UK begins roll out of cheque imaging

UK begins roll out of cheque imaging

The UK is beginning the phased roll out an image-based cheque clearing system that will slash processing times from six 'weekdays' to one day and pave the way for the introduction of interbank mobile cheque deposits.

Although cheque usage is in decline, 477 million were written in 2016. Previous attempts to abolish cheques caused political uproar and howls of protest from consumer groups and charities which still rely on paper-based donations.

Legislative changes to enable the passing of digital cheque imaging came into force in July 2016 and marked the onset of a number of bank trials of mobile cheque deposit systems for intra-bank clearing. Under the new system, banks will be able to accept and clear cheque images drawn from their peers.

Initially, the volume of cheques going through the new system - built by Vocalink and Exela Technologies - will be small, with the UK's Cheque and Credit Clearing Company running two clearing systems in parallel until all banks have come online later in 2018. This means that some cheques that customers write or pay-in will be cleared more quickly via the image system, and some will clear to the existing, six weekday timescale through the current, paper-based system.

James Radford, chief executive officer of the Cheque and Credit Clearing Company, says: "For more than 350 years the way cheques have been cleared in this country has essentially remained the same. Now, with the introduction of cheque imaging, we are bringing the UK cheque into the 21st century, ensuring that it remains a secure, robust and viable payment method for the millions of charities, businesses and personal customers that still write or receive cheques on a regular basis.”

Comments: (12)

A Finextra member
A Finextra member 30 October, 2017, 11:51Be the first to give this comment the thumbs up 0 likes

If a unique QrCode is printed on the Business Cheques it can be deposited by a simple scan and deposit with the appropriate application.

Robert Zahm
Robert Zahm - Accenture - 31 October, 2017, 09:55Be the first to give this comment the thumbs up 0 likes

This story would seem to be news only because it has taken the UK so long to "get it done".  As to needing Qr Codes to deposit checks, really?  US retail banks have been allowing that via simple check photos for a couple of years without requiring information beyond what's already standard on US checks.  And the UK is supposed to be a hotbed of FinTech development, really?

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 31 October, 2017, 16:10Be the first to give this comment the thumbs up 0 likes

Banks issue blank cheques to business customers who write the amount and beneficiary name on individual cheques later. Who will print the QR code that's beneficiary-specific?

James Piggot
James Piggot - Finastra - London 01 November, 2017, 10:08Be the first to give this comment the thumbs up 0 likes

Most enterprises large and small print out cheques directly from their accounting software these days rather than writing them out by hand. This means they can print a QR code if that is required to automatically identify the beneficiary.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 01 November, 2017, 11:39Be the first to give this comment the thumbs up 0 likes

When somebody says "I'll write a cheque", it doesn't mean only "write by hand". It's a metaphor for filling the cheque, whether in wet ink or via printer.

With that out of the way, a payer that prints a cheque needs only to know the payee's name. Not having to collect, store and process the payee's account number, sort code, etc. is the major advantage of cheque. What QR code can it print with just the payee's name? With whatever QR code that it can print with just the payee's name, how will the payee be able to use a smartphone QR code scanner to deposit that cheque into their bank account? 

Anirudh Raghavendra
Anirudh Raghavendra - FIS - Bangalore 01 November, 2017, 12:10Be the first to give this comment the thumbs up 0 likes

In an era when customers really want frictionless payments and faster payments, is cheque imaging really required? Yes, it purportedly reduces processing from 6 working days to 1 day; but the customer wants payments to be made immediately !!

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 01 November, 2017, 14:01Be the first to give this comment the thumbs up 0 likes

@AnirudhRaghavendra: 

Cheque imaging is required because cheques are still around.

And why are cheques still around?

Part of the answer lies in your question. 

