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MONEY BOX

Presenter:	PAUL LEWIS


TRANSMISSION:	1 JULY 2006   1200-1230 BST    BBC RADIO 4



LEWIS:		Hello.  In today’s programme a new service 
now allows you to use your mobile phone to buy things with a text 
message.  Will cash survive?  Bob Howard’s with me today.

HOWARD:		I’ve been to Edinburgh to look at another new 
method of payment: the debit card which aims to replace small change.

LEWIS:		Will wine investments be a corker or end up in 
the red?  Oh dear!  And after 160 years no one will be with the 
Woolwich as Barclays announces plans to wipe the historic brand off 
the high street.

40 years after the first Barclaycard peaked out of that bikini in the 
famous ad, are we on the verge of a new revolution in the way we pay 
for things?  We still spend almost as much in cash as we do on our 
plastic – one reason being that retailers and banks discourage their use 
for amounts under £10.  But Mastercard and one high street bank are 
trying out a new system that allows an ordinary debit card to be used 
for very small amounts and you don’t even need a PIN.  Here’s Bob 
Howard’s report from Edinburgh.

HOWARD:		Welcome to the brave new world of shopping.  
I’m in the corporate headquarters of the Royal Bank of Scotland in 
Gogaburn outside Edinburgh.  If it sounds like a shopping mall, that’s 
because the ground floor has shops for the staff to use from hairdressers 
and chemists to, yes you’ve guessed it, Starbucks.  But for the last week 
they’ve had a new weapon to beat the queues – the contactless debit 
card.  That’s a regular debit card with a new feature.  Alan Richardson 
and Sarah Newton are two employees who’ve been trying out the 
system and they told me all about it.

NEWTON:		You go to the till to pay as normal just with 
your card out.  The people at the till will then type in the amount into 
their machine rather than inserting it and then all you have to do is hold 
your card for a second against the machine.  It beeps and you’re away, 
your receipt comes out.  It’s brilliant.  I had a couple of reservations to 
start with, but I find it difficult not to use it everywhere now.

HOWARD:		So what were your initial concerns?

NEWTON:		I was worried maybe about security, if anyone 
can just hold it up, but with a limit of £10 on it and obviously we check 
our statements carefully, there’s no real danger.

HOWARD:		Now one thing research has found is that people 
who use the system tend to spend more money than they would if they 
were paying cash.  Has that been your experience?

RICHARDSON:	It hasn’t been my experience.  I’ve just carried 
on with exactly the same things as I would normally do.  It’s easy to 
keep track of.  I know how much I’m spending through my current 
account.

HOWARD:		Is it pre-paid?  Do you have to charge up the 
card with credit or does it work as a debit card?

NEWTON:		No, it’s just a debit card.  It works exactly the 
same as your Maestro card would but without having to remember 
hundreds of PIN numbers, which is great.

HOWARD:		Contactless means what it says.  The card 
doesn’t actually touch the reader. You just float it over and off you go 
with your coffee or shampoo; no messing around with change.  It’s 
estimated that using cash costs UK banks and retailers up to £4 billion a 
year.  Replacing it has the potential to be cheaper and quicker for all 
concerned.  David Rockliff is Head of Commercial Development for 
the Royal Bank of Scotland.  He’s clear about what he thinks are the 
advantages of the system.

ROCKLIFF:	It’s for low value purchases and for this trial 
we’ve picked a tenner as a good threshold.  But the big benefit over 
cash is you don’t end up with a pocketful of change, you don’t end up 
having to queue at ATMs to get the cash out; you can run it straight 
from your bank account.

HOWARD:		Most contact less transactions are authorised 
simply via communication between the reader and the card.  To prevent 
fraud, there’s a random security check, so after a certain number of 
purchases you are asked to put in a PIN as you would with a normal 
debit card.  I asked David Rockcliff if the system wouldn’t confuse 
consumers who had been told with the roll out of Chip and PIN, they’d 
need to be put in a PIN for every card payment.

ROCKCLIFF:	That’s a good point and we’ve done a lot of 
research with our consumers and actually once we introduce the 
concept of this random security check being basically a Chip and Pin 
transaction, then people are pretty comfortable with it again.

