Banks have announced plans to phase out the use of cheque books from October 2010. The announcement came as a shock to many who see the cheque book as a safe and secure way of making payments and controlling expenditure. Many customers do not have on line banking access and are concerned over how payments can be made in the future in a convenient and safe way.
Cheques have been used as a method of payment for over 350 years. In announcing the move, the UK Payments Council commented that the paper based payment mechanism was not suited to life in the 21st century. The Council, which is the body responsible for overseeing the UK's payment strategy, says that it will be promoting a range of other payment mechanisms to offset the departure of the cheque book.
The number of cheques written has been declining each year since 1990 but the most marked reduction has been in the past 5 years where the number has dropped by a significant 40%. Although the target date of 2018 has been announced, the Payments Council plan a review two years before hand to ensure that usage has declined sufficiently for them to finalise cheque withdrawal. If the current trend on reductions is followed there should be around 1.6 million cheques written per day compared to 3.8 million in 2008.
One of the major arguments against the cheque is the cost of handling and processing. It costs around £1 to handle the physical paper and process the payment and for this reason most supermarkets, petrol stations and high street retailers do not accept them as a payment method. The significant aspect here is that the payer is present at the time of transaction so an alternative credit or debit card can be used. Cheques tend to be used to settle payments at distance such as through the post.
This lack of a suitable payment method for settlement over distances is where the prime arguments against abolition stem. Small businesses without access to electronic banking and consumers without internet access will be disadvantaged. Already research has demonstrated that there are 6.4 million people over 65 that have never used the internet and rely on card and cheques to pay their bills.
But cheque free societies do exist. Finland abolished cheques in 1993 and Sweden has followed suit.
So what are the alternatives to a cheque book? At the moment there are few and these surround the use of plastic cards and chip and pin technology. But there have been recent findings published showing that the security features of chip and pin technology is not as robust as we were promised. A team at Cambridge University claim to have been able to make fraudulent payments using credit cards without the pin being present. Whilst this is denied by the card providers, there is sufficient evidence to suggest that a major security overhaul will be needed to upgrade the security.
Biometrics is also being increasingly used to ensure the identity of the user is who they say they are. This is already being incorporated into passports and other products and will surely be introduced into payment cards in the future. Cashless payment cards have already been trailed in Swindon and Northampton with mixed results but touchless payment processes do exist although they do need enhancing!
But it is with mobile telephony that the future looks brightest. Technology already exists to turn the mobile phone into a payment terminal. The options include the use of SMS text technology or internet access using free to consumer open space wi-fi or 3G access. Whilst this will appeal to the younger members of society, it still will not probably fit with the older generation that struggle to get to grips with rapidly changing technology.
So the future battle lines are being drawn up. All that is needed is for technology to develop at a fast enough pace to enable us to feel comfortable to consign our cheque books to the rubbish bin. That inevitably will mean getting to grips with some form of technology and let us hope that whatever is introduced is simple and straightforward to use – and is secure! 2018 may seem a long way away but it will be upon us before we know it. We may even have paid off some of our huge national debt by that time – although probably not by cheque! At least we will not have to worry about keeping all those cheque stubs to remind us of what and whom we have paid!