The death knell for cheques has been sounded after yesterday’s decision by the Payments Council to abolish the national cheque clearing system, a move which effectively makes this 350-year-old payment method redundant.
There has been a steady fall in the use of cheques over the past ten years as more consumers transfer money electronically, by direct debit or with debit and credit cards. Last year, around 3.8m cheques were written every day in Britain, compared to a peak of 10.9m in 1990.
But charities representing the elderly criticised the move saying it would force millions of older people who have relied on cheques all their lives to use payment methods which they are not comfortable with.
Andrew Harrop, head of public policy at Age Concern and Help the Aged said: “Without cheques, we are very concerned people will be forced to keep large amounts of cash in their home, leaving them vulnerable to theft and financial abuse.
“The Payments Council needs to urgently come up with some practical alternatives to replace cheques or it will be condemning thousands of older people to extra worry, cost and financial insecurity.”
The National Pensioners Convention (NPC) also criticised the decision, describing it as “out of touch” with the needs of older consumers. Dot Gibson, NPC general secretary said: ”Chip and pin is simply not suitable for a large number of pensioners and this announcement provides no guarantees that cheques will be replaced with anything that meets the needs of older consumers. We have to reverse this decision before it’s too late.”
The decision will save banks hundreds of millions of pounds a year as each cheque costs approximately £1 to process compared to much cheaper electronic forms of payment such as direct debits and standing orders.
But while the use of cheques has been declining small business lobbyists say there are still plenty of situations where they are used extensively. These include payments between individuals, and payments to sole traders, small businesses, clubs, charities and schools.
John Wright of the Federation of Small Businesses said: “It is not for the Payment Council to do the bidding of the banks, which have been against keeping the cheque because of the cost incurred.
“The Payment Council’s action will be extremely detrimental to those businesses and their customers that rely on the humble cheque and have now been presented with no viable alternative to it.”
The Payments Council responded to criticisms, saying that cheques would only be phased out if adequate alternatives are developed and said there would be a review in 2016 .
“Customers aren’t likely to see any immediate change as the target date is still a long way off. said Paul Smee, chief executive of the Payments Council. “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.”
It is not known what these alternatives might be but some experts believe that mobile phones could be used to transfer money via text message. Another alternative could be an increased use of debit cards with traders carrying some kind of small card reader.