An old and trusted payment method to finally cheque out
Cheques, it seems, have had their day. Under plans announced at the end of last year, the Payments Council Board — representing the banks — has decided that cheques will cease to be used from 2018.
The banks quote a long-term decline in the use of cheques as the reason for ending them, but that trend will be accelerated next year when banks will cease to offer a cheque guarantee service. It is true, though, that many retailers no longer accept cheques and there has been a 40% drop in the use of cheques in the last five years.
Despite this, last year about 1.4 billion cheques were issued in the UK, roughly half of all adults sent a cheque and about the same number received one.
But, significantly, there is not an even spread across the population as to who does, and who does not, use cheques. Business-to-business payments are increasingly conducted through internet banking. And most people under 25 do not have a cheque book — relying on a mix of cash, internet banking, plastic cards, standing orders and direct debits.
The picture is very different for older people. Pensioners are more likely to use cheques than are younger people. There are many transactions where it remains |easiest to use cheques — paying tradesmen, for heating oil and to pay for school dinners and trips out, for example. This may explain, also, why women are more likely than men to use cheques.
Select Committee hearing
Now the House of Commons Treasury Select Committee has begun a hearing into the proposals to end cheques. It is worried that older people will find it difficult to pay many bills without them — if a person cannot get out to go to a cash machine, how else will they pay a plumber? |People with disabilities have particularly difficulties with telephone and online banking.
Northern Ireland’s Consumer Council is worried about the impact on the over 65s and says that its research shows 8% of consumers here prefer to pay household bills by cheque.
Julie McCurley, head of money affairs, says: “The Consumer Council has received assurances from the Payments Council that the cheque clearing system will only be closed down if there is |evidence that consumers in Northern Ireland are able and willing to use alternatives to cheques.”
The recently merged Age Concern and Help the Aged also want to see evidence of an alternative payment mechanism that is acceptable to older people.
Andrew Harrop, its head of public policy said: “This move by the Payments Council will leave millions of older people worrying about how they will manage their finances without cheques. 2018 is the date set for the withdrawal of cheques but we are concerned that this will give the green light to banks and retailers to start phasing them out |even sooner.
“Chip and pin is problematic for many older and housebound people and we know 6.4 million over 65s have never used the internet. Without cheques, we are very concerned people will be forced to keep large amounts of cash in their home, leaving them vulnerable to theft and financial abuse. The Payments Council needs to urgently come up with some practical alternatives |to replace cheques or it will be condemning thousands of older people to extra worry and financial insecurity.”
The question of what might replace cheques will be central to the Treasury Committee's investigation. One option promoted by the banks is micropayments cards — plastic cards that are like debit cards, but with cash preloaded. But there seems to be consumer resistance to these and they are more useful in shops and on buses than for people sitting at home.
The mobile phone alternative
A more likely alternative could be the mobile phone. In many countries, mobile phones are used as ‘electronic purses’ — offering yet another function to devices that make calls, take photos and play music and games. Both the manufacturers of mobile phones and the providers of mobile phone networks are keen to push this as the new way to make payments.
Hannu Markus of Nokia in Finland told us: “Last year we announced our plans to bring Nokia Money mobile financial services into market, first in emerging markets. A month ago we told that in partnership with Yes Bank, we have started the service as a commercial pilot in Pune in India and will roll it out later to the whole of India. Nokia Money offers a wide spectrum of mobile payment services, encompassing all consumer needs: sending money to family and friends and paying bills whenever and wherever.
“In addition, Nokia has actively participated in various mobile payment trials based on NFC — Near Field Communications — technology. They are typically used for face to face — proximity — payments, while Nokia Money will enable both proximity payments as well as remote payments, which allow consumers to send money to each other over longer distances, or pay for online purchases.”
Consumers here may not have long to wait to use mobiles for payments. PayPal already operates a system for its subscribers to transfer payments between mobile phones. And Orange has entered into a relationship with Barclaycard to use mobiles in place of cash for small transactions (under £10) using contactless technology — a mobile is held over a card reader in a shop, or going onto a bus, for example.
It is the case that tomorrow is here today, except we have barely noticed yet.