The world is a changing place. 20 years ago none of us could have imagined being able to stock our food cupboards without stepping foot into a supermarket, nor could we have imagined not using our cheque book when out shopping, but both have become a reality.
The simple fact is that consumers and businesses are using fewer cheques; cheque use has been in decline since 1990, and has fallen by almost 40% over the last five years. Each year cheque numbers continue to fall by around 10%.
However, there are still times when certain groups of people, such as older consumers and small businesses, remain reliant on cheques, even if they are playing a declining role.
Given the irreversible decline in cheque numbers, the Payments Council – the strategic body responsible for ensuring that payment services meet the needs of all customers - was charged with assessing the future of the cheque in the UK.
The Council was presented with two options; stand back and allow changes in customer behaviour and market forces to determine the rate at which cheques decline, or take a more proactive position to actively manage the decline. Doing nothing risked banks changing the cheque services they offer at their own timescales, leaving customers confused, particularly about where a cheque could be used, and possibly without sufficient alternatives being developed instead. Arguably, those most dependent and least equipped to change would most suffer.
Following 18 months of extensive consultation and research, the Payments Council Board agreed in December 2009 to set a target date of 31st October 2018 to close the central cheque clearing.
2018 has been set as a target because it is far enough in the future to allow us to identify those who could be adversely affected, find suitable alternatives and ensure these alternatives are made available.
A final decision on whether the clearing can be closed in 2018 will only be taken in 2016. It will only close providing alternatives are available, users are aware of them, that those alternatives are considered acceptable and have been adopted.
How cheques are perceived in the UK
Before a decision was reached extensive research was conducted with consumers, SMEs, large corporates and financial institutions on cheque use and barriers to cheque migration. This confirmed that all major stakeholder groups saw cheques as being in a state of permanent decline, that may be phased out at some point in the future, and that users are amenable to their replacement by electronic payment methods, provided these new options meet their needs. The independent research showed that the key drivers behind the continued use of cheques were habit, tradition and inertia, combined with a lack of awareness and confidence in other payment methods.
Extensive consultation was also undertaken with large corporates, including banks and other financial institutions, and public sector bodies to understand where they make and receive payment by cheque and their future plans for cheque migration. The majority of corporates and public bodies interviewed have already done much to reduce their cheque usage and were supportive of a cheque migration plan, seeing that this would deliver significant economic benefits. For some corporates, the cheque clearing could be closed tomorrow with little or no impact upon their business. For others it would have major implications, either in terms of the systems or process changes required, or in terms of the need to collect account details on substantial numbers of payees.
Over the last year our work has focussed on listening to, engaging with and understanding the needs of those people who use cheques, particularly those who would have the biggest challenges in moving away from them, like small businesses, older people and charities, clubs and societies. Working with all of these different groups has helped us better understand the rational reasons why they use cheques, what they need from alternatives, and to identify gaps where alternative payment methods do not currently exist or are not suitable for their needs.
We do not underestimate the challenge we face. Importantly, our decision is not about doing away with chequebooks now but setting out a plan for how the country as a whole can move away from cheques in a planned way. When the project is concluded, and if we have succeeded in our objective, we want consumers and businesses to feel better off in terms of the payments they can use,
