/ Money, Technology

Embrace the cheque’s digital makeover

Digital cheque imaging

We know that lots of you still love using cheques. The question is, do they have a future? Could giving them a digital makeover be a great way of keeping them alive?

We are a step closer to being able to pay cheques into the bank using our smartphones, after the idea, known as cheque imaging, was strongly supported in a government consultation.

The new system will mean that banks can clear a cheque by presenting a digital photo of the document to the payer’s bank, rather than sending the original as at present. That could mean cheques clear in as little as two days, and opens up the possibility of paying in cheques simply by photographing them using a mobile banking application on a phone.

The technology has already been successfully used in other countries, including the US and France. To make it happen, the banks will have to overhaul their systems, and the laws regulating cheque clearing, some dating from 1882, will be updated.

Digital cheque imaging

Almost 75% of people in the UK own a smartphone, according to Deloitte, while ING found that 31% already use mobile banking apps. Digital imaging should breathe new life into the 300-year-old cheque, and will be especially handy for those who find it difficult to get to a bank branch. If banks get the technology right, it could also be more secure than sending a cheque by post.

Not everyone is comfortable with mobile banking, and the Government says that its legislation will force banks to continue to provide traditional methods for paying in cheques. It’s vital that this happens, so that the cheque system remains accessible to all.

Banks should offer the technology as a new option – and avoid the temptation to see it as another reason to strip back the face-to-face banking experience that so many customers still value.


Thought I do my best to avoid paying by cheque, I receive many of them as a volunteer working for a small charity.

I don’t relish handling cheques but I would like to know more about the security of mobile banking apps before using one. Many of us are very careful about security when using computers but I wonder how safe it is to use mobile phones for any financial transactions.

Another possible problem is that since cheques are not destroyed when they are photographed, banks will have to deal with the same cheque being paid-in twice. No doubt the system can handle such mistakes but how quickly would the user be informed that they had made a mistake.

I’m not sure what security concerns you have about smartphone apps for paying in cheques. What is the potential risk for an app used for depositing money? In any case, the banks already use security on browser-based and mobile banking apps that is thousands of times more secure than cheques themselves for example.

I believe that the banks already detect duplicate cheques (e.g. colour photocopies), given that each issued cheque has a cheque number. Therefore the procedure would be similar to that with a physical cheque deposit.

Tom has provided a link to a Which? article about mobile banking in his introduction. One of the measures it advises is:

“It also suggests that consumers make sure they have sufficient protection against the possibility of downloading malware or viruses on their smartphone.”

I’m not sure how to do that and having discussed this with other smartphone users, they have clearly not given it much thought either.

Obviously depositing money carries little risk and I recently deposited a bunch of cheques at an unfamiliar HSBC branch, knowing only the account number and sort code used by our charity. But a banking app could encourage us to engage in transactions where there is a genuine risk.

It would be good for us all to remember than banks denied that phantom withdrawals from cash dispensers were possible, until it was demonstrated that this was untrue. Let’s make sure that the security is in place first and then take advantage of what technology can do for us.

Grumpy ole man says:
2 August 2014

My wife has a self employed home hairdresser who has no idea how she would cope if cheques were abolished. Our window cleaner is the same. Unfortunately electronic technology would not work in this locality, as is there no mobile signal.

Banks should consider the convenience of their customers, not how to increase their profits by abolishing useful services.

My window cleaner encourages payment by direct transfer to his bank account details of which are sign-written on his van.

NFH states: “browser-based and mobile banking apps that is thousands of times more secure than cheques themselves”.

Is this an evidence-based assertion or merely rhetoric in an attempt to convert others to a deeply held belief? What are these security measures based upon anyway: number of transactionis? overall value of transactions?

In any case why are you so against people having the choice? If you want to go down that route then that’s fine for you, but do appreciate that we live in a diverse community, where others may have differing wants and needs.

Just for the record, I have worked in IT for five decades, so am hardly a luddite.

