A couple of weeks ago I decided to write to the Payments Council regarding the future of payment options for those such as voluntary organisations and the less well-off. It was not my best-written email, despite its brevity, but it is a correspondence that speaks for itself and so I am publishing it here. Please feel free to offer your comments.
Dear Sir/Madam,I would be grateful if you could let me know what work you are aware is being done in either the public or private sector on the issue of cheque replacement, especially for 1.) families on lower incomes and 2.) for those who are uncomfortable and resistant to a technology-based solution.
The Payments Council
Thank you very much for taking the time to write to the Payments Council to register your concern about the decision to set a target date for the closure of cheque clearing in 2018. Firstly I must apologise for not responding to you earlier but it is taking me longer than I’d expected to answer all the emails and letters that we have received. There have been over 450 of them and I want to ensure that I respond to as many points raised as possible so that we understand people’s different issues.
One thing I’d like to stress from the outset is that in the short term this means no change to how we use cheques, as 2018 remains eight years away. We have made very clear commitments that the Board will only decide to go through with closure in 2018 if, by 2016, suitable alternatives are in place and being successfully used. Obviously removing cheque books now would not be feasible as so many people rely on them but that is not what was agreed. Importantly we completely recognise that as things stand there are not enough easily accessible alternatives to cheques for a range of individuals (as well as charities, small businesses and schools). That’s one of the reasons that the target date is enough of a way off to ensure that the necessary work is done on alternatives, that they are bedded in and that they meet everybody’s needs.
The Payments Council first started looking at the future of cheques two years ago and undertook a public consultation but felt that more information was required before making any decision on this issue in 2008. All parties that we have consulted recognise that the number of cheques we use is in terminal decline: cheque use has declined 40% in five years and only half of the cheques written in the UK are personal cheques with businesses writing the other half. In many ways we really had no choice but to completely review the future of cheques taking into account the changing pattern of use by individuals, businesses and retailers. Without us putting a plan in place for the future, we could see a number of banks moving away from cheques and customers suffering but there being no work to develop an industry alternative. This way there will be a concerted effort to ensure that alternatives exist.
Since the publicity over the decision, a number of representative groups that we have not discussed this with so far have got in touch to refer their specific issues to us. These range from the impact that stopping cheques will have on the level of donations amongst the myriad of small clubs and societies that exist, through the impact on those people that group represents to the need to provide dual signature authorisation for existing transactions. In the latter case, there are online solutions available and we would expect banks to explore other alternatives to those functions that cheques currently offer. This year we want to concentrate on this area and we will be arranging a series of workshops to explore solutions with the voluntary sector.
One aspect that has proven useful over the last couple of months is that a number of people have got in touch to highlight the key areas where alternatives to cheques will be really required. You won’t be surprised that these mirror the issues that you mention. Obviously there are some alternatives already in existence – not all of these, however, suit everybody and there is certainly more work that can be done by the Payments Council to demonstrate what options suit which type of existing cheque use.
A number of people have asked what they would use instead of cheques for small gifts and personal payments and an alternative will need to exist if the proposal to close the cheque clearing is to go ahead. One option that will be reviewed is whether a paper voucher – that can be electronically processed – would be practicable.
I can see how paying sole tradesmen is a concern but there are alternatives already and with some additional work, these issues can be tackled by banks. Mobile card machines are easily available although they may not be priced as attractively as they need to be to encourage their use, but they are increasingly used by very small outlets. One of the problems with cheques for small tradesmen is that they have to pay them in to the bank and wait for them to clear so they can get their money. In all cases, electronic transfers and card payments are quicker; and we expect to see more use of direct electronic transfers not just between individuals but between small businesses too. Increasingly people use the Faster Payments service to transfer money between individuals or to pay small service providers – actually that’s how I paid a recent bill from the plumber.
We completely understand the concerns this proposal may cause some who are older themselves or have elderly relatives and I would like to reassure you that we are not trying to force people who feel uncomfortable banking online down that route.
I appreciate that my comments may not assuage your overall concern but I would like to re-assure you that we’re talking about gradual change and helping people understand what options exist rather than suddenly finding in 7-8 years time that cheques aren’t accepted. The Payments Council was set up to look at what type of payments we need overall as a country for the kind of business (as individuals and businesses) we all do and the payments we make. It is not a purely banking industry body: to that end, there are four independent Directors sitting on the Board and I’ll ensure that they receive a copy of your correspondence. Three of the independent Directors chair the User Forums covering consumer, corporate and small business interests and have been discussing the issues on cheque use for some time.
You may have no interest in reading how we came to this decision but we have published a report The Future of Cheques in the UK on our website along with two fact sheets for consumers and small businesses http://www.paymentscouncil.org.uk/media_centre/press_releases_new/-/page/855/. If you would prefer a paper copy, please let me know and I’d be happy to send on a copy (my telephone number is at the bottom of this email). As alternatives to cheques for different types of use become clearer, we will be updating the fact sheets and ensuring we communicate as widely as possible about any developments.
I hope you don’t mind me writing such a detailed response but obviously you raise important issues that we need to take into account.
Again thanks for writing and apologies again for my dilatory response.
Director of Communications