Abolition of cheques 'not a fait accompli' says Payments Council

Abolition of cheques 'not a fait accompli' says Payments Council

News (UK)

The abolition of cheques, which research shows is the most popular method for HNWIs and older people to make donations, is not a done deal and they should not be abolished until a paper-based alternative is in place, according to Richard North, chairman of the Payments Council.

Giving evidence to MPs on the Treasury Committee on the proposed abolition of cheques, on Wednesday June 15th, North, whose organisation oversees payment systems, said work was taking place on two alternatives to the cheque, which could be abolished in 2018. One alternative is a mobile payments platform and the other is a paper-based solution.

The Treasury Committee studied the planned abolition of cheques a year ago, but following 1,200 letters and e-mails to MPs on the committee from those uneasy about new technology, decided to reopen the inquiry. The Council says that cheques are in terminal decline with 43% fewer issued in 2009 than 2003. The Council estimates that savings across the economy, especially for business and the public sector could amount to £750m in 2018, with banks saving £200m.

At Wednesday's hearing, members of the committee lambasted the Payments Council for its plan to phase out cheques. Committee chairman Andrew Tyrie called it an "an appalling mess. It is a scandal. This is even worse than a colossal error of judgement."

"This has scared the pants off middle England,” says David Ruffley Treasury Committee member.

North said at the meeting that the council had not put across its message in a very clear way. "I regret that we have failed to get our message across and that has created concern," he told MPs. "Do I think it could have been done better? Of course.”

Speaking after the meeting Payments Council spokesperson Mark Bowerman said it is just as likely that cheques will be retained as it is that they will be abolished. “Many people got the wrong end of the stick over the issue; the abolition of cheques is certainly not a fait accompli and will depend on whether a suitable alternative system can be found and implemented by 2016.”

Many have questioned why cheques should be abolished if they are to be replaced by a paper-based system.

Bowerman explains that a paper-based system would in fact be more of a hybrid system. “To the end user it might work like a paper cheque, but behind the scenes it would have to work more efficiently. The system we currently use is around 300 years old and inefficient, taking days for cheques to clear because they have to be physically transported across country. A new system might allow for that to be done electronically. We have set the abolition date far in advance to allow for that kind of innovation.

Earlier this year the council invited ideas for a mobile-based platform, but Bowerman said he could not confirm any timescale for when tenders for a paper-based system might open. 

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