The main reason that the US has gone down the route of cheque imaging is because it has no high-volume low-value payment system (like the UK’s Faster Payments Service for example). Consequently the US economy relies heavily on cheques. If you use online banking to make payments in the US, a US bank will not ask you for the payee’s bank account number etc, but instead asks you for the payee’s postal address, and the bank will then send a cheque to the payee by post; I’m not joking. Although we in the UK might laugh at the US’s very archaic banking system, other countries elsewhere in Europe similarly laugh at the UK for still using cheques in the 21st century. Given that the UK has Faster Payments Service, I question why we need to retain cheques at all. What makes the UK different from many other European countries where cheques are now unheard of?

Nevertheless while cheques unfortunately remain in use, I welcome the introduction of cheque imaging, because depositing a cheque is currently a very onerous task for people who conduct all their banking online. If cheques are to have a future in the UK, then cheque imaging is essential.

NFH – I have explained in other conversations that cheques are the only practical alternative to cash cash payments for small charities. Try taking donations and payments out of doors as one of a group of volunteers and you will see one reason why we need cheques. Please try doing some charity work and you might understand the problem.

The previous cheque conversation showed quite clearly a need for cheques, or their equivalent. You want to pay a private individual where you have no internet access, or they don’t have their bank details, or you pay one of the many organisations (e.g. subscription to your local bowls club) who don’t have credit card facilities, you don’t want to pay cash – a cheque is ideal and with the possibility of paying it in electronically will no doubt save the banks money in processing.
My worry about security would not be whether it gets paid in – no doubt you will get confirmation – but the possibility of counterfeit cheques being paid in. Still, if it works in France it must be alright -unless they have some statistics on fraud to show otherwise?

Thanks Malcolm. I’m also concerned about the security of any financial transactions involving mobile phones. Most of us are careful about keeping computer software, especially malware protection, but what about smartphones and tablets?

Neither of you has answered my question – What makes the UK different from many other European countries where cheques are now unheard of?

Why do we need to keep them in the UK but not in Germany or Switzerland for example? Why is it that the Germans and Swiss can manage without cheques, but we in the UK can’t?

I don’t know NFH. In this and other Conversations I have tried to explain why cheques are very important to small charities and I certainly have sympathy for others who have presented equally valid reasons. Please let us get on using cheques when there is no practical alternative other than handling a lot of cash.

Maybe you could tell us why Germany and many other countries use non-polarised mains plugs. We do some things better in the UK. 🙂

I agree about the electrical sockets; BS1363 is the safest in the world, which is used in 50 countries worldwide including unexpected countries such as Iraq.

Although Germany and Switzerland have never had safer electrical sockets, they have had cheques in the past. They decided to move on to more modern alternatives. The UK is lagging behind, and we need to catch up, although we are thankfully not as far behind as the US.

Thank goodness we can agree on the safety of electrical sockets – and many other things too. 🙂

I think the onus is on you to come up to suggest practical alternatives to cheques when receiving donations. Neither me or my colleagues want to be handed a couple of hundred pounds in cash and would rather receive cheques.

A charity can simply publish its sort code and account number. Donations are then made by bank transfer, which can be instructed via online banking, telephone banking or in a bank branch. Similarly a charity can publish a mobile number for donations by Paym or Barclays Pingit. The days of using pieces of paper for payments should have finished a long time ago.

There is often something spontaneous about a charitable donation that doesn’t lend itself to deferral of the payment in order to process it through the banking system. Good causes beget good deeds and the giving and receiving of a payment hand-to-hand is a fulfilling part of the transaction. Obviously, HM The Queen doesn’t have to turn up on some cathedral’s steps every Thursday before Good Friday to dish out bags of Maundy Money to a beaming queue of deserving recipients; the relevant bishop could supply the palace with a list of sort codes and account numbers and – hey presto! – the bunce appears like magic in these worthies’ funds. I think we should keep cheques as a payment option at least until that ancient custom has been resigned to history. Apart from anything else, the use of cheques keeps banks open and many people want that as well.

NFH – I use bank transfer to pay in donations that I receive as cash and so do most of our volunteers. Except for membership subscriptions, guide books, etc. most of our income is donations rather than fixed charges. When booking an event for a group, organisers are given an indication of what others have paid in the past and sometimes we are told what donation they plan to make. If the group really enjoys itself we sometimes receive 50% more donations than expected, and where appropriate it is usually supplemented by Gift Aid. As John has said, there is something spontaneous about donations.

