/ Money

Your view: checking in on cheques

A cheque being handed over

Our discussion about digitising cheques was followed by an impassioned debate to leave them be. The new system would let banks clear cheques via a digital photo. Here’s what the community thought of the idea.

Waltham needs cheques for his small business:

‘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.’

For and against cheques

Mick thinks the paper cheque needs to stay:

‘I believe that there are millions of people that have neither smartphone nor a computer.

‘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.’

Our Facebook friends even joined the debate. John made a plea for cheques:

‘There is a whole generation out there who are completely discriminated against and are being abandoned by the age of the internet and smart phones. They certainly do not want to see the end of cheques yet. They need our respect and support.’

Terry isn’t a fan:

‘Cheques are useless. We should scrap them. It’s only businesses and the legal profession who like them because of the built in delay in issuing/posting them and because they use them for audit trail.’

Security of digital cheque imaging

Phil was worried about the security of using a digital photo to clear a cheque:

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

Our Money expert Tom Wills put Phil’s question to the Payments Council:

‘They told me it would only be possible to submit photos of cheques taken using an app from your bank, which will use similar security procedures to existing banking apps to confirm your identity and secure your information.

‘The Payments Council also said that existing fraud prevention systems would be used, and that fraud levels have not increased in other countries where cheque imaging has been introduced.

‘We’ll be keeping a close eye on how banks implement cheque imaging and the security measures put in place when cheque imaging apps become available.’

Are you a cheque user? Could you live without them?

Leo says:
2 August 2014

I would prefer to keep,cheques as they are. I don’t trust internet banking, and certainly don’t want to use a mobile app for banking. I’m not a Luddite, I’m very at home with computers and technology, just don’t trust internet banking or mobile apps. And there are still LOTS of people who are not confident computer users (including many young people), and many people who do not have a computer or smartphone.

Keith says:
2 August 2014

The only reason banks wish to abandon cheques is their relentless drive for ever greater profit.

It’s not about increasing profit but about eliminating a costly an archaic system to process payments using archaic pieces of paper. Given that the use of cheques is now at a fraction of the level it was at before more efficient payment methods were introduced, the banks don’t want to keep a costly old system running to process a relatively small number of payments. It makes sense to shut down such an inefficient and unnecessary payment system.

Please don’t say that cheques are not necessary. A fair number of people have explained why this is not true and there was an outcry when it was suggested that cheques should be phased out.

The efforts of banks would be better spent in trying to regain trust than getting rid of cheques when there is obviously still a need and a demand for them.

If people want to keep cheques, then those people should fund the costs of operating the cheque clearing system. As fewer and fewer people use cheques, the processing cost per cheque will increase. Only people using cheques should pay for the system; others shouldn’t have to subsidise it. If you want to keep cheques, then let’s have a cost-reflective charge per cheque issued and/or deposited.

What about the costs of running alternative payment systems, including keeping security measures up to date?

If you were working out the costs of ownership of a car you would not just consider the cost of the fuel.

The average cost per payment of running Faster Payments Service is negligible, particularly as volumes increase. On the other hand, the average cost per payment of running the cheque clearing system is significant, particularly as volumes are decreasing fast.

OK, if I accept this, why will you not accept that there is still a need still a need for cheques? I have explained why they are important for small charities and others have given different reasons in our various Conversations on the topic.

Most of us with current accounts kept in credit are receiving little or no interest on their account balances but benefitting from ‘free’ services, irrespective of how much they use them.

I suggest that we don’t worry about the cost of processing cheques since the number in use is falling. I’ve been encouraging others to use alternatives to cheques for a few years, where a practical alternative exists. I’m a little bit tired of being told (by a number of people) that there is no need for cheques in the 21st century. There is, and what we need is practical alternatives that take account of the objections to phasing them out. Thats where the effort needs to be devoted.

The banking industry has a lot to do to restore public confidence and continuing to push for phasing out of cheques is not going to help. I have never forgiven the banks for denying that phantom withdrawals could occur.

