It is a pleasure to serve under your chairmanship, Sir Henry. I thank Seema Malhotra for securing this important debate. I commend her for encouraging us to consider the issue across multiple areas, because it is in understanding how things fit together that we will find some of the solutions that the 15 speeches that I have carefully listened to in this morning’s debate have drawn attention to.
To improve financial inclusion, we need to be firing on all cylinders, bringing together regulators, civil society and industry—from the big banks to credit unions—to ensure we create a financial services landscape that offers something for every consumer. I am keen to engage with the points made. I will have further conversations, including with David Linden tomorrow; I have attended the all-party parliamentary group of Yvonne Fovargue and met a number of other colleagues, who are here today, on specific matters. I will try to attend to all the points in my response.
It is undeniable that the retail financial landscape is changing, as more consumers and businesses opt for the convenience, security and speed of digital payments and digital banking. At the end of 2017, debit cards overtook cash for the first time as the most frequently used payment method in the UK. It is also true that increasing digitalisation and technological innovation is changing not just the way we pay for things, but every part of our society—from communications to shopping, and from transport to healthcare. It is an exciting but disruptive time. I acknowledge that it is a confusing time for some of our constituents, as they struggle to keep pace with the rate of change.
The Government recognise that there is a need for cash and traditional face-to-face methods of banking. Although financial firms take operational resilience very seriously—indeed, last Monday I visited Barclays Joint Operations Centre to see how the bank is keeping its customers safe from cyber-attacks—we cannot guarantee that IT systems will never fail. Cash is therefore a crucial back-up system that many people continue to rely on.
We have heard that cash remains some people’s preferred, or only, method of payment for a variety of reasons. I am sensitive to that, and it is important that the Government act. We have expressed our commitment to safeguarding access to cash for people who need it. As the hon. Member for Feltham and Heston acknowledged, we have set up the Joint Authorities Cash Strategy Group, which brings together the Bank of England, the Payment Systems Regulator and the Financial Conduct Authority to provide comprehensive oversight of the UK’s cash infrastructure, from supply to customer access. The announcement was made a couple of weeks ago, and the group’s work will complement the Bank of England’s work to reform the wholesale cash industry, so that it encourages innovation and guarantees resilience, even in a lower cash usage environment. As cash is used less, we need to refine the way it is distributed, because the existing method is too expensive and needs to be improved.
Industry has a central role to play in maintaining access to cash, because with industry innovation we can do more at a lower cost. As the Access to Cash Review showed, creative industry initiatives are already being developed. In conjunction with PayPoint, Link is exploring a new service that offers cash and balance inquires through PayPoint’s convenience store terminals. In response to Ruth George, I make the following observation on an initiative by Square, a digital payments company that recently did a trial in Holywell to help small, independent retailers take card payments. It found that 55% of shoppers in Wales would be more likely to shop locally if businesses took cards, which has led to more than 95% of the town’s independent shops now taking cards. It works both ways, and FinTech provides new opportunities.
The shadow Economic Secretary mentioned the important initiative by Lloyds, in partnership with Visa. I note his reference to the Post Office, which provides for cash withdrawals and cash and cheque deposits at each of its 11,500 branches across the UK. Indeed, a sub-postmaster in Devon, whom I met last year, recently contacted me again to say that banking transactions have really boosted business at his rural post office, which is hosted in a library. I will meet him next week to look at that and at what lessons can be learned across the country.
I am sensitive to the points raised by the hon. Members for Feltham and Heston and for Harrow West (Gareth Thomas) on credit unions. I want to update the Chamber on that matter, which I take very seriously. There are 440 credit unions across the United Kingdom, and it is a question of distilling exactly what they want to happen. When I spoke to a number of CEOs of credit unions at the Association of British Credit Unions Limited conference on