Text donations have raised precisely £10 in two years, and half on that was from one of my colleagues checking that the system works. It’s not for the want of promotion either. Having experimented with different ways of payment of membership subscription, cheque is most popular, followed by standing order, and a few pay by cash at events. Only a few choose to pay by bank transfer. Like many small societies, our membership is mainly drawn from middle-aged and older people and I’m happy to take their donations however they are made.

I’m happy to use an app to scan and pay in cheques providing that is all that it does. Until I am convinced about the security aspects, I don’t want to use any form of mobile banking.

Cheques work well – so why lose them. The decision has been made to keep them. By all means use other forms of payment when it is convenient, but I don’t propose to be forced into using intertnet banking through a smartphone when a cheque is so useful. We don’t have to follow Countries like Germany otherwise we’d be in the Euro and suffering because of it!

Malcolm r – Cheques don’t work well. Being physical, they are very costly to administer compared to electronic payments, and they are more prone to fraud and failure given the very primitive security measures (signature vs a 128-bit encrypted password).

Germany stopped using cheques long before the euro was introduced. The euro is nothing to do with it, as demonstrated by Switzerland which has one of the most modern banking systems in the world (by which I am referring to standard retail banking rather than secret numbered accounts). Nobody has given a reason why the UK, unlike other European countries, really needs to continue using archaic pieces of paper for payments. Only wavechange has hinted at the true reason – older people are often reluctant to embrace modern technology. But then older people in Germany and Switzerland survive without cheques. So why can’t older British people do the same?

NFH, the point I was making was that cheques work well for a number of the contributors here, including myself. By all means we could have an equivalent, with the features those above find worthwhile. From what I recall the security issue was not deemed a problem compared with some other current forms of payment.
Just because some other countries abandon something does not automatically mean we should. We had a proposal ro do away with cheques and an investigation decided otherwise.
It is absolutely nothing to do with older people not embracing modern technology. Most older people have grown up with it – or invented it.
My comment on the Euro was a little facetious – but we have survived an economic crisis better than most other states, partly because we are not hampered by being a member of the Euro. Maybe we get somethings right?

Phil says:
28 July 2014

” What makes the UK different from many other European countries where cheques are now unheard of? ”

Possibly because people still want them. Furthermore France still uses cheques and anyway why do we have to copy everything they do on the continent? Just because they do things differently doesn’t mean it’s better.

Germany might not use cheques but there is a standardised bank transfer form, an archaic bit of paper, that bank customers fill in and hand to their bank that does much the same thing.

While I do not bank from my smartphone, I do have a free anti-virus program on it (AVG).
However, it does take up phone memory on my basic (oldish) android smartphone (Galaxy Europa GT-I5500) and an adviser recently suggested I remove it to free up scarce space when I had a problem! I declined.

TBW says:
26 July 2014

I do not have a smartphone and have no intention of getting one and will therefore rely on cheques.
I resent being forced into banking online or adopting any other online activity by camponies to save them expense that is never passed down to the consumer.I am quite computer literate by the way.

I should like to reinforce the points Wavechange has made about small voluntary organisations’ and local charities’ dependence on cheque payments: I am a member of quite a few such bodies scattered all over the country so I am not necessarily actively involved in collecting payments or raising funds, but I like to support their good causes, pay my subs on time, and buy their publications. Usually they want payment by cheque since it helps their membership secretary or sales organiser keep track of each transaction. If payments go directly to the bank, and they have to be dis-embedded from the bank statements by the hon treasurer, it can delay reconciliation, lead to unnecessary correspondence, conceal lapses and renewals of membership, postpone the delivery of goods that have been paid for, and cause various other difficulties. In my experience the various office-holders of small organisations do not necessarily see each other frequently enough to obviate these problems so the paper cheque containing the payer’s details is a very useful – and virtually indispensable – part of the admin function that almost everybody involved can understand and comply with. There are distinct advantages also in having these jobs dispersed among a number of volunteers who can provide a simple and effective control on financial conduct.

