Cheques: 2-4-6 to 1-2-2
Cheques, believe it or not, still form a large part of Britain’s payment scene.
Cheques, believe it or not, still form a large part of Britain’s payment scene, writes Anna Milne. In 2012 cheque payments to the tune of £840 billion were processed, which accounted for 10% of all payments made by individuals, according to government figures. Cheques are still the primary method of payment for many smaller charities and other voluntary organisations.
In 2009, the Payments Council revoked its decision to close the central cheque clearing system by 2018 after pressure from the government and the Treasury Select Committee and, as a result, the Payment Systems Regulator was instated to ensure payment systems are operated in the interests of users.
Hence cheque imaging. Customers using this service would be able to photograph their cheque on their smartphone and pay it in electronically via their mobile banking app, should they so wish. Great for those who live far from a branch or small businesses who dedicate manpower and courier costs in processing and lodging cheques. The facility would be on top of existing cheque-lodging facilities such as in-branch scanners or just over-the-counter.
The current 2-4-6 timescale means that only on the sixth day is the customer certain that the money is theirs and will not be reclaimed from their account, unless fraud is suspected. Cheque imaging would create a new 1-2-2 timescale.
Digital cheque clearance would reduce the clearing cycle from six to two days, much more in line with other methods like Bacs. It will also reduce the paper trail and hence the cost for banks. It seems win-win.
Under current UK legislation, a paying bank has the right to insist on receiving the original paper cheque. New legislation will enable banks and building societies to adopt image capturing solutions, not force them to do so, but remove their right to refuse a cheque image. The other methods will still be in place as options for both bank and customer.
The TALL Group of Companies, which provides financial security printing services, has already been fitting out retailing organisations that do remain committed to cheques as a means of payment, with cheque-processing solutions and the benefits are well received. About two million cheques are processed in the UK each working day, which can amount to one person processing 17,000 each week. Go figure.
TALL has already worked with mail order company Lakeland to transform their process of receiving cheques- they receive between 1,000 and 4,000 cheques a day. Time and therefore money have been saved in cutting the administration involved in receiving cheques, although they still are not being electronically lodged in this way.
The reforms are included in the Small Business, Enterprise and Employment Bill, which is currently awaiting approval. The technology is in place, ready for adoption.
Rather than dictating, the new legislation will allow the method to be adopted by banks and therefore adoption will be directed by market demand, banks responding to the wishes of their customers.
The US embraced digital cheque clearing after 9/11. It’s been massively successful there, not least because US banks have been dining out on cheque-processing delays for years- and you thought they took the biscuit here. It’s high time we had it here, isn’t the UK meant to be in line for becoming a world leader in digital financial services?