that they can use a post office and how they can use it, and to make it simpler for people to use a post office? First, in terms of building societies, from a customer point of view, there are some corporate differences, but the reality is that from a customer point of view there is no difference between a bank and a building society in terms of the retail offer. In terms of post offices, there is a catch-22 that we find ourselves in that to be able to pay money into a post office, you need a personalised paying-in slip from your bank. Where do you get those slips from? You get them from your local branch. That needs to be addressed if we are going to take that forward. The other proposal that we have suggested is that more could be done through ATMs. Link is not enthusiastic about that, but Link could be mandated to provide greater services, for example, for paying-in of cash into their machines. It is not about there being one alternative, but it is about that combination of three or four different options for taking it forward. I could just follow up on that and thank you for those answers. There has been some concern expressed by the Federation of Small Businesses about the gap available for small retailers in terms of cash-in and cash-out. The other wider range of services that businesses can access if they have a branch lending business advice. Do you agree that there is a gap if a bank branch closes? Even if you have a post office nearby, there would be a gap for small and other businesses that use that branch? It is interesting that, as far as I am aware, only one bank, even when they are open, will do lending to small businesses from a branch. I am not sure that, in terms of lending, it would make a great difference, because you would have to go and meet somebody who would come from somewhere else to have it. My knowledge of the banks is quite extensive in this area. I think that one probably does lend from a branch, but that is all. It should not impact on the way that a small business can borrow, because most of it will be done on the telephone or by making an appointment with a specialist to come and see them. I think that you hit on an important point that it is about the round. For too long, we have dealt with bank branch closures over here and ATM closures over here, and it is that combination of the two. We have no view on the political structure, but we have two different regulators. For example, the SCA is responsible for banks, the PSR is responsible for ATMs, and we are working with the FSB very closely to say that if you take away both the banks and the ATMs, how do small businesses pay cash in? There are 15 billion cash transactions in 2016—that is the latest year for which we have figures—but cash transactions are still the single most popular form of payment. 44 per cent of consumer transactions were cash. If you are seeing 250 bank branches being closed in Scotland and by links-owned figures up to 700 ATMs going from the Scottish network at the same time, that becomes much harder for consumers and for businesses. I disagree with Thomas. I think that he is right about the cash, but it is going down. Cash is being used less over time if you look at the drift down, but it is still quite important. I am talking to my own little community to the retailers there. It is about them getting help to look at what the alternatives are when our RBS shut some time ago. Some of them will still have to travel to do that, which they do not really need to do if they were told better how to do it in another way. We have a post office in Sancras, so they could go in there. They could theoretically go and do it in another bank, but it is much better to do it at a post office if they can. They can do it exactly as Thomas said—they have to certify themselves to do it. I would like to expand a little bit on the question of the ATMs. We have taken evidence from businesses that indicate that 85 per cent of their transactions are still in cash. They seem to indicate that that level is pretty stable. We have talked about the need to be able to take money in and out, and the impact that that has on those businesses. How, in particular, are ATMs to the individuals and to the businesses in that process? I think that ATMs are quite critical now to businesses, and I think that they are quicker removed to the more sophisticated types of ATMs that can do inputs and outputs and the better. That will not help cash in terms of coins, but it will always help cash in terms of notes. It is interesting if you look in Scandinavia now, and I cannot remember whether it is Norway or Sweden. The Government bought the ATM infrastructure and now operates it on the grounds that they can choose how to do it. They charge the banks a fee for using it so that they can guarantee everybody free service, and they can decide where it goes. That was done with the co-operation of the banking community, and it appears to work quite well from what I can gather. The operator is on a cost-neutral basis, so the fees coming in from the banks allow them to do the infrastructure. It is very important. My understanding is that the RBS, having all the fuss about the branch closures, has guaranteed that they will not take an ATM away from anywhere. They are keeping it in Barra, for example, if it is further away than a kilometre from the next ATM. That type of discussion is helpful, but it is important. The RBS said several years ago that it would never close the last bank in town. That did not last too long. A number of businesses have indicated—I am not sure what proportion that is—that they say that they actually top up the cash machines themselves. They use their own resources to top the cash machine, which must help with the cash position. I am not aware of that. In fact, one of the reasons that I am shaking my head is that I know that if you have an ATM in a banking building and you want to use the banking building, Loomis and G4S will make it quite difficult for you to operate around that ATM. That is news to me. There seems to be in some of the small grocery shops where there is a local ATM. It is supposed to be a question for Link, who I know you have later. I cannot imagine how that would work, but I am not the expert. I will be interested in finding out a bit more about that. Given the fact that you have talked about ATMs closing and so on, how do we protect vulnerable customers in this whole picture? I mean, we are talking about remote ATMs closing down, presumably because it is not the volume of use or whatever, but the customers using it nevertheless are probably the most vulnerable in our society. It seems to me that the ATMs are withdrawing into an urban environment more than a rural environment. We seem to be getting this gap in the population. We have been very clear that we would like to see an end to an approach where there is frankly a silo between the FCA and the PSR. It needs to be seen as a round. The bank branches and the ATMs need to be taken as a pair. There are probably three things. We would want to see a really robust piece of work done that says what is the long-term impact of the closure, particularly on vulnerable customers. We are very clear that it is not just rural ATMs and branches that are at risk. It is also in flantially challenged urban areas, where quite often those branches have come out and that cash is particularly important. There was a system there where there was more compensation given to keeping ATMs open in those areas. There is a very specific criteria for very rural areas. Part of the problem, as you were hearing from Link, when they give evidence, is that Link has been unable to tell us which of the cash machines in Scotland or across the UK are at risk. My local ASDA has three cash points side by side, all operated by the same bank. No one would object to one of those three coming out, but that is probably not what we are talking about. What we are talking about is rural cash points and those in the more deprived areas. We are very clear that it is not a rural versus urban. It is financially challenged areas that will come out. The first thing is that there needs to be a robust piece of work. Secondly, the PSR needs to now be challenging Link about the impact of its decisions. The PSR has refused so far and has been unwilling to challenge Link on its decision to cut the payments that it receives. Thirdly, the SCA needs to do more. We have the 2015 access to banking protocol, which says that there should be consultation with communities before bank shut. That has not really led to any change of decisions. I do not need to tell people around the table that communities lose confidence in consultations if they think that it is simply a process that is going through and no changes will come at the end of that. Those are the three things that we think need to take place now. If I go back to your question on the rural areas, that was specifically the reason why, if I recall correctly, it was the Scandinavian country that bought the infrastructure so that the Government could control where it was. As I said, it was done with the co-operation of the banks. They removed the challenge. As the infrastructure is not owned by one person, it is owned by a multitude of people, all who can make different decisions. If you look at the 2006 task force, which was chaired by John McFall, who at the time was chair of the Treasury Select Committee, it specifically highlighted the need for low-income areas to access free-to-use cash points. I would argue that that is more important even in 2018 than it was in 2006. That is at risk now. As I said, there is a huge variation on how many cash points are at risk. KPMG, who are links advisers, said that it could be up to 18 per cent. That is 700 cash points in Scotland. That is 9 to 10 per