/ Money

We need an independent review on scrapping cheques

Close-up of cheque and pen

From the strength of opinion here on Which? Conversation, we know that abolishing the cheque is unpopular, so it’s good that the enquiry’s been reopened. But we need to take it further and have an independent review.

Every time we mention cheques in our Conversations it shows just how popular they still are. It also shows us the strength of feeling that exists against the abolition of the cheque.

Well, it seems those folks at the Treasury Select Committee may read Which? Conversation as they have re-opened their enquiry into the abolition of the cheque.

The consultation so far…

At is stands, the decision to abolish the cheque will be made by the Payments Council. They have held lots of consultations and worked with a huge range of stakeholders, (including Which?) to:

  • Analyse where cheques are still used.
  • Assess what impact, if any, abolishing the cheque may have.
  • Come up with alternative payment methods that could be introduced.

This has been a very collaborative process and we are happy to be a part of it. However, the decision on whether or not to abolish the cheque will still ultimately be made by the Payments Council.

Their decision-making process is largely dominated by industry. This can often mean that vital interests of consumers, such as Faster Payments, are not properly pushed forward. So I have to question whether the Payments Council can ensure that adequate cheque substitutes are in place if, and when, the cheque is phased-out.

Why we want an independent review

The final decision to abolish cheques should be taken out of the hands of the Payments Council and instead it should be made following an independent review. This should consider whether the proposed alternatives to be in place by 2018 are suitable, cost-effective, accessible and safe to use for consumers.

We’re not wedded to the cheque, and understand the arguments behind scrapping it. But it would be foolhardy to scrap the cheque unless suitable replacements are in place – and an independent review would be the best way to do this. What do you think?

Erica says:
12 June 2011

Only the banks want to abolish cheques. Electronic banking is extremely lucrative for banks and we will all be locked into this if we allow cheques to be abolished. I personally use cheques on plenty of occasions for my sons school dinners, school uniform, school trips. Also convenient for paying the milkman, workmen who do jobs at my house, sending birthday presents for children; cannot send cash in the post. The company I work for still has numerous customers who pay by cheque. For a lot of small businesses losing the ability to accept payment by cheque will mean they will have to increase their charges to pay for the additional costs they will have to pay the banks.

One point about the cheque is that the amount of money to be drawn from ones bank account is FIXED by the signatory. It is very difficult to fraudulently alter this. I was a computer engineer for 26 years and ultimately there is NOTHING electronic that cannot be altered, manipulated or compromised.
Second point. Systems based on electricity are inherently failure prone. I know several people who use internet banking and have had either virusses or system failures which have deprived them of the means to survive – temporarily perhaps – but the cheque system worked before electronics and still works. Deliberate fraud is not avoided by electronics, nor are automatic systems any more secure than the word of the individual; if you have the brass face to pass a worthless cheque you can do it – if you want to misuse a credit card you can do it just as easily and a stolen credit card is just as useful to a thief as a stolen cheque, perhaps more so.
Thirdly. The only advantage on getting rid of the cheque is to the banks. It allows them to have even more control over their customers and will allow them to continue to substitute machinery for employees, reduce the numbers of branch banks and put people out of work. Who will pay for the unemployed? Not the banks, not with the governments we have had for the past five years, all of whom have been unable to prevent bank officials making obscene profits and bonus payments gambling with their customers money and driving the world economy into the red.

PaTrick says:
12 June 2011

The main reason for the use of cheques having been reduced appears to be because retailers, especially the supermarkets and other chain stores, (aided by the banks) have decided to refuse them as methods of payment.
The withdrawal of the Cheque Guarantee Scheme is something that may reduce still further the use of these helpful slips of paper. The Cheque Guarantee should be reinstated and extended to a higher amount – say £200 or more. (I thought years ago that the limit was way too low and needed to be increased.)
There are a lot of technophobes out there who either cannot or will not use electronic means of cash transfer. What, other than cash, would do the job that cheques manage so effectively?
As evidence of the trouble that many older people have with technology may I point to the decision of the pensions people to force the elderly to use PIN machines to withdraw cash from the Post Office? I have frequently seen our local Postmistress come around from behind the counter in order to assist those who continue to be befuddled by the “new” technology.

Stephen R says:
12 June 2011

Cheques (in one form or another) have been in use for centuries so they are part of our everyday life. However, I think we will have to accept that their days are numbered as they are an outmoded form of payment. I probably use no more than 1 every month or so and in each case there will be an alternate method of payment. It is also a fact that the cost of transmitting cheques through the banking system is horribly expensive. Would people using cheques be prepared to pay the full cost of their use? I doubt it. In addition, they are no more secure than other payment methods; they are, after all, a negotiable instrument and great care has to be taken when completing them to ensure that the drawer is protected. Change is always difficult to accept and many people will carp about the demise of cheques simply because it is change and they are reluctant to lose something so familiar. If they are scrapped, I shall not miss them.

