Survey of payment services - PTS-ER-2006:41
31/10/2006
In April 2006, PTS was assigned by the Government first to survey the counter service network in relation to the objectives prescribed by the government and second to survey which of the basic payment services are required by the different user groups, both consumers and business operators, and whether there is any real demand for a separate service for people who do not have a bank account. Furthermore, the assignment included identifying where the government may need to assume special responsibility for the provision of basic payment services and reporting on which market stakeholders may be willing to offer these services in those areas where such services are not provided in some other way and where it is also not commercially feasible to do so. This document reports on the assignment.
As regards the distance to fixed service points, it has emerged that 240 000 people are more than 20 minutes by car from the nearest counter service point, but that the vast majority of these people have access to counter services through their rural delivery service. PTS concludes in this report that even if the distance to a Svensk Kassaservice fixed service point has increased in recent years, the fixed service network together with the counter services provided by the rural delivery service, provides a service that fulfils the objectives prescribed by the government.
As regards the demand for basic payment services, PTS considers that there is demand for, in particular, Svensk Kassaservice's services in sparsely populated areas where there are few banks or other service providers. PTS's annual survey of demand shows that about one to two per cent of the population mainly use Svensk Kassaservice to pay bills or withdraw cash. Since the turn of the millennium, the volume of transactions at Svensk Kassaservice has reduced by 65 per cent and this decline is expected to continue at about 15 per cent per year.
Based on the services that Svensk Kassaservice currently provides and the demands that need to be secured, focusing on the company’s primary customer groups, PTS considers, in line with previous inquiries 1), that what should be provided is access to cash-based payments of bills, cash withdrawals on certain forms of payment documentation, cash withdrawals on certain cards and some daily cash handling for, among others, business operators and associations.
The current counter service network offers an opportunity for people without bank accounts to make deposits and withdrawals over the counter through paying-in and withdrawal slips. PTS considers that there is no general demand for a special service for people who do not have a bank account. People without a bank account, or those who have been refused a bank relationship providing supplementary services, such as for example Brevgiro and a debit card, have a further opportunity to deal with deposits and withdrawals over the counter at bank branches or other establishments that provide such services.
However, there are still some groups for whom it may be necessary to put special solutions in place. One such group includes people who receive financial support from municipal social services and who do not have any ID documents. It is probably best if the party making the payment determines and arranges the most appropriate way for payments in purely practical terms to be set up for this group of people. The Swedish Migration Board's payments to asylum seekers represents one example of how a well-adapted solution can be achieved. The Swedish Migration Board has procured a service for this group, which involves payments as of 2006 being effected via the ICA supermarkets at their shops or at bank ATMs.
During the implementation of the present assignment, it was observed that new technical solutions for deposits and withdrawals have developed rapidly. A number of interested parties have built up their preparedness, both technically and organisationally, to be able to meet the demand for services that it is considered may arise if Posten's obligation to provide counter services comes to an end. Among the parties expressing an interest are several nationwide food store chains, petrol station chains, convenience stores and roadside shops as well as banks and other businesses operating within the area of payment transactions and cash handling.
The Post and Counter Service Inquiry's proposal in 2004 on winding up the Swedish counter service created incentives to pursue this development. At the same time, PTS has found that the absence of clear information about Posten's commitment and about how the counter service will be run in the future impedes the development of new solutions and the change of consumer behaviour. In PTS's opinion, the single most important precondition for future progress towards a more user-adapted and cost-efficient counter service may therefore be the provision of clear advance information about the future commitments of Posten regarding counter services.
Two main scenarios for how counter services may be provided in the future are presented in this report. One is Svensk Kassaservice's own scenario whereby a nationwide operation is maintained up to and including 2010, following which the business would become responsible for solutions in sparsely populated areas up to and including 2015. The solution for sparsely populated areas involves Svensk Kassaservice providing counter services through the rural delivery service and in 134 places where there are no banking alternatives 2) .Svensk Kassaservice's commitment ceases after 2015.
The other scenario that PTS refers to as ‘Targeted initiatives’ is based on the precondition that Posten's obligation to be responsible for counter services is replaced by a policy objective whereby ‘everyone in society should have access to basic payment services at reasonable prices’ and the fundamental approach that the demand for counter services should in the first instance be satisfied by the stakeholders in the banking and retail markets. A government authority has been commissioned to monitor developments to ensure that the overall counter service provided in Sweden satisfies this policy objective.
In both scenarios, it is anticipated that the current service through the rural delivery service will remain unchanged. The government initiatives that may appear necessary, according to PTS's scenario, must be adapted to local and regional conditions. If special initiatives are needed on the part of the government, these may consist of, among other things, funds being appropriated for the provision of payment services within 'multi-service projects' and/or by government investment support. This scenario is based on the possibility of changing over to other solutions earlier than in the scenario presented by Svensk Kassaservice, and in this way creating earlier incentives for other stakeholders to provide alternative solutions. One precondition for achieving this is timely information about the cessation of Posten's obligation to assume responsibility for counter services, though by 1 January 2009 at the earliest, as it is considered that it will be necessary to have a readjustment period of one and a half years computed from the date on which the Riksdag (Swedish Parliament) makes a decision on the winding up of Posten's responsibility in this respect. Indeed, the earlier the responsibility of Posten ceases, the greater the financial scope in the national budget becomes to, if necessary, support local and regional solutions to ensure an alternative that is sustainable in the long-term.
There are also reasons in favour of PTS's alternative as regards opening hours, costs, sustainability, the long-term perspective and flexibility. The assessment is not clear-cut as regards the geographical distance to services and the composition of the services to be provided within the scope of this alternative, and it is an essential condition that the authority given this assignment monitors the situation to ensure that payment services satisfy the policy objective.
Previous inquiries have reported in great detail on the core aspects of the provision of counter services and possible solutions for the future. In this report, PTS presents overall scenarios, but it has not been possible to analyse in depth the preconditions for and consequences of the various alternatives. There are therefore some questions that through closely associated investigations may need to undergo further examination in the course of the ongoing preparatory work with this matter. These issues include accessibility for and the needs of the most remote households in sparsely populated areas. As regards the authority that should bear the responsibility for monitoring the policy objective, PTS notes that the Swedish Consumer Agency has adopted a positive stance regarding such an assignment in its statement of views on the Post and Counter Service Inquiry.
PTS wishes finally to point out that measures such as, for example, sector agreements on offering access to payment services in the form of supplementary services to bank accounts and special information initiatives, as proposed by the Post and Counter Service Inquiry, may facilitate the implementation of the scenarios presented.
- Payment Service Inquiry (Ministry of Finance 1998:04) and the Post and Counter Service Inquiry (Ministry of Industry, Employment and Communications 2003:09)
- Most of the 134 counter service points in places without banking alternatives are currently run by a representative or partner of Svensk Kassaservice.