constituency in Scotland. I suspect that if you had to go around your constituencies and start picking the 9 or 10 that you thought should go or would go, it would be interesting to see which ones would be at risk. I think that a figure was given of 44 per cent of bank customers who do not use online banking. We can surmise that a proportion of those at least will be in the more vulnerable bracket. Absolutely. How does the withdrawal of the ATM affect them? If they are not doing online banking, presumably some of them at least will be able to cope with an ATM, although, frankly, as you get older, it becomes more difficult to deal with even the basic technology. I think that if you look at how the banks look at how branches will go in the future, the ones that will remain, it is interesting enough that they will go back to becoming much more advice centres than anything else. I think that one of the things that they have looked at is that as you go through this process of how people are now interacting with finance and using it, it tells you that in the end what people want most of is advice of somewhere to go for help, not necessarily to do a transaction, because you can do the transaction on the ATM and the sophisticated ones. I think that the nature of branches will change anyway. If you look at some of the models that they have put across the UK of what those new branches look like, they are very interesting. We will go back to places where you go for advice rather than to do transactions. I guess that is where the type of people that Thomas was talking about have the biggest challenge, which is an advice rather than transactions. We do not have Scottish-specific figures because they come from UK sources, but there are 2.7 million consumers at UK level who rely overwhelmingly on cash, so we can obviously do a rough calculation of what that would be in Scotland. I suspect that it is probably a disproportionate number. Those are the people who are going to be most affected by any reduction in the combination of bank branches and ATMs. There are three reasons why people predominantly prefer banking in person to online banking. Convenience, which many banks are doing the best to try to take away, but it is connectivity and it is confidence. Connectivity, if you do not have broadband or you do not have access to your own computer, you cannot do online banking. Professor Griggs talked about apps and so on. That is great if you have a smartphone, but many of your constituents, the people who are most financially excluded, do not have smartphones. They cannot do online banking and they cannot use apps. The third reason is confidence. The barcals, such as the TSB, over the past couple of weeks, will have done nothing to let the TSB get more of its customers to switch to online banking. 44 per cent of people are not using online banking, as you said, Mr Beattie. Some of that is because of convenience, some of that is because of connectivity and some of that is because they do not have confidence in the system. I would say gently that I do not think that it is just an older people's issue. We should not get hung up in cash. It comes back to the point that I was making earlier and Thomas was making. There is no real evidence. There is a really interesting article by a company called Voltex on cash use in the UK and it comes to three conclusions. Three conclusions are cash usage is declining, cash usage is growing and cash usage is staying about the same. It is looked at three sets of the data that is out there and it has come to those three conclusions. Part of the challenge is that all the data that is out there conflicts with each other. Until we go away and have a long look at what all the data says, 64 per cent of all payments were made in cash. In 2005, the figure dropped to 45 per cent in 2015. On the other hand, the value of the bank notes in circulation has gone up and the value of all payments made by cash decreased by only 3 per cent. All the data seems to conflict with each other and it is back to Thomas. There is no good empirical data on any of that. The main part of my question has been covered in your last answer, but it is to do with this 18 per cent reduction that is put into the submission for current and remote free ATMs. What impact is that likely to have specifically on communities where there is no bank? Perhaps there was a last bank in town scenario and that is now closed, so it is specifically to those communities. It is a really good question. There are something like 200 cash deserts in the UK. That is somewhere where there is no access either to a branch or ATM within a reasonable distance. The problem is always going to be how do you find a reasonable distance? If you have got very good public transport from one community to another—we were talking about this beforehand—Professor Griggs lives in Sankirk. Anyone who knows that part of Donfries and Galloway knows that it is three communities in one—it is Sankirk, Cornwall and Kellehome. We are slightly cautious about how we define a community, but there are 200 communities in the UK that are cash deserts. 130 of those are in Scotland, which is two thirds of those by my maths. It is overwhelmingly in very rural areas. It is difficult—this is where it all ties together—for those small businesses who are trying to operate because they need to pay in cash because they cannot keep holding long. Also, it is very difficult for their customers because if they cannot get access to cash, with the best of all in the world, if you are on a fixed income and you are expected to travel 30, 40 minutes to get your credit card. That is clearly not acceptable. That is the type of problem that we are seeing. That problem will grow as bank branches continue and as ATM closures happen. When I did my work looking at which branches had closed and you go to communities like my own, which are really two communities, so if you go to Glastonbury and the one next door to it, and if you go to Invergordon and the one next door to it, you will find that the branch is open in the community that has legal in it, or a shopping centre where people go to do their—not in the other one. It follows the pattern of where people go to do all the other things that they do on a day-to-day basis. Similarly in Glastonbury, it has gone to the town next to Glastonbury because they have the big shopping centre there and not in Glastonbury itself. People go to do their shopping, go into their banking rather than—what defines a community has changed? Thomas is quite correct in a lot of that as well. How do you think that those cash results, as you put it, impact on people with disabilities? I was interested to see the equality human rights commission taking an interest now in the issue of the bank branch closures. I think that that is a sensible decision by the commission because that has to be explored. We supported the 2015 protocols. We are unconvinced that they have led to a significant change in behaviour, Mr McGregor. It is a balancing act, but financial institutions are commercial organisations. We understand that, but they have a duty to the communities that they serve. We are not convinced that that balance has not necessarily been struck yet. It is worth asking the FCA whether they feel that they have done enough to address those concerns. How do you think that those cash results can affect local small businesses? I use the example of steps in my constituency, which is facing a last bank in town closure. I am sure that my colleagues are sick of hearing about steps. I use the example because there are a lot of local small businesses, cafes and stuff like that, where they do not have any swipe. If they also lose the cash machine there, there is obviously going to be a struggle. We did a survey in May 2018 of consumers specifically in Scotland. One in seven people said that the loss of free access to cash would leave one in seven consumers across Scotland as a whole, unable or finding it much harder to be able to pay for services, to pay for shopping and so on. It is common sense that that would disproportionately be across those more rural or less connected areas. However, right back to my first answer, convener, there is not the proper evidence. We can make those assumptions based on the surveys that we have done on common sense, but we agree with Professor Griggs that somebody needs to step up and do that empirical research. It goes back to the point that Mr Lockhart was making. We should not have remembered all of this. We are all of the post office, because we are worried about ATMs going away. However, if post offices started to shut down or got smaller and therefore could not take in the amount of money that small businesses want to them, that would have an impact as well. That is one of the things that we should not forget about in all of this. Post offices shrink and they go back to being part of the co-op or NISA or whatever it is in an area. Their ability to take in money across the county will become less. When I was up and in the garden, somebody was telling me that he had gone in as a business to pay in £10,000 in cash into his local post office. It took them 25 minutes to count the £10,000 because they have to do it by the rule book, whereas if you go into the bank, they take it and they can put it through the machine at the back and test it. There are issues, but I think that Mr Lockhart's point is a really good one. In all the talk about ATMs, we should not forget about the post offices and make sure that they are there to provide the service. That is why I think that the conversations at the bank are having with them, like they want to ban all the banks are having with them at the moment, but making that service better is absolutely critical in this. Link will, I am sure, tell you that it is