Filed Under: Money, Payment systems

For the Chancellor's cheque-list today

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Why are people who use debit cards, PingIt and other modern contrivances required to pay for people who want to mess around posting pieces of paper to each other? It’s time to either draw a line under cheques or shift to full cost recovery pricing on cheque books.

A letter arrived from our window-cleaning service, that we have used for many years, informing us that they will no longer accept card payments. It says:

Having examined all the costs we incur, the majority are coming from external sources for card processing and internal costs to process these payments… We will no longer accept any credit card payments or standing orders only CHEQUE or CASH.

The capitalisation is theirs, by the way. Now, as a normal consumers, my wife and I clearly do not have cash around the house to pay them with, especially since we are almost always out when they make their monthly visit. Although they have thought of that, asking us to indicate where we will leave the payment…

For example under a plant pot, mat or dustbin somewhere… We will issue a receipt for all cash payments and these will be posted through the door.

I certainly appreciate their commitment to receipts, but I still don’t want to pay non-electronically. I don’t know anything about running a window-cleaning business, so I have no idea how any of this can be cheaper than, say, PingIt, but whatever. Now that I’ve found our new cheque book (I think it’s new – I don’t know when it arrived) and the new security device of printing a random (?) code on each cheque…

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…I’ve still got no intention of using it. For one thing, strange code or not, using cheques appears to be as insecure as leaving cash under plant pots.

Clyde and Co, an international legal firm, lost cheques worth £2,271,289 in three months. More than £800,000 worth was successfully banked by the thieves. Post for banks, solicitors and barristers was also targeted.

[From Postman took millions meant for City firms – Telegraph]

There are two interesting aspects to this story (that I jotted on the back of a page I tore out of The Telegraph a year ago and just found while I was looking for something else). The first is that (in an era of faster payments) people are still messing around sending cheques through the post and the second is that the thief was able to pay the cheques in, presumably by opening accounts in the payee names. Another victory for our massively expensive KYC, AML and ATF policing. How could a thief obtain a convincing bus pass or Portugese fishing licence (see yesterday) and persuade a regulated financial institution to open an account? Beats me.

If you look back at the projections for transaction growth in the UK over recent years (see, for example, the data in the Payments Council’s “UK Payments Market 2013”), the industry as a whole tended to underestimate the fall in cheque usage (because we are by nature conservative), overestimate the growth in direct debit and card payments (because we all tend to extrapolate existing trends), underestimate the growth in credit transfers (because we underestimated the impact of the new player, the Faster Payment Service) and make reasonably accurate estimates of ATM usage.

It seems to me wholly consistent with this evidence that the arguments against ending cheque clearing on the grounds of volume are wrong. The number of people using cheques in a decade will be below the projections made at the time of the Payments Council / Treasury Select Committee fracas (that I’ve written about before) and the cost of each of those cheques will therefore be higher than predicted. So yes cheques are inconvenient and insecure, but on the other hand they are also a waste of money. A couple of years ago, Gareth Lodge at Celent made a succinct plea that still holds:

Be bold. Every other country bar one in the world is to trying to, or already has, abolished cheques, yet it seems George wants us to invest massively in them. Do the right thing, not the vote winning thing.

[From Celent Banking Blog » Gareth Lodge for Chancellor – “Save our Payments!”]

Let’s hope the Chancellor does the right thing today and announces an end to the cheque clearing system in a decade.

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