22 December 2014

MPs reopen inquiry into abolition of cheques

14 April 2011  |  8805 views  |  13 cheque

The UK's Treasury select committee is reopening its probe into plans to abolish cheques by 2018, claiming it has been "inundated with letters" from the public opposed to the move.

After several years of declining popularity, in December 2009 members of the Payments Council voted to set a provisional target of 2018 for the abolition of cheques, with a review scheduled for 2016.

However, the decision provoked widespread concern, with consumer groups, small businesses and charitable organisations all speaking out, prompting the Treasury Committee to launch an inquiry last February.

The Committee declared itself "unconvinced" by the Payment Council's assertion that cheques are in "terminal decline" and associated claims about the cost benefits of ditching the 350 year old payment method.

Treasury Committee Chairman, Andrew Tyrie MP, now says: "The Payments Council had seemingly forgotten about the millions of people who remain less at ease with the latest technology. Since our last inquiry we have been inundated by letters from the public telling us that they rely on cheques. Many charities, small business and vulnerable people - including pensioners - depend on cheques. Their needs must be considered."

The MPs are now calling for evidence on:

  • trends over time in the use of cheques as a payment mechanism, including estimates of likely usage over the next five to ten years
  • the advantages and disadvantages of abolition, including the impact on particular groups in society
  • analysis of the likely costs and benefits of the abolition of cheques
  • progress in the development of suitable alternative payment mechanisms
  • the decision to close the Cheque Guarantee Scheme and the implications for cheque usage

In addition, the Committee is taking aim at the Payments Council itself, asking for submissions on whether the body is sufficiently accountable for the way its decisions impact on consumers, how well it is delivering on its core objectives, and how its work fits with industry efforts to reduce fraud.

Written evidence should be sent to the committee by 6 May.

Payments Council chairman Richard North responded by claiming to "welcome" the chance to update on the plans, adding: "We remain committed to being fully transparent and to keep consulting with those who still rely on cheques: and this inquiry enables us to reassure consumers and businesses that cheques will not disappear unless we deliver on our commitments to make sure that acceptable alternatives are in place and available."

The Council has been working to develop an alternative, revealing in December that it is teaming with banks to develop an alternative paper-based payment method as part of a commitment not to leave customer "high and dry".

Comments: (13)

Brett King - Moven - New York | 14 April, 2011, 21:45

Oh please, can we move on already...

Why don't we start a campaign to save the Telex machine while we're at it!

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Matt White - Finextra - Toronto | 15 April, 2011, 09:15

Yeah, screw old people, small businesses and charities! So what if MPs are being told by the idiots that elect them that cheques should stay, let's just look after the people who really matter and need our help - the bankers.

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Brett King - Moven - New York | 15 April, 2011, 10:15

I hear old people still like playing Vinyl records too Matt...

Seriously, it's not a problem in Germany, Austria, the Netherlands, Belgium, and Scandinavia, where cheques have almost completely vanished. I don't see old people, charities and small business hurting there.  

Cheques are simply a 350 year old, outmoded form of payment that are inefficient, costly and aren't the best solution for customers in any case. If cheques were the BEST solution for customers, I'd be all for keeping them, but that is far from the case. 

Just because you're used to something doesn't mean there isn't something far better and simpler around the corner. Cheques are dead, they are inefficient and there are much better forms or payment around. Most of the EU has already figured this out, so why are Britons slow to adapt?

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Matt White - Finextra - Toronto | 15 April, 2011, 10:44

Brett

Let's be clear about the central point here: I agree cheques are a relic and are set to go the way of the dodo and I agree that banks need to give them a little push.

What I object to is the disregard shown for the genuine concerns of real people. As an advocate of 'banking 2.0', mobile, social media et al, you and your tribe love to tell banks that they are behind their users; that they have to introduce this stuff because it's what the customer wants.

So why ignore the customer on cheques? Is it because old people are less likely to be profitable than the feted 'Gen Y' or maybe poor ancient cheques just aren't as shiny and sexy and new as Twitter.

I can't remember the last time I wrote a cheque but I received one fairly recently. It was from my Grandmother, she sends me one every year on my birthday. She's in her mid-seventies and a few months ago started getting lessons at the local library on how to use the Internet. She's just about getting the hang of email but I'm not sure she's ready for online banking and sending me a transfer.

So rather than just dismiss these people and their concerns, advocates for the killing off of cheques should take them seriously and address them. MPs and banks have a duty to act in their customers' interests, not just sneer and say ‘get with it grandpa'.

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Brett King - Moven - New York | 15 April, 2011, 10:53

Matt,

I fully agree that it is the responsibility of the Politicians to look after their constituents as respects things like this. However, I still maintain that while your Grandmother is attached to cheques, the reason she probably doesn't use alternative payment methods is that she sees them as too complicated, and she's used to scribbling your name on a bit of paper and sending it in the mail.