a brilliant financial inclusion programme, but it only covers less than 3 per cent of the ATMs. We are not knocking that bit. We think that that is good, but it is frankly not enough. Jamie Halcro Johnston The word consultation was never meant to be a consultation. The word goes something like, the bank makes a decision and then it works with the people in the community to see if there is anything that can do to lessen the closure. There was never going to be a consultation about the closure. That is the decision that the bank was made and that is why the protocol was put in place back in 2013-14 to try and give them some framework in which to do that. All the parties, including the FSB and the Governments, accepted that this was a commercial decision for the bank to make on when it closed. Yes, they have to do it in a way that deals with the vulnerable people and all that stuff. I think that they have moved a long way to try and do that. There is still work to do. In terms of the 2006 act, I will pass because I am not quite sure what its recommendations were. A couple of things. They mentioned the financial inclusion premium. They also mentioned a greater role for the public sector in terms of planning and encouraging more free-to-use ATMs and transparency in charging. John McFall chaired Task Force. It is worth trying to remember why that came about. John chaired the Treasury Select Committee at Westminster. There was a debate in the Commons where John and the economic secretary at the time, Ivan Lewis, said that there are lots of people trying to do investigations. There are lots of people trying to do studies. Let's bring everybody together. There were consumer organisations, the financial institutions took part, the Treasury Select Committee and others all took part. It's about 20 pages and it's really useful. It's still relevant today because some of the central recommendations around the need for low-income areas to be guaranteed free-to-use access is even more relevant given the current closure of banks. Atms in those remote areas, to go back to Mr Beatty's point, absolutely needed to be guaranteed. Our argument is that there has to be more than just 3% of the total number of ATMs in the system and that financial inclusion is at the heart of the debate about access to cash. My short answer to that is that it is even more relevant today than it was in 2006 when it was written. I think we need to move on to that. It's not just about looking at the evidence that we need to do, but it's all about looking at it much more holistically. It's not just about ATMs, it's not just about buying branches, it's not just about post offices. It's about how we as individuals manage our finance and making sure that we all, all of us, have a way of doing that across the myriad of different ways that we can do that now. It's about having a holistic approach to it. It may be in the areas where ATMs can't be that there's another issue. Unless you look at it holistically, it's very difficult to solve issues for all of us to do that. That was one of the colour points that I was going to come to on a very much on a localised point of view for myself, Sir Heinz and I and MSP. Obviously, large parts of the area of the region are remote and rural. We have large distances to even quite small towns and areas. A lot of the local businesses are very reliant on cash, local stores and the like, high areas of isolation, low-wage economy in parts and, of course, has been mentioned at real issues in terms of broadband. If you give us an idea of some of the particular issues that those remote rural communities face and also the impact on individuals with them, perhaps the more vulnerable and older people as well. I mean, to say particularly not just on rural areas, but on some other areas as well, that one of the issues that we have been talking to FSB about is the impact on tourism of not having cash available, particularly where you don't have good connectivity. The number of the area that needs to be looked at is worth in the Scottish economy. If, frankly, we have tourists that cannot get money out, then it becomes more difficult for them to spend money and to support our Scottish economy. That is something that would particularly affect rural Scotland. You are absolutely right, Mrs Tyllwr-Johnston, though connectivity is crucial both in about digital connectivity, and physical connectivity, being able to access it. If I use that example, on the other end of Scotland in Dumfriasten Galloway, if it's quite easy to get from Sankah to Cullconol to access the cash then there isn't a great problem. That would be a great thing for those of your constituents who cannot make that journey y maes unigiant, ac mae'n fawr i cwestiynau ei bod filliad. Ond maes ei fod yn fawr i gwrth gweithio ac yn fawr i gwrth iawn. Rwy'n cael ei gweithio gryg, mae'n cholgros fel achos. Rwy'n cael ei gweithio'n gweithio'n gweithio'n gweithio'n gweithio'n gweithio, mae hynny'n Byddai'r rhai ffordd yn achos i ddefnyddio â ddiogel iaith, a dod i gefn nhw'n nhw fyddd gynghau e Rae Evell. Rydw i'n wneud i chi ychydig yn dweud i gyfnod iaith. Rydw i'n dweud i chi i chi gael ei gael ei cyflosion hwnnw yn gyfnod iaith? Rydw i chi'n dweud i chihawnnw yn cyflym yn cyflosion hwnnw, rydych chi'n dweud i chi gael ei Cathryshines, the free-to-use Cathryshines in Scotland are at risk. We have struggled to get an understanding from Link as to what the criteria is for which ones will be at risk and we struggled to get a full understanding as to what are the particular challenges. We would observe that if you have, for argument's sake, 50 cash points in a service row, one of which is protected and 49 is, and the 49 are going, common sense is that makes that one machine even more difficult, even more challenging to service. However, as you say, you'll hear from them shortly. In terms of the cash, the banks are very well aware of my view, as I can't see how a bunch of clutter of people that they have couldn't get together to figure out how you could go and pick it up in the first place. It can't be done on the bit of man or woman to figure out how to, I mean, G4S is all over Scotland every day, so I think that there are things that it can do. I've said that many times to them that I think that they could be cleverer at what they do in this, and it's not to do with IT in this particular case because it's cash. I think that there is a lot that they could still do in that area, not just to do with ATMs, but just physical collection. It is difficult in some of the really rural areas in your part of the world, but it's still possible. It's interesting that, if you speak to the small businesses that I've done on this, a number of them are quite happy to select a standard day a week that they would have their cash collected on, and if they wanted it collected another day to pay for that, so it's not an issue of cost. It's an issue of just putting it together. Now I know again that the banks are talking about this, but I think that it goes back to the point that Thomas was making. Unless we look at this in the round with everything else that's going on, we're going to end up solving up one problem, but leaving another one left over there. Can I just ask very quickly as well? I think that you mentioned the figure of 11 per cent. Was it the link figure of 11 per cent up to 11 per cent? Do you know that they've also not identified, as you say, exactly where those are, but would you suspect that a high proportion of the 11 per cent would be in areas like the Highlands and Islands that are remote and rural? That would be a logical assumption to make, but we have been unable to get linked to share. They say for commercial reasons—I'm not sure why it's commercial—but they say for commercial reasons that they are unable to share their criteria or their methodology, but it would be rural areas and the more financially challenged communities in perhaps more urban areas would be the two most likely categories. That's interesting. We talk all the time about what we should do about helping the people that are around, but in the work that I did in going round, what amazed me was how young people now manage their money much better than I used to do when I was their age because of banking apps. The average usage of a banking app by a young person is about six times a day. It's the first thing that many of them do when they get up in the morning. While we're doing all the critical stuff of this—which we should do—and I'm not saying it is—on the other side, we should be looking at where the advances are going that could help. There are two sides to all those stories. I think that we're probably going to just move on due to time. Professor Gregg is just to go back to one of the points that you'd made. Would you agree with there being a proper holistic review of banking services and all of those issues to see where we're at and where we should be going, and perhaps a change in the regulatory framework for banks to reflect that? You give the example of a Scandinavian country where the ETMs are run by, I suppose, the state, if one wants to put it that way. I'm hesitating because I suppose it depends how big you want this to be. Yes, Thomas and I have both said that there's a need for good solid data, good evidence before we start making some of the decisions that we want to make, because a lot of it is anecdotal at the moment. It has to be because of where we are. In terms of regulation, we have to be careful here. It's interesting now that most of our world is now, wherever we are, run by voluntary regulation, not by statutory regulation. That's the same in food and all the stuff that we do. We need to do it in a way that we can do it, and whether it's through regulators or not, I don't know, but yes. The challenge is that because