  1. Next to cash, cheque is the most frictionless method of payment.
  2. If customers really want frictionless and realtime payments, cash can't be beaten. As DB Research noted, cash is the only form of realtime payment that accomplishes transfer of value between payor and payee without any dependency on bank, hardware, software, network, battery, and other third parties.
  3. Personally, I need to make a payment on 7th of every month and another payment on 10th of every month. There's no way I can guarantee availability of server, Internet or me on those days for making a realtime payment via RTGS/IMPS. So, I schedule them in advance via NEFT. Do I care for realtime payments? No.
  4. During the implementation of FPS for a Top 5 UK Bank, we predicted that FPS would kill BACS within 2-3 years of launch of FPS in 2008. Nothing like that happened. Instead, UK customers didn't care too much for realtime payments; BACS volumes grew steadily and reached a peak a couple of years ago.

I see a growing belief that realtime payments is merely a hygiene factor.

A Finextra member
A Finextra member 02 November, 2017, 09:08Be the first to give this comment the thumbs up 0 likes

Don't forget - the UK banks tried to get rid of cheques a few years ago and the backlash from politicians, charities and representatives of older people was massive - cheque imaging is a response to that backlash in the UK and a way for banks to reduce costs and environmental impacts associated with moving huge volumes of paper around the country.

Yes, we're all real time payment geeks on here but you need to think about all banking customers - not just tech savvy Monzo using millenials.  There are many customers who like to use cheques as a secure way to exchange value (without the danger associated with carrying lots of cash) - there are also lots of businesses (such as kids clubs, window cleaners, etc, etc) who like to recieve cheques as opposed to setting up with gocardless, izettle, etc (often because it's cheaper for them). 

Despite being a payments geek myself I find my family needing a new chequebook every year for the reasons stated above.

So lets get some perspective, stop forgetting about ALL of the customers that banks serve and accept that cheques will likely have a place for another 20 years at least

(PS I don't work for the cheque and credit clearing company!!)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 November, 2017, 08:42Be the first to give this comment the thumbs up 0 likes

@AnirudhRaghavendra:

According to this MINT article about digital payment transaction values in India, batch mode NEFT is the clear winner.

Batch A2A NEFT: 12,50,000 Crores INR

Realtime A2A IMPS: 65,100 Crores INR

Batch:Realtime = 1250000/65100 = 19.2:1 ~ 20X

Like in UK, batch payment volumes far exceed realtime payment volumes even in India.

This resonates strongly with my aforementioned belief that realtime payments is a hygiene factor.

James Piggot
James Piggot - Finastra - London 07 November, 2017, 09:28Be the first to give this comment the thumbs up 0 likes

I can't remember the last time I wrote a cheque must have been years ago. While there are some tradespeople who ask for cheques, most have switched to being paid by bank transfer which is cheaper for them. And the faster payments system means  they receive the funds mostly within the hour. In my experience most people when told about faster payments are astonished that it used to take longer in the past, they assume anything done on a computer is pretty much instant. In the UK batch payments may exceed realtime payments but presumably only because not all the banks and building societies have implemented faster payments yet?

Handling cheques has become a real problem because of branch closure. If there is no branch nearby depositing a cheque can be a real chore, so cheque imaging is very welcome!

A Finextra member
A Finextra member 07 November, 2017, 09:32Be the first to give this comment the thumbs up 0 likes

Regarding batch payments, it's primarily down to cost of BACS vs FPS.  It costs banks about 3.5p to sent a faster payment (just the scheme fees) vs a fraction of that for BACS.  If you're sending non urgent payments then BACS still makes a lot of sense.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 November, 2017, 10:471 like 1 like

@JamesPiggot:

"...they assume anything done on a computer is pretty much instant." So it's not only my father or mother or sister or wife or daughter, none of whom is remotely connected with fintech or payments tech! It's even more difficult to explain why payments done via computers could fail!! 

"Handling cheques has become a real problem because of branch closure. If there is no branch nearby depositing a cheque can be a real chore, so cheque imaging is very welcome!". Extremely valid point. The banker in Why Branch And Digital Channels Will Coexist Forever told me that, despite 90% of routing transactions going digital, their branch network is growing mainly because of cheques. (For many years, cheque truncation at the backend is fairly ubiquitous in India but there are still no signs of Mobile RDC - probably because of a conservative regulator and / or shift of the entire spotlight to digital payments.)

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