You have a good appreciation of the challenges of keeping track of payments in an organisation run by volunteers, John. We encourage members to use standing orders for membership subscriptions, but getting everyone to update their SO when the subscription rises is a challenge.

It occurs to me that if it is possible for someone (e.g. a society treasurer) to receive a copy of the image of a cheque being paid in by smartphone, that could be very helpful in keeping a check on cheque payments.

Wouldn’t a scanner be better for making the images?

A scanner would produce a better quality image but I assume that convenience is the reason for using a smartphone app.

Phil says:
28 July 2014

What safeguards are there to prevent the image of the cheque being altered?

I presume that cheque scanning apps must be designed to prevent such problems, otherwise anyone with the most basic skills in image manipulation could change the cheque number on the image, for example. We need to know more about how the banks will protect honest customers in event of fraud.

Thank you, Tom, for following up Phil’s point. I seem to recal that the Payment Council were trying to abolish cheques; it’s good to see they’re now looking for ways to make them even more useful.

Are there such things as dedicated cheque readers/scanners for small businesses or charities and, if not, would Which? promote these?

Linked to a book-keeping/banking system they should pay for themselves by reducing work and speeding payments.

I worked for a company over 40 years ago which designed and manufactured Cheque Readers & Scanners for large commercial companies. I can see no reason, with the current advance of technology, why cheap and commercialy viable Cheque Reader & Scanners cannot be designed and made for small bussiness at a reasonable cost.

Still not convinced about security. Only this morning Action Fraud tweeted. “Almost 1 in 10 Android apps are now malware”. I cant see it taking too long before before fraudsters can edit images of cheques. And even though they’re going digital I doubt the money will be available instantly.

And as far as “If banks get the technology right” really? That would involve spending money, and banks do everything on the cheap, just look at the mess they got into with the subprime market, if only they’d got that right. And many banks are still using systems and hardware from the 80s. So I for one can’t see them getting anywhere near getting it right.

What evidence do you have that UK banks do everything on the cheap? In my experience, they’re entirely the opposite, often at the forefront of technology, particularly Barclays for example. On the other hand, US banks are way behind the rest of the world, still operating a banking system that relies heavily on pieces of paper, and it was US banks whose reckless lending caused the subprime crisis to which you refer.

Well in my experience, I worked for a software house that supplied software and consulting services to banks and financial institutions here and aboard. The US banks due to their regulations where much hotter on security than the UK ones.

Remember Nick Leeson who single handedly brought down Barings Bank? A UK Bank, well if they’d bothered to invest in our derivatives module for their Hong Kong Office that would have been less likely to happen. And the prices for our software there where peanuts compare to the US and here.

e.g On 2 deliveries of exactly the same software, I know cos the delivery guy showed me him cutting 2 discs from the same source and putting 2 different names on them. The US client paid $1.5 million, the Hong Kong client HK$35,000

Oh and I was working there for over 21, from the mid 80s, that’s how I know some banks still use that type of hardware and the software we wrote to work on it. Many of the problems they’re having now are because they no longer have people who understand these systems, most were made redundant in the crash, whilst at the same time they’re bolting on new technologies to systems that weren’t designed to handle them. Oh and why did they make those people redundant, cos someone with 20+ years experience will command a much higher salary than a wizzkid fresh from university or an army of overseas grads in the far east. Typical equiv salaries in the far east were around £6k a year, over here you’d be paying closer to £30-40k for the same person.

As for pieces of paper, they’re much harder for hackers to get hold of. Did I not read only last week that some spy organisation was thinking of returning to the good old typewriter to tackle overseas hackers.

The US banks may have caused it, but why did the UK banks buy that stuff from them? cos they started flogging it off cheap when in fact the stock was worthless. The film Margin Call, sums up that episode quite nicely.

Don’t confuse retail banking technology with investment banking technology. The two are very different. This topic is about retail banking, and therefore I disagree with William’s comment about US banks being hotter on security. UK banks have had two-factor authentication for many years, yet most US banks still rely on single-factor authentication, i.e. just a password or two. But maybe that’s because US banks don’t allow you to make proper payments online, only to issue a cheque in the post to the payee.