it's changing so quickly, you could do a piece of study now that my two years' time isn't relevant because the world's moved on, and that's one of the challenges that we all have. If I don't disagree, we shouldn't do it, so the answer to your question is probably yes. Is there much point in having consultations after decisions have been taken, which is effectively what's allowed for under the access to banking standard? Yes, there is, because strangely enough, there have been quite a lot of changes made to some of the way that the branches have come. Some have kept ATMs, some of the buildings have gone on to other use, so there have been changes in the case. There's not been any not closed before you ask me that question, but they do so. Yes, I think it is, and it does help a lot from going to—and I spoke to a couple of hundred people when I did my piece of work—knowing what's going on and being told about it to any human being, and especially in these stressful circumstances, is useful. Yes, I think there is. If that communication is done properly, it can add value. A good example is that Link has said that there are two phases, as you know, to the changes in the link-charging regime. One is, I think, the first of July, and what Link has said is that it will monitor what the impact is and that it will report on any reduction in the availability of free-to-use ATMs, but that's it. Simply monitoring and reporting on how many ATMs do not do anything to help your constituents, and it is very hard to use a cliché to put the genie back into the bottle. I think that Link is suggesting for a second if, at the end of that initial period, if, as I say, 700 ATMs have gone from Scotland, Link cannot suggest that they are going to put those 700 ATMs back in at the end of their monitoring period, and that's why we're saying that the PSR can't simply adopt a wait-and-see approach. It needs to intervene ideally, but I think that that must be realistic. After that initial charge change takes place in July, the PSR needs to be saying to Link that it cannot proceed with the second phase of changes to the charging regime until a proper evaluation has been done of the impact. If necessary, the PSR should intervene and do the job that it is paid to do to protect consumers. For better data and some proper research, but you haven't yet said what agency you think is responsible for that, who is best placed to do that. Secondly, there's a lot of discussion about the possibility of legislating to prevent the last bank in town leaving. Is it possible that, rather than legislating to do that for banks, we should be looking now to do that for post offices, if post offices are so critical to the future of towns? Indeed, you could do that, and you could argue that you could do the same for pharmacies. Once you start asking that question, it's about where you stop in terms of rural retail, if I can put it that way. Yes, that's the answer to the question. You could ask yourself all sorts of interesting questions, but I'm not sure that legislation is the right answer, because in a lot of those things it tends to become quite a blunt instrument, unless you write it very well, which has not always been the case. The point on data, sorry, if I could push you. So that you have referenced several times in your evidence, lack of data and lack of research, what agency should do that? I don't know as the answer to that question, simply. I'll try to be quick. On the data, first of what I say, 12 years ago there was no shortage of people who were wanting to do stuff, if only we were in that situation. Ideally, we'd like to see the PSR and the FCA together, because they have this silo mentality. As I say, one does banks, one does ATMs, and we think collectively that they should be working with Treasury, but it should be the regulators who do that evidence. Being slightly mischievously, if we want to do a Scottish evidence, there are perhaps organisations within Scotland who could undertake their own investigations and produce its own report in the short term, but ultimately it should be the regulators who should do that. On the question of the last bank in town, we are very careful of unintended consequences, but first of all there is this question about what is the town. I mean, I think about something like Edinburgh, you know, even somewhere like Edinburgh Eastern, how would you define, how would anyone define what is that part of town where clearly going from Portobello across to Princess Street whilst it's technically one town, it isn't practical. Secondly, there is this very obvious danger that if you've got two financial institutions that are in a town and we have a legislation that says that the last one standing has to stay open, it's pretty obvious what happens next, which is that the two financial institutions will race to shut their branch so that they aren't the one left at the end of the metaphorical musical chairs. So we're very cautious about how that would work in practice to help consumers. In one post office, the work you play, so is the post office framework more important to preserve? It could be, it could be, and just on your data point, I think one of the challenges, the reason I said I don't know, because to do this properly you're going to have to do over a period of four or five years because it's not just about the immediate impact, because human beings are wonderful at just adapting to situations and returning to normal, so you would have to look at it over a period of about five years to get any real good empirical data of what the impact of all this has in an area, but if you want my going forward for a rural area, the post office probably is as important as anything else. Thank you. Brief supplementary from Willie Coffey and then on to John Mason. Thanks very much for the chance there, convener. It was just on the figure that you gave earlier, Mr Docherty, that 56 per cent of people use online banking services in this mysterious other 44 per cent don't. We know that the banks brought in their closure programme based on their assessment of online usage, but doesn't that reveal that there's quite a still a significant size of their customer base just can't or won't use online? We know that's true from a lot of studies on the digital divide. There's quite a substantial number of the population can't or won't use those services. Is that further isolating those communities, the elderly, the infirm, rural and so on and so forth? Does that not point to the use of cash within that segment of society that's actually gone up? If they're not using online, they must be using cash services or post office services on an increasing basis? Obviously, I'd be more than happy to source the actual data if that's helpful or convenient. It would be helpful if either of you wish to write in about any issues that you've not had an opportunity to cover fully due to the time limitations here. That would be very welcome to the committee's point of view. Obviously, this was the UK finance to produce that figure. Within that 44 per cent that isn't... Obviously, we make an assumption that all 56s are only using online, but, of course, it is more complicated than that. Even if we pretend that all 56s are just doing online, for the remaining 44, there is a breakdown. Some people are using telephone banking. Some people are, as you say, using predominantly cash. The figure that I saw—again, we'll source the exact figure—was 2.7 million people across the United Kingdom. I would hazard a guess if we're talking about 300,000 Scots, if we're seeing the similar patterns as elsewhere. I am overwhelmingly cash, and they are in rural areas, and they are financially excluded people. I think that the challenge is really that the data is so confusing that you can argue either way. That's part of the problem, as we've both said. That's why the Voltex, when I thought it was hilarious, came to three different conclusions. However, if you look at the data in three different ways—I think that's part of the challenge—is that each bank will have its own data. It's difficult to put all that together. If you look at other data outside of that, the data in this area is not good, if I could put it that way. John Mason. On the access to banking standard, I'm really wondering whether it's working, if it's fit for purpose, whether it needs to be changed or improved. I mean, the obvious one—we've already heard this—is that the customers and others have to be notified of a closure, but they are not consulted on a closure. Whereas other parts of society, there would generally be consultation before a decision is made. Now, I know that in many businesses they might have pretty well made up their mind before they consult, but at least legally they would have to consult before a decision is made, whereas with the banks it seems to be the other way round. Do you think that we need to change that? No, I don't. I think that the challenge is that with each branch, the consultation would have to be different. It's very difficult to do that. However, if you go back to where the standard was, no consultation was decided by all parties, including the business association everybody, some three or four years ago. Therefore, when I went into writing the new standard, it was on the assumption that there would be no consultation. If you did a consultation, you'd have to then set some parameters and bars and levels. I've thought about this a lot because I've been asked this question more than once, and I still haven't, in my own head, figured out how you would do one, even if you wanted to do one, because how many people do you have to get to say, I don't want you to do this before you don't do it? It's a difficult consultation to do. In some of the other decisions, you're talking about it. Would it not maybe give