Embrace the cheque’s digital makeover

Dual signature authorisation is possible with some banks such as CAF and Unity Trust Bank. Most of the rest of Europe except France and Ireland have ceased using cheques and use either electronic banking, debit cards or giro system. In each case the payer transfers the money directly into the payee’s bank account. The giro system works very similar to a cheque except that the payer needs the payee’s sort code and account number then sends the details on a giro slip to his/her own bank to be paid directly to the payee’s bank. If it works in the rest of Europe and has done for the last 50 years in some places then there is no reason it cannot work here.

Wavechange – I clearly didn’t explain why giro works effectively as a replacement to cheques in most European countries.
Giro is a paper based system that works in a similar way to a cheque but is more secure. Usually the giro form is created by the payee with the bank details and the amount. With clubs and small charities it can often include the payer’s name and reference/membership number. With a business it is often at the bottom of the invoice and is like the paying-in slip that you see on many bills which is often a giro form; you will often see “Bank Giro Credit” printed on the form (have a look at a Council tax bill). Business’s and charities can publish their details even small clubs can give those details to their members, perhaps on their membership renewal notices. The difference is that the transaction is instigated by the payer passing the giro slip directly or in the post to their own bank, rather than the payee passing it to their bank who then have to pass it on to the clearing system to ask the payers bank to transfer the money on to the payee’s bank account. The system removes at least two stages and the time and cost implications from the system. It is also the same mechanism and flow as internet banking payments, hence simplifying the system.
Of course the system would mean a change which is always a problem for people to accept but I believe in the medium and long term would be not only more cost effective for small charities and clubs it would be easier to administrate and would incur lower error rates. Just think how many cheques you receive without signature or not in the name that you expected with the wrong amount or not dated. One of the charities I work with estimate the current error rate is often as high as 10% on membership renewal.

I see that Waltham has been awarded Comment of the Week for his contribution on 31 July, explaining why getting rid of cheques would be a problem for some small businesses.