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A reprieve for cheques – but is it needed?

The U.K is no longer scrapping cheques by 2018. But will they still be here by then anyway?

The news from the UK Payments Council yesterday that cheques will no longer be forcibly scrapped in 2018 has, perhaps inevitably, received mixed responses.

For the banks, issuing, handling, securing and processing cheques is expensive and time consuming – a cost that in the end has to be passed on to customers. However, consumer groups, especially those representing the elderly are celebrating at the news, because of the convenience of cheques for those less comfortable with the alternatives such as mobile or internet-based transactions.

As we have often seen in the past, consumer demand is a very big factor in payments - the response from the public to any new payment mechanism can, often, make it or break it. We also know that many consumers dislike change, as demonstrated by the response to the initial proposals to drop cheques.

However, as the Payments Council points out, cheque use is falling year on year – and the scrapping of the cheque guarantee card scheme in recent weeks will be another factor to drive down the number of places or people who will be prepared to accept cheques.

If I were a betting man, I would anticipate that cheques will have been replaced naturally by other mechanisms by 2018 anyway, but we in the industry can certainly help - to prevent the atrophy we would see if cheques just go on and on. The  replacement of cheques has happened successfully in many other countries, and we need to see what we can learn from them to get it right.

There are many alternatives already in the market that offer faster and more secure payment of bills (such as telephone or internet banking) – not to mention the plethora of electronic gift cards available in any supermarket today that can replace the ‘cheque in a birthday card’ or PayPal for person-to person payments. We will definitely see more and more schemes emerge, such as those using SMS messages over mobile phones.

We need to make sure that consumers see the benefits of these new systems, and that they feel there is at least one that is right for them, to stimulate the change we need. This is a combination of education, explanation and communication, but we did it with Chip and PIN and we can do it again. If we get it right, I am certain that these schemes will see phenomenal growth in the next five years to become even more mainstream.

Last time my son saw my wife writing a cheque he asked why on earth she was writing a letter to the bank. Good question son!

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