the impression that the banks were listening if it did nothing else? No, because I think that if all they did was then carry on closing the branches, it wouldn't have made any difference at all. I suspect that that would be the situation. In the way that they notify, we were in Leven last night, some of us, and met some local community people, and their RBS had closed fairly recently. One lady had this letter that she showed us from the RBS. I didn't read every word of it, but it was just closely typed, just full of words. However, as far as I could see, there was no information that they could go to a post office to use it, just telling them where the next nearest branch was, her reckoning was that it was the wrong branch, that another one was nearer, or at least easier to get to. There certainly seems to be a lack of understanding that the post office is a choice that's available to people. I don't think that people seem to know what they can do in the post office, and I don't think that banks seem to be making much effort to tell people that. Is there room for improvement around this area of notification? The answer to the question is yes, and they're all improving as they go along, and they're learning as they go along. I think that you'll see in the coming months that perhaps an answer to the point about making everybody go in the post office. They all do an impact assessment, so they have the data that I've pressed them harder and harder and harder to just give everything that they've got to the consumer, because a consumer is an intelligent human being and does read it. They need to do more about not just saying that they can go and do it at the post office, but how they do it at the post office. Yes, there is a lot more that they can do, but the lending standards board, who now oversee the standard, has already started their work on going to each bank to evaluate how they're doing against the standard. I know we'll issue a summary report later this year on their opinion on how that's going, but there is now a compliance office and an inverted commons lending standards board that's going round with each of the banks, going through the standard and seeing how they're doing against it. They're better than they were, but they've still got some to do. I think that we have sympathy with individual banks in that it's a natural tendency to compare a change to a dental service or a GP service consultation with a change to a bank. An individual bank is not a public service, isn't publicly funded in that way, but as a round there is definitely a public duty on financial institutions to provide consumers with access, free access to cash and to banking services. It isn't just about getting money in and out, it's all the other things that we talk about. Our view is that, frankly, at the moment there isn't enough of a robust consultation going on, and rather than pointing the fingers at any one individual bank who happens to be going through the process at the moment, I bring it back to the regulators. We think that the SCA in terms of banks and the SCA and the PSR together in terms of access to cash should be reviewing that consultation process, and we would argue that we're doing more. Mr Mason, we'll leave it at that, thanks. Finally, I think that that covers the questions for now. As I said, if you wish to write in to fill out some of your answers, then please do so. Thank you very much for coming in today to the committee. I'll suspend the session for change over witnesses. Jobs and Fair Work Committee, again, we've reconvened in our inquiry into the impact of bank closures, and we have two witnesses from Link. First of all, Mary Buffy, who is head of consumer affairs, is welcome, and also Sir Mark Ibolyat, who is the chairman. Welcome to both of you. We'll start with some questions from Colin Beattie. Helpfully, you were sitting here while I was asking the questions previously, but let me put it to you that we've heard evidence from a lot of the smaller businesses that around about 85 per cent of their transactions are in cash, and there seems to be in the case of smaller grocers and so on a linkage to availability of cash machines in that particular area. How do you feel about ATMs and so on being very integral to that process? ATMs are a vital part of the payments infrastructure, and we are committed to maintaining that predominantly for individuals as opposed to small businesses. ATMs, at the moment, are not equipped to take in large amounts of cash. They are more about distributing cash than taking it in, and I think that one of the problems with the closing of bank branches is for those small businesses that do rely heavily on cash of actually putting it into a bank. Of course, one thing that's happening is that small businesses are increasingly using payment methods other than cash for precisely that reason, and that's not a matter for us, that's for the businesses and the banks. Clearly, for a lot of these small grocers, particularly in areas of deprivation, customers who use ATMs tend to use them frequently for small amounts, and those small sums are obviously spent in the grocery store. The linkage between the ATM and the grocery store seems to be quite strong. That's an ideal situation if you're an ATM deployer because you can have the ATM in the grocery store and the ATM deployer is paid per transaction. Somebody who takes out £10 at a time, as opposed to £100 in one go, the ATM deployer gets 10 times as much money. I think that where you've got a grocer like that, there will be an ATM and that would not be a problem. We do have problems in areas where there is nowhere to put an ATM. You do need a site for it, and a small grocer is frankly the ideal place, and many small grocers will have ATMs. At least one of the witnesses we had previously, a small grocer, seemed to be indicating that he topped up the machine with money from his own till. How common is that? It is a fairly common method of operating ATMs. People go into a store, they take money out of the ATM, they give it to the storekeeper in exchange for goods, and he puts it back in the ATM. It's called Merchant Fill, and it's a way of keeping machines going that otherwise it would be very expensive to maintain if cash has to be taken away and delivered. The previous witnesses seemed to be indicating that it was something unusual or strange that they had no knowledge of, and they were indicating that it was very difficult to manage. There are thousands of Merchant Fill machines out there operating today, so it's certainly common place. There are some challenges around the retail site having to take enough cash to sustain a cycle of filling it and then issuing notes. It doesn't work in retail environments where large amounts of cash are not taken because clearly there's no money to stock the ATM, so there's a certain model where that tends to work better than others. We talk about remote ATMs and ATMs in rural areas. How do you define a rural area? What's your definition of that? I'm saying we don't, because it's the answer. We have said that the interchange rate will not be reduced for any ATM that's more than a kilometre away from another one. Clearly that will cover a lot of rural areas. But you have no definition of what a rural area is. The way that the programme works is that it essentially tries to protect coverage of machines that exist today. Where customers in communities use an ATM and they rely on one ATM within that community, it doesn't have another one, another free-to-use within a kilometre. A kilometre distance is what's used across the industry and was agreed upon back in 2006. That machine will not have its rate changed from 1 July onwards and will be protected, so there's no commercial reason why that machine should close or switch to surcharge. I mean clearly there's a concern about availability of ATMs in rural areas, but how do you define a deprived area? In terms of the Link Financial Inclusion programme, it started in 2006 as a result of the Treasury Select Committee hearing. Essentially what was defined back at that time was that we looked at the most deprived areas in England, Scotland, Wales and Northern Ireland. Essentially units of geography called super-output areas and using the index of multiple deprivation we selected the bottom quartile of super-output areas based on the index of multiple deprivation. Can you explain the term super-output? Super-output areas is an area defined by the Office for National Statistics and it's a geographical unit that essentially is driven by a size of a population. They have varying degrees of size as super-output areas and then there's output areas. Essentially it can be all sorts of different shapes and sizes, so it's not a geographical unit like a grid, it's basically a population. What we took as deprived was the bottom quartile for the index of multiple deprivation. That identified just shy of 1700 areas back in 2006 that were deprived that didn't have a free-to-use machine within a kilometre of that area. How many of these areas were in Scotland? So, in Scotland there were 222 in total, of which 198 now have access to a free-to-use machine. I think that it's just worth adding quickly. The number of ATMs has doubled in the past 10 years. And yet I hear that 700 have closed in Scotland? No. I think that the figure currently open in Scotland is probably the highest ever. 700 have not. I mean, there's always ATMs closing and opening every month. There's quite a significant churn for all sorts of reasons, but no, there's been no reduction. So, the numbers have been maintained. It's a question of where they are. Yes, it's at its highest level, so at the moment there are almost 6,400 machines in Scotland of which 5,400 are free. I suppose that one concern really is with the banks closing on the high