And these that would the same technologically advanced banks that stated chip and pin was the safest yet.

I rest MY case.

Famous last words, and where’s the call centre for your bank, here in the UK or in the cheap far east?

William, you mention Chip & PIN. Again, US banks lack security in this respect in that they don’t use Chip & PIN at all. US cards mostly have no chip, meaning that US card holders have to rely on easy-to-forge signatures. Another disadvantage for US card holders is when they travel to other countries and use points of sale where Chip & PIN is mandatory, for example automated petrol pumps and ticket vending machines. Chip & PIN is a global standard, so you can’t blame its security loopholes on UK banks.

NFH, No one forced UK banks to say chip and pin is the safest yet, so clearly they’re idea of security isn’t as good as it should be and that’s cos they have no idea. They clearly didn’t check it out thoroughly presumably cos that would cost money.

So if Chip & PIN isn’t the “safest yet”, what is?

Well I’m only going by the fact that in the 20 years before chip and pin I had experienced zero credit card fraud, since chip and pin I’ve been done twice. And have you not seen the news reports showing someone sitting outside a restaurant, scamming the card details from the wireless chip and pin card readers? That would have been impossible in the days of prior to chip and pin.

Are you seriously suggesting that portable payment terminals don’t encrypt the data between the terminal and the base unit? Who told you this?

The statistics of your own fraud incidents are not representative of the population as a whole. You need to look at a larger data sample than just one person.

Taken from a channel 4 report in 2012

“Using second-hand terminals purchased on eBay, MWR accessed the computer code on which the terminals use. Using this code to programme a fake chip and PIN card, they loaded the chip with malicious software capable of “reprogramming” the reader.
The card can be made to look like a normal credit or debit card in order for criminals to be easily able to use it in shops or cafes.
The malicious card then transfers its software to the reader, which begins storing the details of all subsequent cards inserted.
The criminal then returns later on, using a second malicious card to download the data, including the card numbers and PINs.”

The Daily Mail described the hack as “Millions of customers’ banking details are at risk after it emerged that card readers used in shops and restaurants can be hacked.” Is a million a large enough sample.

Any system is only as strong as its weakest link. I for one, don’t believe banks are capable of doing enough to make these systems secure. Fortunately that “trick” described above should have been closed by now. But really allowing card readers to be reprogrammed, how safe isn’t that.

And with many people using android based smart phones I can’t imagine it’ll be long before someone writes a fake bank app that will divert or even edit a photo of a cheque before sending it to the fraudsters bank.

I can’t find the story showing how to get credit card details. But I do vaguely remember it.

William, you mention Chip & PIN. Again, US banks lack security in this respect in that they don’t use Chip & PIN at all. US cards mostly have no chip, meaning that US card holders have to rely on easy-to-forge signatures. Another disadvantage for US card holders is when they travel to other countries and use points of sale where Chip & PIN is mandatory, for example automated petrol pumps and ticket vending machines. Chip & PIN is a global standard, so you can’t blame its security loopholes on UK banks.

I believe that there are millions of people that have neither Smartphone nor a comptuer.
Pensions are now paid only into bank accounts.
If this stupid idea goes ahead how will such folk control their money, pay their bills etc.especially as more banks are now moving to “counterless” outlets.
There is nothing wrong with the cheque system, it needs to stay.

Mick, rest assured, there was a move to abolish cheques but it was abandoned. Let’s hope it stays that way for those who find them very convenient. We need to consider the wishes of all the customers of the banking system.

We run a small business where cheques and cash are still the main method of payment, only about 10% of customers pay via bank transfer and we see no reason to bear the additional cost of a card processing system. If banks really want to get rid of cheques then the replacement system needs to be as reliable and free to use. I’m not too worried about ultra-fast clearance, in fact we normally deposit cheques with our bank via post rather than use one of the bank’s in-town branches..It works well.

Cheques are a total pain in the proverbial. Up until last year I used to pop them into the post to the Nationwide & they would be paid in that way.

