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Cheques lose their bounce

27 Mar 08

The cheque is slowly being consigned to history, superseded by electronics

by Martin Hillman

The cheque is probably not in the post – that delayed payment is much more likely now to be stuck in some huge financial institution’s computerised payment system. We use 4.4m cheques a day, which sounds fine until you realise that use has fallen 40 per cent in 10 years, according to the UK payments organisation, APACS.

“UK cheque volumes peaked in 1990,” says Jemma Smith at APACS. The figure then was 11m a day. She is reluctant to predict the cheque’s demise though: “In 2016 it will still be 2.3m a day.”

To some extent, the cheque has entered a vicious spiral of decline, certainly in the retail sector. The fewer outlets accept cheques, the more buyers will use plastic, so the less the few remaining retail outlets will be inclined to accept cheques.

Marks & Spencer, one of the last high street outlets to stop accepting them, put usage by the end at 2 per cent of transactions; another late leaver, Tesco, said 0.5 per cent.

It is not just plastic that is taking its toll. Electronic payments are on the rise, for instance direct debits when it comes to paying the bills that once required a monthly cheque. There are few pay packets left, and few pay cheques: it is all electronic. Even freelance or casual workers who are not on regular salaries are likely to be paid by bank transfer.

Business is being encouraged to go electronic, and big business can basically do so on its own terms. As far as small companies are concerned, Federation of Small Businesses spokesman Simon Briault admits he rarely praises banks but says: “Even small independent shops have been able to get card point machines from their banks.”

Cheques remain essential for small businesses, he says – a local contractor who gives some of the work to an independent plumber or electrician, for instance.

Clearances have recently been speeded up – his main concern that the Big Four banks do not artifically push cheques out.

“As business becomes more involved in doing transactions online, cheques will organically fade out,” Briault says. “It is not a problem so long as it happens gradually and the banks don’t one day suddenly say ‘No more’ or impose massive charges.”

Smith adds: “There are still plenty of places where the cheque is the preferred, if not the only, option.” Person-to-person use is important: presents and allowances. Then there are small personal payments: parents’ payments for school activities, for instance, club memberships.

It is 40 years or so since we first put plastic in our pockets and purses so we are pretty much used to it, APACS points out.

Indeed, it recently issued guidance on how to use cheques – a sure sign that after more than 300 years, they are fading away.


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