streets. ATMs appear to be an integral part of the solution for customers where these banks have gone. Particularly with vulnerable customers who have difficulty accessing banking services, the ATM becomes very much a lifeline for them. To what extent do you take that into account? Does that come into your calculations? First of all, we don't run any ATMs. You may have got the impression from the last session that we run ATMs. We don't. We manage the network. So, it is up to banks and independent ATM deployers as to where to put ATMs. But generally, I think that the banks themselves will want to have an ATM if they're closing a branch and ATM deployers' independent companies will see a market opportunity. You're saying that you don't actually have input into opening or closing ATMs? We don't run any ATMs. We run the network. However, as Mary has explained, we have a financial inclusion programme that is designed to put in ATMs that could not otherwise be justified. That is agreed with the banks? Yes, absolutely. The banks are very supportive of it. The banks want a widespread network of ATMs, as we do. Is it simply a bank that will advise you that they're going to close their ATM in a particular area? Is there a process for that? They may do. The banks on the whole haven't been closing ATMs. What they've been doing is selling their ATM estates to the independent companies. So, they're selling them to companies that charge for them. No, the banks pay a fee to the ATM companies every time there's a transaction. The ATM deployers may charge, but that would not be a consequence of the banks outsourcing their ATMs. Of course, most of the ATMs are now with independent suppliers. I'm thinking it's around half. All of what you call the remote ones that are not in a branch is the vast majority of them. Less than 3 per cent of transactions in curfee link sets the central interchange as part and the operating rules of the scheme itself. The actual sighting, as Mark has said, is the decision whether to install a machine, where to install it, what to pay the retailer. All of that is not visible to Link. It is essentially an individual commercial arrangement between the operator himself or herself and the retailer. They also have the ability to decide whether to charge the customer directly or whether they take the interchange rate that is set as part of the rules. It's all entirely done by our members. You make it sound very remote from yourselves. Well, again, I come back to what Link is. We do not run any ATMs. We were set up to manage a network. In Britain, we have a single nationwide network of free-to-charge ATMs. That is unusual. In most countries, ATMs cost money to run. In most countries, there is a charge. If you go to America, you'll be lucky to find a free-to-use ATM. In fact, it's a really good system that has 70,000 ATMs. Most of them are free-to-use. As Mary has said, only 3 per cent of transactions are tracked to charge. Any card works in any machine. We think that that is a really good system. You mentioned deposits. You said that they are largely not available at the moment to do deposits through your ATMs. I was wondering what the barriers are to that. Is that down to the individual ATM operator, whether they install the technology or what can be done to encourage that? The Link system does not accommodate cash deposits. Money can be paid into machines in bank branches. As I said at the beginning, there is clearly a problem with small businesses that want to pay in large amounts of cash. That would only be available if it was a bank ATM? If all of the banks wanted to do that, they could ask us to do it, but they haven't. I was going to say that effectively what happens today is that there are multi-function ATMs, which will take deposits of cash and notes and checks. They are run by the banks, as Mark says, inside their bank branches, but those facilities are only offered to their own customers in their own branches. If our members wanted Link to build a facility to have a central infrastructure to support deposits reciprocally, we would be open to doing that for our members. I take it that that would be a security issue. I don't know if it was your constituent with £10,000 in cash. I think that there might be some questions asked about depositing £10,000 in cash anyway. The thought of having an ATM and a small retailer taking in £10,000 of cash would, quite rightly as you say, raise security and money laundering issues of that amount. You may be aware that an Australian bank has recently been caught for large amounts of deposits, so there are security issues, and that's precisely why the banks want control of it, which they can have within their branches. It doesn't alter the fact that there is a problem for retailers if a branch closes, that they will have to travel further to deposit their cash. We accept that. We talked about the availability of ATMs and the sites and locations on how easy it is for a business. For example, in a remote area where there's a no-village shop but maybe a village pub or a hotel, how easy would it be for them to get an ATM within their building? A shop is quite easy. Typically, it's gross, but I did pass a laundry with an ATM, which I thought was rather odd. You've got to have a shop front or people going into the shop, and there are areas, and Mary does all the hard work on this, where it's agreed that it would be really nice to have an ATM. The community needs it, but there's nowhere to put it. There's no retail space. There's no retail space. There's two operating models, really. One is a cash-in-transit operating model, where the transit organisations will deliver cash and they will load the cash, and the retailer plays no real function in that. Essentially, it's run and operated independently. Those tend to be more expensive to run, which is why we tend to find in smaller locations, like small retail and convenience stores. It tends to be a merchant fill, so it requires a relationship between the operator and the retailer themselves to have that agreement to stock and to run the machine. We've mentioned earlier about the importance of tourism, obviously, of cash, particularly in a lot of areas in my region. Actually, an area where there perhaps is a turnover of cash, such as a cafe or a pub or a hotel or something like that, that would be suited. I was just wondering how easy it is for them to access a merchant fill. There are a range of our members that would operate in those sorts of retail environments. A retailer has the ability to contact any of our members directly to see if they could come to a commercial arrangement to install a machine. Link also has something on its website called a Sugester site. A member of the public or a retailer or a consumer group wishes to put forward a nomination for a site to install a machine. Link takes those emails in centrally and disseminates them amongst our members so that they can basically do a site assessment. Communities could come together and suggest that they can nominate somebody. Andy Wightman, thank you very much. Who are your members? The members are the card issuers, banks and the building societies, and the ATM deployers. They are independent companies that provide cash dispenser services. The grocers and people are not your members. Your role in all of this is to manage a network, so that you have something that will work everywhere. You have taken the step of being proactive in your financial inclusion programme. Are there any other areas where you would consider it appropriate to be proactive on the front foot and go beyond just managing a network? It is worth going back a bit of the history of all of this. Link was originally set up by some building societies many years ago. It then developed into a network for all of the banks and building societies, and it was run by the members. Before I became chairman—indeed, even when I was chairman, the big decisions were taken by the members. That is not easy. There were 36 of them, and, clearly, the interests of the banks and the ATM deployers are not the same. This is about a commercial transaction of how much is paid by one party to another, and they spent a lot of time trying to get agreement and couldn't. Fortunately, thanks to the Bank of England, which required that we had effectively independent governance, the responsibility for the key decisions was taken by the board of Link, which will consist entirely of independent members. We have two bank members who have recently resigned. We now take the decisions as the board, and we clearly have a public interest remit. We are not publicly owned, but we have a public interest remit. Hence, not only have we run the financial inclusion programme well before I was there, which Mary has explained, we have expanded it, and that was our initiative, not forced on us by anybody else, before we took the decision on interchange to have a higher premium. We would increase the premium from 10 pence to 30 pence. We have recently initiated an access to cash review, and the details would be announced shortly because we need to understand the implications of the declining use in cash. Just to remind you, cash use has fallen 30 per cent in the past 10 years, and I think that the forecast is 40 per cent in the next 10. We cannot ignore that, and we need to understand the implications. What we want to achieve is the continued wide geographical spread of ATMs, but the number clearly will fall. We identified in our paper when we published the results of our consultation. There are some city centres with 50 pay-to-use ATMs. We do not think that the public will be disadvantaged if that number falls to 40, or even to 30 or to 20. To give you a stat, 80 per cent of ATMs are within 300 metres of another one. On the public interest remit, banks are free to