HOWARD:		Who has the ultimate liability if somebody 
fraudulently uses one of these cards or steals it?

ROCKCLIFF:	It’s exactly the same as it is with a current debit 
card or credit card proposition: the bank takes the liability.

HOWARD:		So what benefits is it bringing to retailers?  
Presumably there’s a charge for them to install the technology and also 
a charge which they must pay to you in order to have these transactions 
processed?

ROCKCLIFF:	Most retailers recognise that cash has got 
considerable cost as well.  They have all the security costs of 
transporting it around, they have the banking associated with it, and 
actually cash itself is a considerable cost.

HOWARD:		Last year was the first where we spent more on 
debit cards than we paid in cash, and when we do pay in cash more than 
half our purchases are under a fiver.  James Monks works for Compass 
Catering, which manages the Starbucks restaurants here as well as the 
staff canteen.  His outlets have been taking part in the Royal Bank of 
Scotland trial, although in this case it’s the bank which has installed the 
technology and they’re not charging him for the payments.  That’ll be 
different in the real world, but he’s seen enough to be impressed.

MONKS:		Particularly in the staff restaurant here, the 
transaction time is probably halved.  If you think about the amount of 
cash that goes through people’s hands through any retail business, it 
would also alleviate the fraudulent activity.

HOWARD:		It’s inevitably going to lead to job losses, isn’t 
it, if this is rolled out?  People are expensive to employ.  If you can 
employ less people in order to take payments, then you’re going to do 
it, aren’t you?

MONKS:		Well debit card systems didn’t prove that to be 
the case, so I can’t see a new introduction of a contactless trial for that 
to be the case either.

HOWARD:		That was James Monks from Compass speaking 
to me in Edinburgh.  So no radical changes to retailing in the short-
term, but the Royal Bank of Scotland and their partners Mastercard are 
hoping to do a city wide trial somewhere in the UK next year.

LEWIS:		And Bob, has Visa been following this idea up?  

HOWARD:		They have.  They’re conducting their own UK 
trial this autumn.  They’ve already got around 5 million contactless 
payment cards in circulation in the US and around 30,000 US retail 
outlets have signed up to using the technology.  Back here we’ve 
learned that Britain’s biggest retailer Tesco’s are looking at a whole 
range of new payment schemes that includes contactless payment cards, 
club cards and staff cards through to using your mobile phone or via an 
Oyster card system like the one currently used on the London 
Underground.

LEWIS:		Thanks, Bob.  Well one new way of paying with 
your mobile phone has recently gone live with some big name 
companies signing up to it.  PayPal is owned by eBay and is an 
international payment system originally devised to help people pay for 
things bought at online auctions.  But this month PayPal has spread its 
service.  Now you can buy things direct from adverts in magazines or 
on posters by sending a text message from your mobile phone using a 
five or six letter code on the advert.  Roy Vella, Head of Mobile 
Payments at PayPal Europe, told me how it worked.

VELLA:		Say I’m walking along and I see a billboard 
advertisement for a Harry Potter DVD set.  In the PayPal mobile world, 
a PayPal mobile user will be able to simply text message – it would via 
a standard SMS text – Harry to Warner Brothers, for instance, or to 
another short code, to order that DVD.  And the scenario is this: so I see 
the advert, I text Harry to Warner.  I get a call back from PayPal that 
says, ‘hello, this is PayPal Mobile.  We’ve just received an order for a 
Harry Potter DVD set.  Please enter your PIN’ and then it reads back 
the order.  It says ‘thank you very much.  We have an order for Harry 
Potter DVD set.  We’re going to send it to your home address on file.  
We’re going to use your credit card on file, ending in these four digits.  
Hit 1 to confirm; hit 2 to cancel’.

LEWIS:		And what if you do this and you make the 
payment and the goods never arrive?  Is it insured?  Where do you go 
for redress?

VELLA:		It would be covered by all the same standard 
payment rules, so if they use their credit card but they use it within the 
PayPal system they have the same protections that they would 
otherwise.

LEWIS:		You also say that you’ll be able to send 
payments to friends.

