Payments Council to keep cheques and cancels 2018 target
Posted by Scott on 18th July 2011 in News
Tagged with cheques, News, Payments Council
The Payments Council announced on 12th July 2011 that cheques will continue for as long as customers need them and the target for possible closure of the cheque clearing in 2018 has been cancelled. The Payments Council Board will continue to focus on security, efficiency and encouraging innovation in all types of payments to ensure customers have options best suited to the 21st century.
Richard North, the Chairman of the Payments Council said:
“It’s in the DNA of the Payments Council to consult and listen to all those people who actually make payments and use cheques. Listening to over 600 stakeholder groups, working with the banks and following our appearance before the Treasury Select Committee, we have concluded we should reassure customers that the cheque is staying.
“Over the last two years we have learnt a great deal about what is important to our many stakeholders and we are really grateful to all of those groups and individuals who took the time to talk to us and help us reach this decision. We will use what we’ve learnt to keep improving existing systems, as well as introducing innovation, so that customers benefit from 21st century ways to pay. Innovation must be at the heart of what we do.”
Scott Gray, Managing Director of Rapidata comments:
“While on the surface, this seems to be pretty good news for the sector, I would argue that this is not news that organisations should be celebrating. We know that cheques are a costly mechanism that banks aren’t keen on and there is nothing to stop them accepting cheque payments tomorrow.
But, by establishing a timeframe (2018) for the end of cheques and for sourcing a viable paper alternative, the Payments Council had issued a spur to banks for hanging on to the mechanism until that date, as well as committing to sourcing the necessary alternative payment vehicle. The proposed timeframe gave us all a clear goal. We knew what was happening when and had time to research supporters’ views. It also fuelled debate about cheque usage and costs across all sectors.
As cheque usage continues to decline, the cost to organisations will grow and eventually become uneconomical. We’re likely to see a natural phasing out of cheques in the years to come, but this may happen now before an alternative is ready. The end of cheques is inevitable. We cannot afford to ignore this issue in light of the Payment Council’s announcement to drop the abolition date. The challenge now is to ensure that organisations continue to debate and research into the move away from cheques and the most feasible ways for supporters to donate.“
The problem with the cheque is that it is a paper transaction that has to be input into the banks system. This is labour intensive, hence the banks wish to drop its use. The banks have been told it must stay so they have undermined it by systematically removing the cheque guarantee card. One excuse for this is that customers do not fill in the details of the guarantee card correctly. This is caused by the banks themselves not having a unified card layout/system. Rather than correcting this problem they use it as an excuse to withdraw the Cheque Guarantee Card.
As a small businessman I have relied on the Cheque Guarantee Card ever since having a series of cheques bounce on me at business start-up. I even forced a millionaire to upgrade his cheque card guarantee from £100 to £250 because he had to write out 4 cheques.
Having travelled in the USA it is common to see signs saying ‘no cheques’ . Recently, I came across a big sign on a counter saying that no cheques would be accepted even with a cheque card guarantee after the 1st June 2011. As a consequence to this situation I too have decided to stop taking cheques as they cannot be guaranteed by the bank.
It doesn’t matter how much bleating is made by the Government or the Payments Council, the writing is on the wall for the cheque to become obsolete as a measure of GUARANTEED payment.
I do see a use for cheque payments via Royal Mail or for payments to employees but it is likely that the banks next step will be to show statistical proof that people no longer use it – which is because they can no longer trust the issue of a cheque.