pull out of the network, but is the position now that your members are essentially locked into something that is so mutually beneficial to them that it would be an odd decision to withdraw? They are free to withdraw. We sincerely hope that they will not. We know that all the banks are committed to what we are trying to do, and they are warmly welcome. They have been very supportive of the financial inclusion programme. They want to provide nationwide access to cash for all of their customers. To be fair to the banks—I am not here to represent the banks—they have a cost infrastructure that is now out of keeping with the market. People are using bank branches less and less, and that is why branches have closed. The banks absolutely want a nationwide network of free-to-use cash dispensers and are very supportive of our financial inclusion programme when we talked about increasing the premium from 10 pence to 30 pence, which means that, for an individual ATM, there will be more than double the payment for each single transaction. There is no problem at all. The banks are very happy to pay that. It is providing the service to their customers that they want. Can I come back to the point that you made earlier, Mary, about the new ATMs closing unless there is one at least within a kilometre? We heard in the previous session, indeed, from other witnesses that there are unintended consequences of doing anything that would impose a burden on the last bank in town because then you have a race to leave. How does that work with ATMs? If one is not going to be withdrawn unless there is one within a kilometre, is it just a question of whether people come forward with proposals to close them? How do they relate to each other? The protected machines will take effect from 1 July. At that point in time, we will identify all free-to-use machines that do not have another one within a kilometre. Those machines will be protected. Their rates will remain the same, so there is no commercial reason why a member should pull out. What the link board has said in its announcement in January is that it will do whatever it takes to protect those machines. That is why we have introduced a tripling of the subsidy to help to support those machines that consumers rely on as a single machine within a kilometre. Is that commitment that the board has made? As a result of what we have decided, there is no case for closing any ATM that is a kilometre or more away from another one. That clearly came from the link early on. It was not forced on us. That is what we and the members wanted. However, this is not the only factor. The demand is falling all of the time. If ATMs close, it will be because of falling demand that makes them uneconomic. Even then, with those protected ATMs, we will do whatever we need to do to maintain them being that. For those protected ATMs, there is nothing that is within the responsibility of Link that changes and therefore there is not a case to close them. You have now gone on to say that you will do everything that you can to make sure that, even for other reasons, they do not close. I am a bit surprised at that. Are you suggesting that you will step in and what would you do? Link does not deploy ATMs. However, the board has the ability to take unlimited amounts of money from the members to fund and support protected machines, remaining in situ for consumers' use. How would that work? Do you just pay whatever the operator wants? I will give you an example. The interchange rate will not change. You have a remote ATM that is more than a kilometre away from another one. As a result of what we are doing on the interchange rates generally, there is no justification for closing that machine. However, if the demand falls for other reasons—5, 10, 20, 30 per cent—the ATM deployer might say that we cannot keep it open, not because of the change in the interchange rate. If you take away the commitment that we had made, that ATM would have closed, but now, with the powers that we have got with the expanded financial inclusion programme, that operator can talk to us and we can see whether a higher premium would be justified. Clearly, there can be the same issue as your last branch in town. We do not want ATM deployers trying to game the system, but we genuinely want to maintain those ATMs by providing an appropriate subsidy level. However, there will come a point where what you can offer is disproportionate to the... You know, you would not have a justification for offering a very substantial premium for a tiny number of cash transactions. The chief executive says that £1 million—well, I think that we might draw the line there. I think that we are looking at something frankly to take us for the next few years. That is why we have set up the access to cash committee to help us beyond three or four years. If transactions fall by 40 per cent in the next 10 years, 30 or 40 per cent, there are bigger issues and we need to address those. Our own data show consistently this year that transactions are 5 per cent below last year. I am getting back to the question that Jamie Halcro Johnston asked about other services such as depositing checks and things. That is not something that you said that that is up to the operators and what they wish to do, and they deploy that within bank branches. Do you have no role in trying to either encourage that or promote it, or think about how it might be expanded to help particularly remote areas? I think that we also need to note that, going back a few years, people were seeing ATMs as being able to do all sorts of things like checking balances, topping up your ATM, changing your pin number, all of those things. Almost all of them can now be done more easily by doing that on an app. But they can still be done on ATMs? As some of them can, yes, certainly checking a balance can be. But in terms of new services such as depositing money, is that something that you would try to promote or have an interest in encouraging or you leave it entirely up to them? Well, I think that we ran through the issues on that. It is really very difficult for a small ATM and a grosser shop to start accepting large amounts of cash. If it was large amounts, the merchant fill system doesn't work, you're left with a small retailer with a load of cash that is not in the machine. But depositing checks is not a security issue? But why would you want to deposit checks in a machine when you can put them in the post? Oh, there's online digital check imaging that's being rolled out, where you photograph and the paper check never goes through the system. It's being launched by the Check and Credit Clearing Company. Oh, it's not launched yet? I think it's in a phased rollout. I'm not sure it's updates, but I'm sure Check and Credit Clearing would be able to provide you with a lot more detail on that. Okay, thank you. Thanks. How long does your commitment not to close an ATM within one kilometre of another last for? So, the commitment's been made. So, there's been an announcement to bring in to change rates down year on year for the next four years, out to the end of 2020. And the protected status will remain in place for those machines for that period of time. As Mark has mentioned, what's being kicked off now is an access to cash review, which says as we get towards the end of that period and for the future, what does the size and shape of the network look like? And so the outcomes of that investigation and that research independent review will help to shape what happens beyond that. So, this is just a fudge, really, isn't it? It's just 18 months this commitment to one kilometre. You said 2020, that's 18 months away. Or four years. Four years. I mean, we're reducing the year. 2018, and you said 2020. I've got that wrong. It's for the next four years. It's from the 1st of July for four years. So, no ATM will close within one kilometre of another for four years? That's a cast iron commitment. That time is reluctant to make promises that we can't keep. We don't run any ATMs. There will be ATMs that will close for reasons that have got nothing whatever to do. But let me rephrase that. No ATM will close within four years of another within a kilometre for commercial reasons, which was your terminology earlier. Well, they won't close because we have reduced the general interchange rate because we're not for those ATMs. If the ATM deployer needs to close them for other reasons, for example, my own local ATM closed because the garage closed. We can't stop that. So, we're doing everything that we possibly can, but we don't want to make a promise that nobody could keep. Okay, and in your written evidence, you say that the number that could close because of the change, the interchange fee is somewhere between 1 and 11 per cent, but KPMG has got that as high as 18 per cent, but the difference between 1 and 11 per cent is quite big. That's 30 or 300 machines, but what end of that scale is it? Well, I think that because we don't want to give unreasonable precision, what we ask KPM to do is look very broad brush if the interchange rate falls by 20 per cent, what do you think would happen to the number of free-to-use ATMs, and their estimate was from memory 10 to 18 per cent, but that was before any mitigating factors. Now, ATM deployers pay a rent to retailers. In other countries, the retailer pays the ATM deployer. Now, the rents clearly will be affected by this. ATM deployers will be renegotiating some of their contracts. That will mitigate part of the effect. Some ATMs earn income from doing other things, not a lot, but there are other potential sources of income. We can't give a precise estimate, and we certainly don't know the number, the notion that we've got a list of them, we don't. It is your own figure to say that it is up to 300 ATMs in Scotland could close as a