I understand that very few organisations are good at managing contraction efficiently and pegging costs back as volume decreases so unit costs have a tendency to rise disproportionately, but it can be done. When I first opened a bank account there were not that many cheques in use as most transactions were in cash but nevertheless there was a practical and cost-effective clearing system [including town clearing to avoid every cheque having to go up to London]. This was part of the service banks provided to enable their customers to conduct their accounts and do business. Over time new systems and technologies have become available to automate and speed up this process but that does not mean that simple clearing now has to be ditched altogether; perhaps rather than a financial penalty there should be a time penalty for paper-based cheque clearing so that customers needing faster payments are incentivised to use the paperless services. Given the stupendous costs of changing staff uniforms every so often and rebranding the branches [Lloyds, TSB, Santander, Barclays, Cooperative – they’re all at it] I think the costs of processing cheques is chicken feed. The greater cost must be in printing and personalising them and since the banks are going to keep on doing that I don’t see the clearing costs as a major problem.

When I opened a bank account, with the District Bank, cheque books were printed at the branch, while I waited. It did not take long and saved the cost of postage.

I’ll specifically address wavechange’s comment “I suggest that we don’t worry about the cost of processing cheques since the number in use is falling.” – Quite the opposite! The problem is that the average cost per cheque increases as volumes decrease, because the costs of running the infrastructure remain fairly static. I’m just guessing at figures, but let’s assume for example that each cheque used to cost the banks around 5p each, but that the cost is now 50p each. As the number of cheques continues to fall, this will increase to £1 each, and possibly £10 each as volumes continue to plummet. Why should all bank customers pay for these costs when the cheque clearing system is used only by a small minority of customers? In the interests of fairness and efficiency, I propose that banks start charging personal customers for cheques, first charging the writers of cheques and then the recipients of cheques.

I’m sure that charities could be exempt from charges, and I believe they already receive favourable treatment from the banks compared to other organisations. Most reasonable people wouldn’t mind subsidising charities, but I do object to subsidising personal customers who insist on using cheques out of stubbornness and through fear of change.

Thanks NFH for your suggestion that charities might be exempted from charges associated with use of cheques and I look forward to some assurance that this will happen.

It still does not address the problem that a significant number of people want to continue to use cheques. Like John Ward and others I am not convinced why cheques are so expensive to process and perhaps it the banks employ a consultant to investigate the costs there could be streamlining of the process.

As with cashless London buses it is simply not acceptable always to put profit before people. What’s around the corner? Should we deny the elderly medical care because they are disproportionately expensive to support?

I don’t believe that the banks have done enough to encourage people to embrace new technology. Take contactless cards. When my bank sent me a new debit card earlier this year I believe it came with a small leaflet explaining this new feature. Maybe if they had given me the option to have one earlier I would have taken up that option. I certainly think they should have had the courtesy to ask me whether I want one or not. Oyster cards have been a great success because of good marketing but there are many who are not at all keen on contactless cards issued by banks.

I cannot remember if my bank promoted electronic banking but I was a late convert because the terms & conditions describing my obligations and conditions for refund of fraudulent withdrawals were complex and beyond my understanding. I showed them to some university lecturers in computer science and they declared that they were too complex for the general public. When I discovered the t&c had been revised and presented in a way that I could understand, I started to use electronic banking.

M Clark says:
3 August 2014

Which are the other countries using cheque imaging? Banks make statements such as this but rarely say who these countries are.

The US is using cheque imaging because its lack of an equivalent of FPS or BACS forces its economy to rely heavily on cheques. The US has such an undeveloped retail banking system (compared to other developed countries) that this is a fudge to modernise itself.

Brian says:
3 August 2014

I’m about to kick the bucket, my wife will be 10 miles from the nearest bank, she can’t drive and there’s next to no bus service. She hates and detests computers, smartphones, etc. As others have said already, cheques will be a must, not be dispensed with for quite a large percentage of British people.