If there was a really simple way she could do that electronically, say over the phone - with no charges, then she might not have a problem adapting to an alternative method. Or perhaps she could drop down the High Street branch, give the bank your phone number or address and they could simply process the payment automajically to your bank account with a nice note attached from Grandma. If she still wants to send you a card, then she could send cash, a money order, or even send you a pre-paid debit card! How cool would that be?

I can think of numerous alternatives here that all boil down to simplifying and improving the customer experience and reducing costs for all concerned, that just don't have to use a cheque.

Maybe that's what the politicians should be focusing on. Let's make banking work better - rather than be happy with the status quo - that includes cheques!

BK

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Matt White - Finextra - Toronto | 15 April, 2011, 11:23

I agree that simple alternatives are needed but you're just plain wrong to say politicians should be focussing on this stuff. That's the job of the banks - if they want to get rid of cheques, it's their responsibility to come up with replacements that are better.

If they don't, they should expect to face opposition from customers and the people that are elected to represent those customers.

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Brett King - Moven - New York | 15 April, 2011, 11:41

Matt,

You are absolutely correct. It is entirely within the power of banks to address this. I was simply responding to the title of the article where MPs had taken it upon themselves to undo the great injustice of abolishing cheques.

I don't know one bank in the UK that has appointed someone specifically to assist customers to transition from cheques to alternatives, so that says a great deal doesn't it?

BK

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Keith Appleyard - available for hire - Bromley | 15 April, 2011, 11:53

One of the great uses of Cheques is to act as a deposit when you hire equipment, only for the Cheque to simply be torn up when the equipment is returned undamaged.

Can you imagine the palaver if we had to place deposits via our Debit Cards, and then ask for the money to be recredited?

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Matt White - Finextra - Toronto | 15 April, 2011, 11:54

To be fair to the politicians (not something I normally want to be) I don't think they're saying to banks 'you can never abolish cheques' just that a better job needs to be done on the transition.

As for the alternatives, I don't know whether to laugh or cry at the idea of the "paper-based payment method" being floated...

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David Birch - Digital Money Forum - London | 15 April, 2011, 13:56

His granny is happy writing cheques because she isn't paying for them.

Look: the solution to this apparent quandary is quite simple. If the Daily Mail, Saga or a bunch of MPs want to carry on with cheques, there is nothing to stop them from obtaining a Payment Institution licence and running their own cheque scheme. I can't see what the problem is.

See http://digitaldebateblogs.typepad.com/digital_money/2011/03/cached.html

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Brett King - Moven - New York | 15 April, 2011, 14:14

Dave B,

Absolutely. How much are we paying to support the cheques business today? I haven't written a cheque in years. I wonder how much of my monthly fees are attributed to supporting this archaic system?

BK

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Matt White - Finextra - Toronto | 15 April, 2011, 14:21

Dave

No, my granny is happy writing cheques because she is comfortable using them and is not sure about the alternatives. But that's inconceivable to the digital evangelists and so MPs are absolutely correct to step in and act on behalf of their constituents.

Brett

You're paying to support cheques despite not using them. Others are paying to build the online and mobile platforms you and I prefer despite not using them. Swings and roundabouts.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 15 April, 2011, 14:23

Kudos to UK's Treasury select committee for its move.

Germany is no lighthouse for abolition of cheques. To say that cheques have almost completely vanished in Germany fails to reflect the full picture of retail payments in that country, if not also in Austria, Switzerland, Belgium and Holland.   

For one, cheques were never popular in Germany even ten years ago.

What was - and I suspect still is - popular is a paper-based alternative called Ueberweisungsauftrag. This tongue twister in German language is a piece of paper that's completed and signed by the payer in "wet ink" as the first step of initiating a payment. Although the bank processes it as an electronic payment and the payee receives direct credit into their bank account with no effort from their side, this is as much a paper-based instrument as a cheque when seen from the payer's perspective - which is exactly the affected constituency the Treasury select committee has on its radar. 

The situation with small business corporate payments was not greatly different either. In fact, if we used the bank's standard preprinted Ueberweisungsauftrag paper form, there were no fees. However, if we resorted to more cool / hip / green alternatives (e.g., email or printout of multiple payments on a single page printed on the company letterhead and sent by fax or snail-mail), the bank would slap a fee of 5 DM / EUR per payment.

No matter which way the debate goes in UK, the government should regulate that banks must continue to offer at least one cheque-substitute ePayment instrument that is fee-free. I know most banks don't charge for FPS and BACS now, but the same should continue even after cheques are abolished. 

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