result of the interchange free-to-use ATMs. That is out of six. That is correct. That is out of six, as a result of what we have done, but that is out of the 6,000 in Scotland. I understand that. I'm just asking you to confirm your own figure, so it is up to 300 ATMs in Scotland could close. We have indicated that we think the likely range is between 0 and 10 per cent. We've got one to 11 per cent here, and that figure is 300. John Mason, deputy convener. Thanks, convener. We've covered that quite thoroughly, but just if I could clarify the actual figures, at the moment, the interchange fee is around about 20 pence. Is that my understanding? I have 25 pence. The standard one will fall by about a penny or thereabouts in July. Five per cent off. Five per cent off, so that's 24 or thereabouts. At the moment, on top of the 20p in a deprived area, there could be an extra 10p, so they would get 30. At the moment. Sorry, on top of 25, it would be 10, so it would be 35. Yes, so the current programme provides a 10 pence premium if you run a free-to-use machine in a deprived area, and there's not another one within a kilometre, effectively, yet. I would have to say, from my experience, that has worked, because where I live is a deprived area, and it is much better now at getting free-to-use machines than it used to be, so I'm certainly positive about that. And that 10p could go up to 30p, depending on circumstances, so then they'd be getting 55 pence. Yes, yes. So that's approximately the figures right up here. I was just trying to get my head round it, because we were discussing it earlier on, and we weren't very sure about it. Right, I think that's all for me. Thank you, Jackie Baillie. Yeah, could I pursue the figures just a bit further with you? Because, according to our papers, the protection applies to, in effect, something like 221 Scottish ATMs. Is that right? That's out of a total of 6,700. So that actually is quite a small proportion that's protected in this way. Yeah, but the ones that we're protecting are the ones that are a kilometre or more away from other ATMs. I understand that, but what the point I'm making is, it's actually quite a small number, given the overall size of the coverage. But it would maintain the geographical spread 100%, which is what we're trying to do. Okay, okay, let me pursue that slightly further with you, because of the ones that are left, your estimate of 0 to 10% or 1 to 11%, let's just agree to disagree on those margins. Actually, it wouldn't be 300, it would be something like 700 ATMs. The figure that we heard earlier, not of ones that have closed, because, of course, they haven't, but this is the potential you're looking at will be impacted. That's your own figures that I'm using against the number of ATMs that you currently have. Is that correct? So, I think the estimate of 1 to 11% cannot be directly applicable to certain geographies. It is an estimate across the entire UK. So, in some... Do you have an estimate just for Scotland then? I mean, again, that sort of thing is just not feasible to do that sort of analysis. We don't run any ATMs again, I have to say. But what we're seeking to do is to maintain the geographical spread. As I drove here in a taxi this morning and I looked at all of the high streets, you could see banks of three or four ATMs together and you go 100 yards down the street and there's another three ATMs. And another 200 yards down the street, there's four ATMs. I could point to several queues and cash machines running out of money at those exact banks of ATMs. Well, that's bad management, if they are. Indeed. So, I think you're going to see those sort of things, those numbers being reduced. But our commitment is to maintain the geographical spread. That is what is the main concern. If ATMs are busy such that they're accused, the ATM deployers will not be shutting them. It strikes me that 221, which are guaranteed, spread across Scotland is actually very thin coverage. So, I'm really interested in how many of the 6,700 will remain. Now, if you're saying to me that your percentage figure lacks sensitivity to tell us what's going to happen in Scotland, I would invite you to go back and try and get us more sensitive figures, because at the end of the day, it is about the coverage overall. And to simply say you'll protect 221, which is welcome, actually doesn't begin to address the sheer size of the coverage you currently have and what it could shrink to. Okay, and understand that. But we go back 10 years ago, there were half the current number of ATMs in Scotland. Indeed. And I doubt whether your committee was saying we desperately need twice as many ATMs as we've got. Now, the fact is that we've got them. And taking something away, we know has a greater public impact than if you never had it in the first place. Now, what's happening is a response to what the public is doing. The public is using cash less. The nationwide figures, and now I don't have separate Scottish figures, on our ATM transactions, and we look at it week by week, at down 5% on a year ago. If that is maintained for the next five, six years, and there are differing views, we'll get some new estimates, I think, in the next month. It could accelerate. Indeed, in London, I was a bit interested last week, and I came out of my underground station to find two people collecting money for charity. One with a bucket, and one with a machine saying, £2 contactless payment. You know, that is the sort of thing that you're now beginning to see. So, if the public aren't taking out cash from ATMs less and less, obviously the number of ATMs will fall. We can't give you a precise estimate. That is commercial decisions for individual businesses. In the same, you'll have retailers closing, which I'm sure bother most communities far more than ATMs closing. You can't ask a retailer how many shops you think might close in the next four years as a result of people shopping on Amazon. You know, they'd love to know, so it will depend. But, as I've said, we are committed to maintaining the geographical spread. That is what we think people are concerned about. I would like to push you to give us more of a description of what that will look like, because again, to repeat the point, not to labour it, £221 out of £6,700 is what the guarantee is for. We want to know where the rest are going to go from. And let me just make the comment to you that in the last decade, we've seen the growth of ATMs, we've also seen the closure of hundreds of bank branches. I suspect that there's a correlation between the two. And for some communities, it's not just the last banking branch that's in, it's the last ATM that's in town. And we obviously want to protect that network, as I'm sure you do as well. Absolutely. I'm just going to make a point on... So the 25 pence interchange rate is an average cost based on the entire network of 70,000 machines. So in crude terms, it's the number of transactions divided by the cost divided by the number of transactions, essentially. Each commercial organisation that is a member of Link that deploys ATMs has their own operating model, their own set of individual costs and their own way that they've set up their business. So take, for example, rent that's paid to retailers. In some circumstances, that would be zero. And in others, it could be as much as £20,000. We do not have visibility of that on a site-by-site basis. So to be able to strictly say to you, this is the list that will close, it is very challenging. I would accept a broad estimate. At the moment, you're giving me nothing other than UK-wide figures. So I'm not looking for, on each individual high street, this is what it will be, but I do think you can go further than you've gone for us today. We'll have a look at it, but again, thank you. You know, it is not easy. I think we'd stand by our one to 11% as a result of the reduction in interchange. The far bigger effect will be from reduced usage. Now, interestingly, if we had not done what we've done on interchange, if we had done absolutely nothing, you would have a greater rate of closure of ATMs. And because we had done nothing, we wouldn't be here being questioned by you. So paradoxically, by seeking to provide greater protection, we open ourselves up to public scrutiny, which we are delighted to do incidentally. We are very happy to have this session or with anybody else, because what we want to do is exactly what you want to do. Excellent. So in that case, let's work together and the more information you can provide us with, the better that will be. Thank you, convener. Well, on that delighted note, we'll close this part of the session. Thank you very much to our two witnesses. Thank you for coming in. The next item on the committee agenda is the late payment of commercial debt Scotland amendment regulations 2018 or SSI 2018-160 in brief, those regulations amend the late payment of commercial debt Scotland regulations 2002 that implemented the EU directive on combating late payment in commercial transactions. The instrument clarifies that representative bodies are able to challenge in the court of session the use of certain grossly unfair terms or practices in or in relation to contracts to which the late payment of commercial debts interest act 1998 applies. The committee sought the views of stakeholders who responded to a consultation on the issues of late payment. The Federation of Small Business has noted their support for the changes made by the instrument. We have also received comment from the Food and Drink Federation Scotland. Does any member have any substantive issues that they wish to raise or are they content that the instrument comes into force? I take it from that. We're all agreed and content with these. Thank you very much. I'll now suspend the meeting and we'll move into private session.