John Magee says:
12 June 2011

I find that in certain circumstances cheques are extremely useful and although I use other forms of finance for transactions more frequently I use and receive cheques regularly in circumstances where card or electronic transactions would not be either appropriate or available. Cheques must be retained.

Anne Blackwood says:
12 June 2011

I run a small homebased business and choose not to have the extra expense of processing cards.
I object to being put in the position of not even being able to accept cheques off my customers.
I am very annoyed that the banks have scrapped the cheque guarantee system, since while you have cheques as a trader, I am more comfortable with having the option of making sure the cheques I receive will not bounce. What justification have the banks for not keeping that side of it going if cheques are still used, and why were they allowed to do it with such a feeble excuse as @its not really used nowadays@ – while cheques are written there will ALWAYS be a need to guarantee them.

CJ says:
12 June 2011

As the banks have done so much damage to us so far, is it not time they listened to us and keep cheques. They enable us “tiny” people to manage our money efficiently and without going into debt

I hope they get the message that not everyone (including my elderly parents) are on or know how to use the internet, and nor do all establishments/businesses take plastic. These things seem so often to be London- or other major conurbation-focussed.

Caroline says:
12 June 2011

Just adding my support to keeping cheques. I am 56, and am reasonably computer/technology literate, and for example am happy to pay for things electronically from known suppliers, using my laptop. I have a mobile phone and plan to update it to a new model soon. However, I suppose I am on the borderline between those who are not so comfortable with new technology, and those who have grown up with it. The sorts of things I use a cheque for are: household services such as gardening and cleaning; health-related services such as acupuncture; leisure activities such as yoga, walking group and choir membership. I also use cheques to pay tickets for theatre trips by post; paying off credit card bills; hairdresser visits. As others have said, small businesses, such as those I freqently use, would not want a card system due to the cost, and I certainly don’t want to have to carry around large sums of cash to make these types of payments.

It may be that new solutions will be found for this by the banks, but I think cheques should be kept in the meanwhile (and without additional costs being slapped on by the banks for the privilege of using them) for those of us who prefer this way of doing things. If I’ in my 50’s and prefer cheques for certian kinds of transactions, then I image there are huge numbers of people in their 60’s and older who cannot easily adapt to doing things differently. My mother is 88 and certainly wouldn’t be interested in learning to use a computer or mobile phone to make payments to her gardener, hairdresser, plumber, handyman etc.

So, as others have said, let’e keep things as they are, reinstate cheque guarantee arrangements, and wait till the banks have developed an alternative that works and is suitable for the large elderly population of this country. Only then, if there is a genuine alternative, should cheques be phased out. Otherwise, they should be retained.

Tim says:
12 June 2011

So, if cheques are “abolished” by the Payments Council and then one building society (or bank) keeps using them for monetary transactions between accounts of that bank, who could stop that bank honouring cheques? Wouldn’t that be a really good way of getting extra customers?

After all, paper money and coins are the same as cheques – promises to pay a defined amount of money!

jason says:
14 June 2011

A cheque is an easy convient way of paying a vendor bills or a simple secure way of dealing with a large amount that would be unsafe with cash and for thouse like myself who are unsure about other methods of payment , security included .

John Harris says:
14 June 2011

As the proprietor of a small business, a B&B too small to justify the high fixed charges the Banks make for a card machine,this makes it impossible for me to take deposite cheques, which they have already rendered pointless by abandoning the cheque guaruntee scheme.
We are all encouraged to use local suppliers.This I embrace;not one has a card facility so how can I
I pay them?Were the government interested in paying anything but lip service to encouraging enterprise, they would force the banks, especially those who came begging for public money to avoid bancrupcy, to take more interest in supporting local enterprise and less in rewarding themselves for failure.
They must know this eventually will force all businesses,charities,groups,clubs etc to factor in the cost of card facilities; unwanted financial leverage that adds nothing just takes a cut.
Al Capone would have approved.

John Harris says:
14 June 2011

As the proprietor of a small business, a B&B too small to justify the high fixed charges the Banks make for a card machine,this makes it impossible for me to take deposite cheques, which they have already rendered pointless by abandoning the cheque guaruntee scheme.
We are all encouraged to use local suppliers.This I embrace;not one has a card facility so how can I
I pay them?Were the government interested in paying anything but lip service to encouraging enterprise, they would force the banks, especially those who came begging for public money to avoid bancrupcy, to take more interest in supporting local enterprise and less in rewarding themselves for failure.
They must know this eventually will force all businesses,charities,groups,clubs etc to factor in the cost of card facilities; unwanted financial leverage that adds nothing just takes a cut.
Al Capone would have approved.

