Payments Council floats paper-based alternative to cheques

Payments Council floats paper-based alternative to cheques

The UK Payments Council says it is working with banks to develop an alternative paper-based payment method as part of a commitment not to leave customer "high and dry" when the cheque clearing scheme is finally abolished.

The Council has already set a provisional target of 2018 for the abolition of cheques, with a review scheduled for 2016.

The move has been slammed by consumer groups, small businesses and charitable organisations, which rely on cheques as an established payment mechanism. The Payments Council has promised to develop alternative electronic payment methods that can meet the needs of all consumers.

However, in a progress update, the Council holds out a fig leaf to the lobbyists: "Where there there are gaps in the current range of payment options, we will look to foster innovation and investigate the feasibility of providing a paper-based method of payment, to address the needs of some consumers who are highly dependent on cheques and who may find it difficult to migrate to the electronic alternatives."

Richard North, chairman of the Payments Council says: "By setting a target date for closing cheque clearing, we know we have set ourselves a massive challenge in developing alternatives that work for customers and that people will choose to use in place of cheques."

Payments Council research shows that 55% of consumers are still not aware that a target date of 2018 has been set to close the cheque clearings. Of those (42%) that are aware of a target being set, a quarter believe that the date is either next year or in 2012.

Finextra verdict: What form could this innovative new payment method take, we ask ourselves. A piece of paper with a space for a signature, payee name, cash amount and date, perhaps? Amazing! Whatever will they think of next?

Comments: (6)

Elizabeth Lumley
Elizabeth Lumley - Girl, Disrupted - Crayford 07 December, 2010, 15:46Be the first to give this comment the thumbs up 0 likes

Charities and services for old people are often mentioned, in regards to the abolition of checks. But anyone with a small child will know that most schools only take cash or checks for the wide range of school trips, uniforms, sports, photos etc... that you have to shell out for throughout the year.

Wouldn't the government be able to help state school migrate off of cash and checks?

Nick Green
Nick Green - ISD Consultants - Northampton 07 December, 2010, 17:57Be the first to give this comment the thumbs up 0 likes

Elizabeth are these checks you use similar to the cheques that are being phased out?

Elizabeth Lumley
Elizabeth Lumley - Girl, Disrupted - Crayford 07 December, 2010, 18:54Be the first to give this comment the thumbs up 0 likes

Nick - try telling that to your average state primary in South London! 

Alexander De Lange
Alexander De Lange - Aurelia Financial Consultants cc - Johannesburg 08 December, 2010, 11:42Be the first to give this comment the thumbs up 0 likes

Surprisingly, such an instrument already exists: it called a CHEQUE

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 December, 2010, 11:45Be the first to give this comment the thumbs up 0 likes

@Finextra verdict:

If I were to guess, the paper alternative to cheque might be something like the German Ueberweisungsauftrag that used to be very popular when I was in Germany 7-10 years ago. In a paper version of SCT or SEPA Credit Transfer, the payer enters the payee name, bank account details, amount, and date into a preprinted paper form. After signing it in "wet ink", the payer hands over the form to their bank (unlike a cheque that is handed over by the payer to the payee). The payer bank converts the payment instruction electronically before forwarding it to the scheme (equivalent of BACS).

Although the payment originated in paper, it gets counted by the scheme as an electronic payment. 

This might just be the UK Payments Council's way of having its cake and eating it too!


A Finextra member
A Finextra member 15 December, 2010, 11:10Be the first to give this comment the thumbs up 0 likes

The abolition of cheques in 2018 does raise some concerns for the elderly and those who rely on cheques as their primary or only method of payment outside of cash. However, Direct Debit Limited is not convinced that a new paper based alternative is the way forward. As cheque usage continues to decline, we believe that Direct Debit is a safe and suitable payment method that will continue to gain popularity as we move closer to the abolition deadline. 

Direct Debit is easy to use.  As a result, some schools have already introduced Direct Debit for services such as school meals. It means that children don’t have to carry cash, it spreads the cost for parents and it reduces the administrative costs for schools. I would also argue that it is generally a much more efficient and safer way to pay compared with cheques, since consumers don’t have to worry about forgetting payments and in the unlikely event of an error they have protection via their banks. The Payments Council does have a massive challenge ahead, but we hope that more and more consumers and companies will realise the benefits of Direct Debit as 2018 draws closer.  

The planned abolition of cheques, whilst being an initial concern for some organisations, has also provided an opportunity for those smaller organisations such as playgroups, schools, charities etc. to move to a more efficient collection system. We are already seeing the start of a trend where more and more organisations are signing up to our bureau collection service to collect direct debit payments on their behalf. This means that an organisation can enjoy all the benefits of the direct debit system without having to commit staff time etc. to run it.