I am not going to claim mobile payments is going to eliminate cheques at all. To be honest I was more looking for a catchy phrase to start a story of cheques and why mobile might crush the popularity of cheques maybe, for sure in some regions.
As many of you know I have a group on LinkedIn,
Innovation In Payments, where all kinds of payments related topics are discussed, like this week the blog post
The death of the cheque – a premature call or a worthy goal?, and the article
AT&T and Apriva turn smartphones into POS terminals.
Believe it or not, but for me this is the perfect combination for another post. I am from Belgium, a country where they say for years now they want to abolish cheques. However a few big clients take a big share of the cheque business: governmental institutions
for pensions for example and retailers who pay the truck of their suppliers immediately after delivery. Another popular segment for cheque usage is real estate.
For governmental institution there seems to be a trend to move towards prepaid cards. At least the intention to move towards prepaid cards. There cards could then be used to retrieve the cash from an ATM (where beneficiairies of cheques retrieved cheques
for cash at the front desk of an office). This already results in more automation, less cheque operations and possibly less cash if prepaid cards could also be used for shopping for example.
The other cheque segment is more of a psychological issue: "you give me the goods, I pay you in return". This could be done:
- cash, unless the goods are too expensive;
- by credit transfer, but that is just a promise to pay and a lot 'could go wrong' or the creditor could forget about it or...;
- by check, that way the benefiairy proofs he will pay for the goods when the seller wishes to encash his cheque, definately if it is a guaranteed cheque;
So in fact it is more a matter of trust. And that brings us at the article of AT&T. Together with Apriva they made a mobile solution to make a POS terminal out of a Mobile Phone. That would solve the trust problem of a credit transfer and it would be a perfect
alternative for cheques in this last case. This solution would make a mobile shop of every truck that is on the road!
Depending on the limits of the card the most expensive goods could be paid by card offering the same feeling of trust as with a cheque: "I give you the goods, you pay with your card (or mobile solution) on my Smartphone". Result is a good-to-money exchange
with a real time settlement, so payments service is even better, and more reliable than with cheques!
For real estate the same could be done: customer goes to the banks and instead of asking for a cheque he asks for a 300,000 euros prepaid card. As in Belgium most real estate is done by a third party, the solicitor, he and his smartphone could in the process
be the receiver of the money, as he is the trusted party. After the final signature the solicitor could transfer the amount (minus costs of solicitor services), to the seller of the real estate. That way the aspect of trust is still maintained and the process
of a real estate service has become 21st century!
You could simply impose higher costs for the usage of cheque, but I do not believe that will eliminate the wish to get a cheque for certain transactions. If you go back to basics, look why people still like cheques and capture that into a new solution it
will be much easier to evolve to a new payments landscape where cheques will be easily forgotten.