But the problem is I have 2 names “Lee Beaumont” that I use for media work, plus “Newt Beaumont” that is my legal name & due to this I can no longer pay Cheques in my post, I need to go into branch and talk to the branch managers Ms Davis & Camp Dave, they pay them in for me.

The Nationwide says if i was a “celeb” I could have 2 names on my account, but as I’m just “someone who goes on the radio & TV talking about companies problems” I can not do this.

At the start it was a pain having to go into branch, but in the end they have agreed I can take my dog in too (I refuse to leave her outside), now I’m fine with having to-go into branch, as i class it as just an extra long dog walk.

Is anyone (like me) old enough to remember the difficulty of finding anyone in the office on a Friday morning because they were all queuing up in the bank to cash cheques for their weekend spending money? One of my employers found this such a problem that it provided a cheque cashing facility for staff. Does anyone still go through this ritual?

A company does not have to accept specific forms of payment, but they need to consider how this might affect sales.

I use a copy shop where they have repeatedly told me that they don’t take cards and I have to pay by cheque or cash. I don’t think they allow online payment either, but will check again. The only reason that I stick with this company is that they provide very good service otherwise.

Maggie says:
2 August 2014

I do not like the idea of digitalising cheques. The elderly will find this technology completely bewildering, so I am glad that the Government is to force banks to provide chequebooks and other traditional methods of payment.

Keep cheques, all it needs for old Mr Sun up there to throw a wobbly, emit a massive sunspot, and all these snazzy little talking bricks will be wiped out. You only need to see someone whose mobile packs up to know that headless chickens ain’t even in it! Aaaargh!

GP CINE says:
2 August 2014

I use all the tech stuff BUT the face-to-face banking is still reassuring and thus, essential

There has been a lot of discussion of small voluntary organisations receiving cheques but nobody has yet mentioned the problem of paying out money. I am treasurer of a twinning association and, like most small organisations, we have a requirement that each cheque requires two two signatures. This makes it impossible to transfer money by internet banking. Obviously, it would not be impossible for banks to produce software enabling the second signatory to access the transaction and authorise it but I have never heard of any plans to do so.

I think last time I had a tax rebate, HMRC sent me a cheque.

This is a very good point. I’m a member of a charity where the trustees authorised to sign cheques have been chosen because they live near each other. Our treasurer does want to make online payments. Maybe the Charity Commission should be pushing for this problem to be addressed.

It is about time we think about practical issues before making technological solutions available.

The award for extreme stupidity must go to Tesco and possibly others where petrol pumps required only a credit/debit card and no PIN or other security was required.

Charity Commission advice seems to be that charities can use internet banking with a dual authorisation.

There is a discussion on this at http://www.datadevelopments.co.uk/groups/general-discussion/forum/topic/dual-authorisation-of-electronic-payments-1/

Thanks for this jgh1. Hopefully the new treasurer of our charity is already aware of this but I will check.

Scrip says:
3 August 2014

Approaching 70 I am not bewildered @Maggie but then I shall not be elderly for at least another thirty years.
Why the article says “to see it as another reason to strip back the face-to-face banking experience” is beyond me. I find it very convenient to put a cheque in with a remittance advice and post it knowing that the excessively long numeric references required are not transposed or shortened or lengthened with missing or added zeros or spaces and that it will only be paid into the (crossed cq) a/c. This does not involve any face to face contact unless I choose to pay in at the Post Office (smile bank).
As a user of internet banking with the Coop for more than 20 years the cheque still has its place in my banking system and probably will do so for the foreseeable future.

Good morning all, thanks for your comments! I’ve published a comment round-up featuring some of your thoughts 🙂 https://conversation.which.co.uk/money/save-cheques-debate/

Gwilym Williams says:
5 August 2014

I agree with some of the comments regarding clubs and societies, if you organise events and members have to pay an entry fee it is usually more convenient to receive cheques with the entry form. We could have payments via direct payments or pay pal, if this is allowed for clubs. In one club I am treasurer/membership secretary almost a third of the members pay their subs by bankers order but it is very difficult to tie the payments to members as the banks use a short name for the accounts, the other is when someone is know to us as say Brian but the bank account may be joint in the names say JB & B Owen.