A reprieve for cheques – but is it needed?
Wednesday, July 13, 2011
Posted by Paul Thomalla
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!
Related blog posts
How Will Insurers Modernize Bill Payment Systems?
When looking for a date in college I had to ask 13 girls before one said yes. The consumer experience at insurance companies isn’t much better. 80 percent of shoppers abandon during checkout. Of those who do sign up, 34 percent intend to leave their insurer next year.
Detecting Internal Fraud by ‘Breaking Bad’
There has been no shortage of news stories around the banking industry and its vulnerability to internal fraud, particularly that the industry has limited internal surveillance. Internal fraud has proven to be news-driven (and news-worthy); it’s a great feature lead-in story and scintillating red-meat for mass consumption. Internal fraud events are obviously a reputational risk for banks, but then take a huge turn into regulatory risk territory, before winding up squarely a legal risk (and the headline-grabbing fines that come with it). Finally, a strategic and market risk bubble up as customers are lost to competitors.
2017’s Payment Buzzwords in October…and Other Insanity
Is it just me or are things a little insane right now? From clowns wreaking havoc across the country to category 4 hurricanes also wreaking havoc (later and later into the year) to a certain presidential election (Sunday’s debate was, how you say, actually, it’s difficult for me to put into words) to now…Christmas decorations in October! And don’t forget the pop-up Halloween stores that arrived in August…August! So let the Rantings begin.
Integrated Fraud Prevention Tools in an Omni-channel World
In a previous blog post, I discussed the way in which technology partnerships are driving the evolution of the traditional payment gateway model, with value-added services becoming an increasingly important aspect of a payment gateway proposition. Real-time fraud prevention is one of many potential value-added services that a payment gateway can offer, but one that deserves particular focus, as the trend towards omni-channel commerce presents new challenges around fraud management.
How Digitalized Banking Will Force Collaboration And Other Key Highlights From Sibos
Returning from Sibos in Geneva, I am in a reflective mood on the main take-aways from this year’s event, key updates about the state of the payments industry—and what to expect in 2017.
Same Day ACH in the U.S.: Which Companies will take Advantage of Faster Payments—and Why
The faster payments movement in the U.S. could be the first opportunity for corporate entities to realize true Straight through Processing (STP) of payments. Anyone involved in payments for corporate entities can see the benefits of this type of new payment opportunity.
Immediate Payments Are "Necessary"—And the Banks Know It
Who says banks are dinosaurs? They just have a lot of innovation to juggle to keep pace. There are so many new initiatives to address—so how should banks prioritize?
DCC Cuestión de Elección y Servicio [DCC: Offering Choice and Service]
We continue our exploration of key trends impacting the Latin America market with a blog on Dynamic Currency Conversion. Many of our reader are seasoned travelers and you will be familiar with the option to pay in the local currency or your own currency using your credit card. Sonia Gomez provides an overview of DCC and how it can benefit all within the payments value chain.
Why 75% of Lenders Are Adding New Payment Processing Options
“Do you want my money?” I wondered as I left the website of a lender that didn’t accept debit cards. You see when lenders offer new payment processing options they increase dollars collected by 15%. To increase collections and meet growing customer expectations 75% of lenders are currently adding new payment processing options.
The Magical Mystery API Is Waiting to Take You Away…Waiting to Take You Away
There’s nothing like a good mashup of a Beatles song and technology, right? We all know the Beatles, but do we all know APIs? To butcher another Beatles song, ‘All you need are APIs, APIs are all you need.’ At least that’s what it seems like, especially in today’s vast finance industry. Before we quote any more songs, we should first define what an API is. According to our friends at Webopedia, Application Program Interface (API) is a set of routines, protocols, and tools for building software applications. An API specifies how software components should interact and APIs are used when programming graphical user interface (GUI) components.