E.Byrne says:
3 August 2014

For security reasons I never disclose my financial affairs on my internet connection. I make all my transactions by debit card on the phone or by mail.

Your reasoning is flawed. Whereas an internet connection (for payments) benefits from 128-bit or 256-bit encryption, the telephone and the postal system do not.

John says:
3 August 2014

Cheques are essential for person to person payments, gifts, etc, as well as for subscriptions to small societies that are not equipped with digital methods of payment receiving.

Why are cheques essential for person-to-person payments? A received cheque is paid into a bank account. Therefore a bank account is necessary to receive payment by cheque. The same bank account can be used to receive a bank transfer instead. Bank transfers can be instructed by a variety of means, for example online, by telephone or in a branch. There is no need for unnecessary pieces of paper to be passed around.

Many other European countries abolished cheques many years ago and laugh at the UK for retaining this archaic means of payment. What makes the UK different from those other countries that we need to hold on to this outdated paper-based payment system?

Hilary says:
4 August 2014

Those who say cheques are useless are those who never see further than the ends on their own noses and their own wants. I am one the the 25% (a whole quarter for those who cannot calculate) who do not have a smartphone, and the attendant monthly payments for it. There are still a number of occasions when I need to pay by cheque as there is no real alternative in certain circumstances. The digitalization whereby a bank checks the cheque first and then sends an image by secure means does seem a good idea to speed up the payments. Those of us of the older generation know that crooks will always try to find a way through any new technology and have also noticed that the banks etc have tried to avoid releasing information when their internet technology has been breached. That is why we are so reluctant to use it.

Pip says:
8 August 2014

I am yet another one of the thousands of people who send charitable donations by cheque,pay for Horticultural outings by cheque,U3a trips by cheque,send a cheque as a birthday present.I do not have a mobile,tablet or any other machinery to carry around and I cannot see U3a people carting around a validator.Companies and organisations will fare badly and may have to close if the use of cheques is withdrawn.

Gerard Phelan says:
9 August 2014

On a recent holiday I paid my B&B landlady £200 in CASH! Why? The deposit had been paid by cheque weeks earlier, but I could not expect her to have perfect confidence that a cheque for the balance would be paid. How else could I have paid her? Some writers here say I should have used a Smartphone banking app, but whilst I use on-line banking, I do not own a Smartphone. Even if I did, my B&B landlady as an interested party would want to check that an electronic transfer had really been made. How would she do that? She (a lady much younger than myself) does not have a Smartphone and does not have a computer in the house. For HER a cheque GUARANTEED with a card would have been an enhancement to the payment process avoiding the need to handle a lot of cash – pity such an option is no longer available!

I agree with NFH that it is valuable to see how other nations behave, but disagree with his selective use of statistics. The European Central bank’s most recent payment data statistics are for 2012 See http://www.ecb.europa.eu/press/pr/date/2013/html/pr130910.en.html
Whilst UK cheque usage is at 4.6% and German usage negligible, the French make 15.5% of their transactions using cheques. Looking at other transactions types, whilst we British make 57% of payments using credit cards the Germans make only 17.5%. The usage of Direct Debits and Direct Credits varies massively between countries, which surely makes comparisons of ALL payment types much more an analysis of national character than of the effectiveness of the local payment systems.

Please banks – leave our cheques alone! Modern technology is hard enough for we ‘wrinklies’ to get our minds around without fouling up our cheques! I don’t altogether commerce with my debit card details, though the fact that my account details’re on the cheque would make things easy enough for any light-fingered type to empty my very thin account anyway!
Please banks, leave well alone!

I have just received a bill from AXA PPP Healthcare, inviting me to pay a bill by cheque. If I want to pay in any other way I have to make my own arrangements to pay the service provider. I expect that I would also have to notify AXA PPP.

It is simpler to send a cheque but I will include a request to provide simple online payment facilities in future.

Sorry that this is off-topic, but this seems to be the most recent Conversation about cheques.