Cheques: the age of dinosaurs
There is little doubt that there is some very innovative work being carried out in the payments world. Digital technologies, including distributed ledger and artificial intelligence, are beginning to be applied to retail and corporate payments. But in the age of digital finance, a dinosaur of payments – cheques – persist.
Certainly, cheques are in decline: a recent Payments UK report, UK Cheques 2016, records a drop in cheque use in the country of 13% – from 644 million cheques written in 2014 to 558 million in 2015. Earlier this year, the Australian Payments Clearing Association (APCA) reported that cheque use in Australia had fallen by 16.3% between 2014 and 2015. During the past ten years, cheque use in Australia has dropped by 71%.
“The decline in cheque use is a global phenomenon, but we are seeing a faster drop than many other countries,” said APCA’s former CEO, Chris Hamilton.
“Our lives are increasingly digital and as more services in both the public and private sector move online, it follows that Australians will choose digital payment methods. We are seeing significant innovation in the field of payments.”
But while the digital universe may be exciting for digital natives and those under 65, there is a constituency that is seemingly left cold by digital. Despite the decline in cheque use, Payments UK stresses that the instrument remains a popular way to pay in certain situations, such as when the account number or sort code of the beneficiary is unknown. Significantly, they also continue to be an important payment method for people over 65 (68% of whom still use cheques). Also, 55% of businesses still use cheques. A sign of times to come, however, is that 88% of 16-34 year olds never write cheques, according to Payments UK.
When Payments UK’s predecessor, the UK Payments Council, announced in 2009 that cheques would be phased out, the mainstream media created a furore and the Council backed down, suggesting that cheques would be phased out only when a viable alternative existed. “The annual rate of decline in cheque volumes is expected to slow as their use becomes more concentrated amongst those who have a strong preference for paying by cheque, such as older people, small businesses and those who are less inclined to use online and mobile payment methods,” stated UK Cheques 2016…
This is an excerpt. The full article is available in the November 2016 edition of Banking Technology.