Cheques gone by 2018?

A banking industry consultation on the future of payment mechanisms in the UK is calling for cheques to be completely phased out by 2018.

The consultation document published by the Payments Council this week calls for the banking industry to consider the future of cheques, pointing out that in 1990 there were over 1.1 billion guaranteed cheques written in the UK, falling to 174 million in 2006. Currently, around 41 million adults have a card but only 12 per cent of these cardholders use it to guarantee cheques at least once per month and 56 per cent never use the cheque guarantee function.

Cheat Sheets

♦ Basel II
♦ MiFID
♦ Sarbanes-Oxley

The document said: "The Payments Council is minded to develop a proactive industry plan to manage what it sees as the irreversible decline in cheques. Do you agree that a plan for cheques should be developed? Would it be acceptable for the National Payments Plan to include a target date of 2018 for the closure of the cheque clearing (on the assumption that acceptable alternatives to cheques have been developed)?"

TowerGroup analyst for European payments Gareth Lodge said: "Payments is a volume game. When there are a lot, the processes are relatively cheap. A smaller amount of any one sort of payment makes it more expensive to process. The Faster Payments Initiative [slated for May 2008] should allow the sort of transactions conventionally done through cheques over electronic means in a guaranteed way. This will even further hasten the demise of the cheque."

The Payments Council was set up in March this year to formulate strategy on banking processes. It comprises of the great and good within banking, including representatives from many of the high street banks and the Bank of England.