Cheques may still have a future, says Treasury minister
It was condemned to a long, slow death, but this week it emerged that the humble cheque may not be scrapped after all.
In December 2009, the banking industry set a target date of October 2018 for the end of cheques. That announcement prompted a row which has continued to rumble on, with many older people, small businesses, charities and clubs left worried and angry about the proposed closure of a system many of them rely on.
This week, the government intervened in the controversy, with the publication of a letter from Mark Hoban, the Treasury minister, which makes clear its unease regarding the whole business.
“Until it is demonstrated that there is an alternative system to cheques in place that is as easy to use and as cost effective, I do not believe there is a credible and coherent case for abolishing cheques,” he said, adding: “The government is keenly monitoring the progress of the cheque replacement programme, and is considering whether it may need to intervene to protect vulnerable individuals and businesses if there is any threat that cheques may be withdrawn without suitable alternatives being put in place for all.”
This alternative should replicate the flexibility and ease of use of cheques, while offering improved processing times, and will need to be “widely available, widely acceptable and widely adopted by users who do not currently have a suitable alternative,” Hoban said. He added that the original announcement by the Payments Council had “created a great deal of uncertainty and alarm across the country”.
Appearing before the Commons’ Treasury select committee on Wednesday, the chairman of the Payments Council, Richard North, insisted that no decision had yet been taken to abolish cheques, and that one would not be made until 2016 at the earliest.
He added that cheques would only be abolished if widely available alternatives were accessible and being used by the groups that currently relied on them, and a cost-benefit analysis showed that getting rid of cheques was the right thing to do.
North said one of the alternatives was likely to be mobile phone payments. Another would be paper-based and was likely to look and feel like a cheque, but would be processed more quickly and efficiently.
He told MPs that the use of cheques had fallen by 70% since 1990 and by 42% in the past five years, with usage expected to decline by a further 40% during the next five years. But in his letter, Hoban said that in 2010 some 1.1bn cheques were issued – still a fairly sizeable number.
MPs also asked North about the decision to close the UK’s cheque guarantee card scheme at the end of this month. After 30 June, consumers will no longer be able to guarantee a cheque up to a maximum of £250 by handing over a plastic card featuring the scheme’s logo or hologram. But North replied: “Only two countries have a cheque guarantee system, the UK and Ireland, and Ireland is closing it by 2016. A cheque guarantee is not seen anywhere else in the world as being an important pillar of a cheque system.”
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