Cheque-out by 2018

The date of October 31st 2018 has tentatively been given by the board of the UK’s payment council to abolish cheques and encourage the development of other advanced payment forms. The first cheque was written more than 350 years ago, its predecessor was the bill of exchange, a way for traders to buy and sell without having to carry gold or silver. Cheque use had slowly risen to an all time high in 1990 to 2.4 billion, with a steady decline to 663 million in 2008.

There is no doubt moving away from traditional payment methods like the cheque will impact on nearly all businesses alike. Affected the most will be small businesses, sole traders and in the consumer market older people. Help the aged said “more traditional paper based methods should still be available to people who feel comfortable with them”. The cheque is the most expensive method of banking to businesses with a cost of £0.46 as compared with a BACS transfer which is around £0.29. Most UK supermarkets and retail chains have ceased accepting the cheque due to cost and security.

The affect on debt collection agencies, credit managers and small business owners?

On reflection cheques can be used as a stalling tactic for payment, with our personal favourite “the cheque’s in the post”. This then leads on to further problems when receiving the mysterious cheque; it will then bounce! Electronic payments should speed up payments, eradicate excuses and increase cash flow.

Already in place is electronic bank transfers, that should see a steady increase as cheques are phased out, however what will replace the cheque in a more social banking scenario? Banks and credit providers have been spending time and money investing in contactless technology. This will allow users to make payment by pushing a chip against a sensor. Other methods that are tipped to grow in the payment culture are mobile phones and pre paid top up cards.

In conclusion we see this as a step into the 21st century of modern day banking, as it will encourage banks and credit providers to develop new, easier banking methods. The down sides as with any change is the cost to society, both in monetary terms and a transition period of social usage.

By Gareth Fawke