End date set for cheque payments
On the 16th of December 2009, The Payments Council [1] (the industry body which sets the strategy for UK payments) announced that it has set a target date of 31st October 2018 to close central cheque clearing. This will bring the use of cheques in this country to an end.
Cheque use has been in decline since the early nineties and has fallen by 40% over the last five years. Many retailers no longer accept cheques but there are still a number of examples where cheques are being used extensively to pay for goods and services. These include payments made to individuals, sole traders, small businesses, clubs, charities and schools.
Whilst the Payments Council are keen to promote existing alternatives to cheque payments, they are also looking into where innovations and techniques will be required to create new methods of making payments. This is of particular importance to meet the needs of elderly and vulnerable people who currently rely heavily on cheques to make their day-to-day payments. The Payments Council has set a number of interim dates to assess progress on the managed retirement of cheques and will undertake a full review in 2016 in preparation for the final 2018 close date.
Chief Executive of the Payments Council, Paul Smee says:
“Customers aren’t likely to see any immediate change as the target date is still a long way off. This announcement marks the start of extensive work that we need to do to ensure that everyone has a viable alternative, should the cheque clearing close. We aim to be very transparent and we will continue to consult fully with all interested parties. There will be a critical review in 2016 when the Payments Council will decide whether sufficient change has occurred against agreed published criteria, to press ahead to do away with the cheque in 2018. There are many more efficient ways of making payments than by paper in the 21st century and the time is ripe for the economy as a whole to reap the benefits of its replacement.”
The decision of the Payments Council follows 18 months of research and consultation with various banking, business and consumer groups to understand how customers use cheques and where alternatives must be developed. Feedback from these groups has showed that the vast majority are happy that 2018 is a realistic end date but that the need for suitable alternatives to cheque payments need to be well in place before the end date is reached.
Smee added: “We have already done a significant amount of work, research and consultation which has convinced us that 2018 is achievable. But the real challenge lies ahead if we are going to be comfortable to wave good-bye to the cheque, which undeniably occupies a unique place in British culture. The payments industry will have to react positively and take the lead on delivering solutions which suit all their customers. I know that the Payments Council Board will pay particular attention to check that the needs of disadvantaged consumers are addressed.”
Jonathan Williams from Experian Payments adds: “This target end-date is nine years away and there are key milestones for the industry to hit before then to ensure that practicable alternatives exist to cheques. This is a great opportunity to develop more customer-friendly methods of payment which do not incur the costs of processing paper instructions.
Even when centralised cheque clearing does end, there is no reason why a PSR (Payment Services Regulation) - regulated payment institution could not provide a cheque-like service to its customers using Bacs or Faster Payments to actually transfer the funds.”
[1] The Payments Council