VELLA:		In that scenario, you text to PayPal a very 
standard phrase, so you say ‘send ten to …’ and then you type in a 
mobile phone number.  And in the same way, we call you back again.  
We ask you for your PIN to authorise the transaction and then the 
money is sent from your PayPal account.  You can send money to any 
phone number.  You can send money to any e-mail address.  That 
person is going to get an SMS on their phone or an e-mail (if it’s an e-
mail address) that says there’s money waiting for you.  To get it, go 
sign up for PayPal.

LEWIS:		(Laughs) Yeah, but you’d just think that was a 
scam, wouldn’t you?  I get messages like that all the time.  I’ve won the 
Lottery.

VELLA:		Well hopefully you’d be expecting a payment 
from whoever you got it to.  But if you weren’t expecting a payment 
and someone surprised you, yeah it would be better for them to notify 
you because, you’re right, there’s lots of phishing out there for PayPal 
IDs and eBay IDs, etcetera.

LEWIS:		Roy Vella.  Well live now to Tim Jones, a Non-
Executive Director of Capital One, who’s tried to introduce several of 
these new ways of paying.  Tim, lots of ideas, experiments, small scale.  
Are we really going to see a major revolution in the way we pay for 
things?

JONES:		Yes, I think we are.  As ever, these things take 
longer than we all think they’re going to to happen.  I think this time the 
revolution is going to be a number of different things that will all reach 
scale, so we’re not going to see cash replaced by one thing; we’re going 
to see cash replaced by a number of things, each of which has 
something about it that makes it particularly suitable.  

LEWIS:		Isn’t one of the problems though that for small 
items, cheap items – newspapers, coffee, a burger – the amounts of 
money are so tiny banks can’t really make money from it; the charges 
are bigger than the actual amounts?

JONES:		Yuh, that certainly was the reason, maybe let’s 
go back ten, twenty years ago, why debit and credit card use below £10 
was discouraged.  But you know what’s happening, every year 
computers get faster, bandwidth gets bigger, they get cheaper, and so 
the kind of crossover point where it becomes economic to do a 
transaction keeps on reducing and that’s really what lies behind the 
touch and go stuff that is happening at Edinburgh.

LEWIS:		And if that becomes widespread, what about the 
security and the privacy issues?  I mean first of all someone has a 
record of everything you’ve bought down to the smallest thing, where 
you’ve travelled and everything like that.  There are questions of 
privacy and security, aren’t there, in that?

JONES:		There are very, very big questions of both.  And 
security in a sense is the easier because that’s a question of fact – either 
your system is well designed and it works or it’s not and somebody 
finds their way in and then you have to revise it.  And that can be done.  
It’s a war sort of between the good guys and the bad guys.  The privacy 
thing is much more profound, you’re quite right.  We are giving up 
privacy hugely in the way we use all of these new things and I don’t 
think we’ve really realised it yet because nothing very bad has 
happened.  Not yet.  

LEWIS:		No, but the two things can be the same, can’t 
they, because we had a case recently of somebody within a bank 
stealing information?  That’s not some guy from outside with a laptop 
sitting in the corner doing something clever.  This is an employee.  And 
more and more employees of banks, many of them maybe not even 
located in the UK, are going to have access to our personal data.

JONES:		They are.  I honestly don’t think that’s a big 
problem. Those kinds of problems inside corporations are very small in 
number; they can be very serious.  You can normally devise a system to 
close the loophole that’s been opened up.  What worries me more is not 
the inside the corporation kind of miscreant – that’ll happen – but it’s 
the general stuff that we’re leaving all of our details electronically 
littering the Internet every time we do transactions.

LEWIS:		Yes.  I mean you’ve been telling us for some 
time that there would be new ways of paying and that you were behind 
the infamous Mondex card, which is a preloaded payment card, the 
electronic purse.  Now that really didn’t work.  Why should we believe 
it will happen this time when it hasn’t happened in the past?
JONES:	I think because things have changed so much 
from those days.  I mean it’s 11 years ago that we launched the Mondex 
trial in Swindon and an awful lot’s changed.  Principally the 
proliferation of network connectivity, whether it’s cellular or WiFi or 
broadband at home, whatever it is, we are all networked all of the time 
and we’re carrying around in our mobile phones very sophisticated 
computers that are getting more and more sophisticated.

LEWIS:		And briefly, Tim, is this going to be the end of 
cash?  It’s been around for two and a half thousand years.

