26 November 2007

UK's Payments Council proposes end to cheques

The UK Payments Council is mulling plans to phase out paper-based cheques in favour of a UK-wide shift to automated and card-based payments. The proposals to eliminate cheques are part of a public consultation, launched by the Council, that will ultimately lead to the creation and adoption of a national payments plan.

Cheque volumes now comprise 13% of UK non-cash payments compared with 64% at their peak in 1990. Based on current trends cheque volumes will fall at an average of over seven per cent per year over the next ten years, says the Council, leading to transaction volumes of 840 million in 2016 when cheques will account for only one payment in 50 in the UK market.

The strongest decreases are expected in bill payment and in payments in the retailer, travel and entertainment sectors. But cheques are still widely used for person-to-person payments and payments to and from smaller businesses.

However, the Council says it will consult on whether the industry allows changes in customer behaviour and market forces to determine the rate at which cheques decline or whether there is a "proactive effort" to phase out cheques within a stated timescale.

The Council states that it is more "minded to pursue the second, more proactive option" due to the availability of automated payment options and increasing use of new technologies such as mobile and contactless payments.

"If this approach is adopted, the Payments Council envisages that in seven to ten years' time the vast majority of users will no longer require cheques, and the cheque clearing could be closed," states the consultation paper.

"Large cheque payers and recipients, including banks, insurance companies, registrars and government, would be encouraged to take the lead in moving the market from paper to electronic payments," the paper continues. "To provide focus, a target end date would be set for ending cheque use in these sectors. An education campaign would be run to support the migration."

The focus would then shift to sectors where electronic alternatives to cheques are not yet widely available, or where the uptake of alternatives is relatively low. This would include person-to-person payments, payment of subscriptions to clubs and societies and payments to small businesses.

Stats released by UK payments association Apacs earlier this year showed that the number of cheques written by people in the UK has halved from 2.0 billion to 1.0 billion in the last ten years, with volumes declining at the fastest-ever rate during 2006.

But despite the decline, Apacs' director of communications, Sandra Quinn, said that cheques would not disappear altogether and predicted that there would still be around 840 million cheques used in the UK in 2016.

© Graham Bishop