Andy says:
15 June 2011

Hi Chris,

Thanks for your response to my comment I made on Saturday. You have correctly stated that the Payments Council will look to “stop” the Central Cheque Clearing Process. You then state that the date to “scrap the cheque” is in 2018. Sorry this is not correct. PC have not said they will “Scrap the Cheque” only stop the Central Clearng process, and only then if volumes decrease enough to warrant it. Stopping the clearing process will not stop the ability to use cheques. Banks will have to find an alternative method to clear cheques (probably directly with each other). If people want to continue using these methods of payment, then they need to carry in writing them. But you cannot get away with the fact that volumes are decreasing year on year. I know this is in part due to many retailers not accepting cheques any more, but has that caused significant issues? Point of Sale transactions can be achieved using your debit card, which you would have had to have used anyway if it had the Guarentee function as well.

Sorry not being awkward, I use cheques to pay school stuff as they dont have any other facility, and there are other uses as well. I am not confident on the alternatives either.

Some good points Andy, but your point about the debit cards and their being used anyway to guarantee the cheque may merit some further exploration.

Debit cards (more so than credits cards, though I can’t for the life of me see why) require an EFT machine (“card machine” to most of us) to process. This means that in the event of a power failure, hacking attack on the processing system (such as we saw earlier this year), systems failure at Mastercard, Visa or the other large card processors, or the customer forgetting their PIN, the transaction cannot be completed.

Cheques can (or could) however still be guaranteed by the card number being manually written on the reverse, which requires no electricity, no processing system, no PIN.

The only reason the banks combined the cards was to save them money in producing two cards.

These are further reasons why Cheques are a more flexible method of payment and why they are better for small traders, etc.

I’m not in any way disagreeing with you: just elaborating on your points to demonstrate still further how keeping cheques is such an important thing.

mike says:
16 June 2011

I use cheques reglarily, and with the amount of credit card fraud I am reluctant to use my card,so need cheques.

Reports in the telegraph this morning show that banks are undermining opponents arguments by abolishing cheque guarantee cards from June 30th.
Despite many cheque guarantee cards also being debit cards, costing banks little extra money to run the system!

Shows the utter contempt banks have for the public. Now perhaps the public should withdraw their money from accounts on mass and demand taxpayer bailout money back by June 30th – if they fail to come up with OUR money, then we should close them down!

In the past banks forwarded new cheque books to customers before the old one ran out without the customer having to do anything. Today Banks do not make it easy for customers when they seek to obtain a new cheque book. Calls are redirected so you can no longer access your own branch. Then you go through the automatic rigmarole of which number to press on your phone key pad etc. Finally when you do get hold of a human being instead of being able to request a new cheque book, there are all these supposedly security questions to answer, plus account numbers, sort codes, secret numbers etc. Also you are given the talk about how cheques are being fazed out and why not pay by direct debit or card.
Why don’t banks realise that they work for us. We are the customer, surely it should be up to us to choose which way we wish to pay, and not the banks deciding on a method that brings them the most income.
Cheques are the most convenient form for me and I wish to retain them.

Whilst recognising the benefits of improved technogy and electronic transactions I realise that it is only a matter of time before paper based transactions become unfashionable and represent the minority of transactions. We may even be there now but that is not in itself a reason to stop a payment method which continues to meet the needs of its users. We should recognise that cheques provide a safe, secure, convenient and flexible means of transferring money for many people and organisations. I am a sole trader and rely upon cheques for the vast majority of payments.

There are many thousands in a similar position and the convenient alternative is the increased use of cash; which is not in the interests of either of the the banking system nor HMRC. There are also the small societies and organisations (I’ll mention fishing clubs, sports clubs, amateur dramatic societies, and orchestras with which I have personal experience and dealings) which rely upon cheques because they are flexible, convenient and a secure means to make and receive (relatively small) payments. Many charities fit into the same category and I feel certain that the removal of cheques will have an adverse impact on the incomes of many charities. (Another nail in the coffin of the Big society?)

Increasingly it is apparent that this proposal is in the interests of and propounded by large organisations and the small trader, organisation, charity, voluntary, recreational and sporting society will be the loser.

Why not allow the continued withering of the cheque and large businesses, organisations and interests to develop and use their alternative payment methods whilst allowing the smaller concerns to continue to have access to payment methods which meet their needs? I have yet to hear of an alternative which will do this adequately and talk of alternative paper-based systems in place of cheques would suggest that the lunatics have finally taken over the asylum which are euphemistically known as the banks.

Chris Marshallsay says:
29 June 2011

Cheques should be here to stay. – There is far too much assumption that literally everyone can make financial exchanges electronically and make rulings just for those who can cope with computers, and feel secure about handling their finances ‘on-line’.

Just as choice is advocated in terms of selecting a doctor or a school there needs to be a choice that respects those who feel able to handle paper transactions but feel insecure in the ‘airy’ world of electronics.

Personally, as someone who is running a small business, I use and receive cheques and find debit cards very useful but, with so much evidence of electronic identification theft, I have no intention of
extending my commitment to carrying out financial transactions that put me in situations where I feel I am losing control of hard-earned income.