JONES:		No.  Cash is a fabulous product.  As somebody 
who’s competed with it for a long time, I have a huge respect for it.  
The batteries don’t run out on cash; it’ll always have a role.

LEWIS:		Okay.  Tim Jones from Capital One, thanks.  
And you can have your say on whether cash is doomed and how happy 
you are with these electronic payments on our website, 
bbc.co.uk/moneybox.

Interest in wine as an investment has been raging in recent months, 
partly because of the release of what experts have told one of the finest 
vintages since … well perhaps ever – Bordeaux 2005.  Although 
expensive already, investors hope it will make them a lot of money.  
The other reason for the interest, of course, is the never-ending search 
for an alternative to shares.  Bordeaux is one wine and champagne can 
be another, which is bought as an investment.  And major sales of older 
wines happen quite frequently in London, so this week I was tempted.

Well to see just how strong the market in wine is, I’ve come to 
Sotheby’s who are holding today a sale of what they call ‘a magnificent 
Bordeaux cellar’.  Now Sotheby’s estimate that this will fetch between 
£1 million and £1.3 million, so we’re going inside to see just how 
popular it will prove to the buyers, the dealers, the collectors and indeed 
the investors.  

ACTUALITY – AUCTIONEER

LEWIS:		Well that was 12 bottles of wine going for 
£5,800.  Now they were Chateaux Margaux in the Bordeaux region of 
France from 1990, but it is still an extraordinary price and well above 
the estimate that Sotheby’s had for this wine, as most of the wines 
today have been.  Well the last of the 1,046 lots have been sold, and to 
find out how they went I’ve tracked down Serena Sutcliffe who is Head 
of Wine at Sotheby’s.  I think you were expecting altogether about, at 
the maximum, £1.3 million for all this wine.  Do you know what it 
fetched?

SUTCLIFFE:	Yup, we did 1.83.  

LEWIS:		What is pushing prices up?

SUTCLIFFE:	I think it’s a combination of a lot of money 
worldwide, plus the fact that wine has become extremely, shall we say, 
aspirational; people see it as something that enhances their life.  Plus 
the fact that the Bordeaux 2005’s have just come out and the top wines 
have come out at astronomical prices, and that of course has served to 
bring up the prices of previous more mature vintages.

LEWIS:		And the people at your sale – are they buying it 
to drink or are they buying it as an investment?

SUTCLIFFE:	It’s always a combination.  With us, it’s more to 
drink eventually – you know building up a cellar for enjoying, 
entertaining, throwing parties, etcetera.

LEWIS:		You mentioned the 2005 vintage and apart from 
being Head of Wine at Sotheby’s, you’re also a Master of Wine.  What 
do you think of it?  Is it really as good as people are saying?

SUTCLIFFE:	It’s very, very good.  I’ve tasted a lot.  It’s 
intrinsically a very, very good vintage.  I mean to say it’s one of the 
greatest ever is pushing it a bit because there’s a lot of vintages in a 
century that fall into that category, but it’s got all the ingredients.

LEWIS:		And for those of us who just might like a glass 
of wine with our dinner, what makes this wine so good?  What is 
special about it that is pushing up the prices and, from what we’re told, 
could well push them well up once it starts to mature?

SUTCLIFFE:	You only need in top red wine equal doses of 
fruit, tannin, acidity.  You need wonderfully healthy grapes; therefore 
it’s very dependent on the weather.  And then you produce wine that 
just has just everything in it and has the potential to age and get more 
beautiful still.

LEWIS:		Serena Sutcliffe of Sotheby’s.  Well listening to 
that in Cardiff is Marlene Shalton, the Founder and Director of financial 
planners Chambers Morgan James.  Marlene, great wine, apparently, 
but is it a serious investment?

SHALTON:	Well yes, it can be.  It’s tax free for a start and 
fine wines have consistently outperformed all other forms of recognised 
investments during the last few years.

LEWIS:		So that wine at Sotheby’s that we were listening 
to there, that was bottles of real wine – you could see them, keep them 
in your larder if you wanted.  What other ways are there to invest in 
wine?

