UK banks set two-year deadline to stop guaranteeing cheques

UK banks set two-year deadline to stop guaranteeing cheques

The UK Payments Council is moving to hasten the demise of paper cheques by setting a two-year deadline for the withdrawal of the Cheque Guarantee Card Scheme.

The Scheme sets the rules for the use and acceptance of guaranteed cheques and uses a depiction of Shakespeare on participating plastic cards as a common identifier.

In setting a provisional deadline of mid-2011 for the withdrawal of the programme, the industry body says the two-year time horizon should provide ample time for consumers and businesses to implement alternative methods of payments.

Says the Council: "The payments industry will now need to confirm a viable date for closing the Scheme and for communicating and managing this process with all users and acceptors."

Last year, of the 1400 million cheque transactions recorded in the UK, just under seven per cent, or 95 million were supported by a cheque guarantee card

Despite the numbers, the Payments Council says the use of guaranteed cheques is in rapid decline with volumes down a third in the last year and by 70% in the past five years. Meanwhile, losses totalling £43 million were reported in 2008 as a result of cheque guarantee card misuse.

The closure of the Scheme is likely to hasten the demise of the paper cheque, as retailers look to alternative forms of payment for certifying transactions.

The Payments Council is due to report later this year over whether it should proceed with a more ambitious plan to shut down the central cheque clearing system in its entirety.

In a statement, the Council says: "Whilst it's generally accepted that cheques are in terminal decline and that managing the process is preferred by all parties, the Payments Council has made it clear that a date for closing the cheque clearing cannot be set until it is confident that alternatives for the vast majority of current cheques uses have been identified and that these will be both accessible and acceptable to users."

Comments: (1)

A Finextra member
A Finextra member 27 June, 2009, 10:49Be the first to give this comment the thumbs up 0 likes

It would, of course, be quite useful if the electronic banking processes worked as simply and reliably as the paper cheque. I find that it is very difficult to set up the account details for government and other corporate accounts, particularly from my business account.