SHALTON:	Well there are quite a number of ways. You can 
buy direct from the traditional wine merchants and some will actually 
put together a personalised portfolio, but they may not necessarily be 
independent.  You can buy fine wine funds on Liv-Ex – that’s an 
international web based stock exchange.

LEWIS:		Now when you buy into a wine fund, that is 
more like investing in a unit trust or something with shares, isn’t it?  
You don’t actually own any wine; you just own a share in a fund that 
owns the wine.

SHALTON:	That’s right, so you’ve really got to know your 
stuff if you’re going to invest on the stock exchange.

LEWIS:		Yes.  But the problem with investing in wine 
itself – I mean first of all it’s unregulated, isn’t it?  You say a wine 
merchant will put together some wine.  Well they’re not registered 
financial advisers.  It sounds a bit dangerous to me.

SHALTON:	I mean that’s the important thing.  It’s not 
regulated by the Financial Services Authority, so some cowboy 
companies have fleeced investors in the past and probably people have 
heard scams about champagne and whiskey.  There is actually a website 
called investdrinks.org which actually names and shames dodgy 
companies.   

LEWIS:		Right, so check that they’re not on there, 
anyway.  But I mean it’s not only the dodgy ones.  Obviously the scams 
have been important for the people affected, but it is this idea that 
everyone’s telling us the 2005 vintage is going to go up and people are 
paying £5,800 plus commission for wine at Sotheby’s.  Is it a bit of a 
bubble?  Is now exactly the wrong time to be investing in wine?

SHALTON:	Well not necessarily.  I mean what you should 
do and what I do when I’m advising my clients is go to an established 
specialist wine investment house – somebody like Premier Cru – who 
will actually put together a portfolio of wine and provide discretionary 
management.  And, as with any other investment, you’ve got to think of 
it as a medium to long-term investment.

LEWIS:		Yes and it’s not for drinking, of course, as 
Serena was suggesting most of her customers were.  It’s actually for 
keeping and eventually, presumably, selling.  And what about the 
charges?  I mean if you buy at auction, you’re paying more than 15% 
altogether in commission when you buy, similar amounts when you sell 
– perhaps slightly less, but certainly an amount.  Are there management 
charges as well to pay year by year for storing it and that kind of thing?

SHALTON:	Yes, that’s correct.  I mean if you go to one of 
the established investment houses, then you can be paying something 
like 2½ to 4% initially.  En primeur, you’ll probably pay about 1%.

LEWIS:		That’s when you buy it sort of in the barrel or 
when it’s very first on the market, isn’t it?

SHALTON:	That’s right, before it’s actually bottled.  And 
then the annual management charges can range between 1 and 1½% of 
the cellar value.

LEWIS:		Yes, so they’re quite high compared with some 
of the charges you have on more regular investments.

SHALTON:	That’s right.  And you also have to take into 
account the warehousing costs and insurance and storage.

LEWIS:		And very briefly, Marlene, should people with 
ordinary amounts of money really have wine as part of their portfolio?

SHALTON:	Well, as with any specialist investment, yes; but 
as a small part of their overall portfolio.  They can invest quite small 
sums – say £1500 if they wanted to.

LEWIS:		Okay, Marlene Shalton of Chambers Morgan 
James, thanks.  

Well by the end of next year the Woolwich will disappear from the high 
street as Barclays completes the process it began 6 years ago when it 
bought the ex-building society.  So far it’s kept Woolwich separate 
from the Barclays name, but during 2007 it will finally assimilate it, 
relegating the 160-year-old name to Mortgage Products.  So what will 
happen to Woolwich customers and what’s the future for the 373 
Woolwich branches?  Alison Hopkins, Network Director at Barclays, 
will manage the change.

HOPKINS:	What will happen is either a branch that is 
currently Woolwich will re-brand as Barclays and in doing that we’ll 
refurbish the site.  Or if the Woolwich and Barclays branches are very 
close together, you know in the order of less than 300 metres apart, then 
we will see if we can merge those branches providing the premises are 
suitable to allow the customer traffic we’ll get in the combined branch.

LEWIS:		So some branches will close?

HOPKINS:	Yes because when we merge a Barclays and a 
Woolwich branch, one of the premises won’t be required.

LEWIS:		There’s been estimates in the press that that 
could be up to 200 branches.  Is that about right?

HOPKINS:	Absolutely.  We’re estimating it’ll be in the 
order of 10% of our current network and that figure’s in the right 
ballpark.

LEWIS:		Do you still have a commitment to a branch 
network?  Your competitors are opening more branches, but you seem 
to be going in the opposite direction still – the old-fashioned direction 
of cutting back on branches?

HOPKINS:	Ooh not at all, we are absolutely committed to 
our branch network.

LEWIS:		But it will be smaller.

HOPKINS:	Well let me give you a couple of facts.  
Woolwich customers will have access to four times as many branches 
as they do today and Barclays customers when we’ve finished this 
change will also have access to more branches than they had before.  
They’ll have the re-branded Woolwich branches.  So for Barclays, all 
customers of Barclays will benefit from this change and have better 
access as a result of this change and we are absolutely committed to our 
branch network.

LEWIS:		And what about people who’ve got accounts 
with Woolwich, savings accounts.  What’s going to happen to those?

HOPKINS:	Our Woolwich customers will become Barclays 
customers.  They essentially move house.

LEWIS:		But there are people with Woolwich accounts 
where there isn’t any equivalent Barclays account, aren’t there?  What’s 
going to happen to them?

HOPKINS:	Over the next 9 months, while we work through 
the detail of this, we are going to establish precisely what a comparable 
product will be and we will match our customers into a comparable 
Barclays product.

LEWIS:		But I mean to take someone with savings in a 
Woolwich Branch Saver account that’s currently paying 3.85% if 
they’ve got say £25,000, on the Barclays Bonus Saver that’s 2.28%, so 
they’re going to lose nearly £400 a year, aren’t they?

HOPKINS:	But we’ve got 9 months to determine what the 
product range will look like and what we will match people to, and our 
aim is to make sure that we don’t have customers out of pocket and that 
we keep as many Woolwich customers transferred over to Barclays as 
we possibly can.

LEWIS:		Can you give listeners any guarantee that no one 
will be worse off in their savings account terms after this move?

HOPKINS:	Paul, what I can do is arrange to speak to you 
again as we go towards the end of this year and the beginning of next to 
give you a much more concrete answer to that.  But, as I’ve said, we are 
still in the process of working out how we will match those products.

LEWIS:		No, I can understand that, I can understand you 
can’t give the detailed information now, but you could at least have a 
statement of principle that we guarantee no one will be worse off, but 
you can’t do that?

HOPKINS:	What I can guarantee is that as a commercial 
organisation we are incredibly keen to keep all of our customers and to 
ensure that our customers have a great deal from Barclays and we’re 
also keen to ensure that Woolwich customers are not out of pocket.  So 
whilst I won’t make you a guarantee today, our absolute endeavour is to 
make that happen.

LEWIS:		Alison Hopkins from Barclays.  And Bob, a 
caution this weekend for Standard Life members who’ll get or buy 
shares when the company floats on July 17th.

HOWARD:		That’s right, Paul.  The 2.4 million members 
who’ll get free shares and any other customers of Standard Life who’ve 
opted to buy shares at flotation will get a bonus of 1 share per every 20 
they hold for 12 months.  But it’s emerged this week that they won’t get 
those bonus shares if they transfer their holding into an ISA or Self-
Invested Personal Pension.  That’s because to get the bonus shares, you 
have to own shares personally and that’s lost if you transfer them to an 
ISA or a SIPP.

LEWIS:		Thanks, Bob.  Well that’s it for today.  You can 
find out more from the BBC Action Line – 0800 044 044 – and of 
course our website, bbc.co.uk/moneybox, where you can contact us, 
listen to the programme again, and of course have your say on will cash 
survive.  Now on Sunday night BBC1 investigates the lending policies 
of some major banks and asks whether they’ve been irresponsible or 
played a part in a number of people taking their own lives.  That’s the 
Money Trap, Panorama, 10.15 this Sunday evening.  Don’t forget our 
phone-in Money Box Live on Monday afternoon.  This week I’ll be 
here to take your calls on mortgages.  I’m back next weekend with 
Money Box.  Today the producer was Paul O’Keefe, the reporter Bob 
Howard, and I’m Paul Lewis.