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7 September 2011
But…you said…something completely different, that’s why I’ve been doing this! Sound familiar? I’m sure we’ve all been set a task and for some reason there has been a disconnect somewhere along the line. Doesn’t happen often – its one of those great “learning points” that happen, typically early in our careers. But sometimes it happens on a much bigger scale. The example in mind is the Treasury Select Committee telling off the Payments Council, and that they need “to ensure that the banks do not attempt to abandon cheques by stealth, nor deter customers from using cheques”. By stealth that would mean not doing lots of research, publicizing the plan, and asking for opinions from all major user groups…like the Payments Council did over a long period. Hardly secret when you publicise the plans. And who gave the Payments Council its remit to deliver its three objectives…? - to have a strategic vision for payments and lead the future development of co-operative payment services in the UK; - to ensure payment systems are open, accountable and transparent; - and to ensure the operational efficiency, effectiveness and integrity of payment services in the UK. The Office of Fair Trading, as a result of a report commissioned by, yes you guessed it, the Treasury. And in true left hand/right hand form, one of the parties pushing hardest for it to reduce the number of cheques it writes is…the Government. The National Audit Office in 2009 released a very influential – and critical - report called “Government Cash Management”. Amongst its key recommendations was : Use of BACS is generally more economic and efficient: It is cheaper than other electronic payment methods such as CHAPS, and both cheaper and more secure than using cheques. This followed the successful move to replace benefits being paid by giro (a form of cheque which were cashed at Post Offices) to electronic payments, principally BACS. Note no outcry when hundreds of millions of payments transferred then from the same group the Committee is “worried” about now. And no outcry when the Post Office lost the contract to PayPoint to cash the remaining giros left in the system. This is life. So what does this all mean? With this post I’m not stating either way whether cheques should go or not (clients will already know my opinion!). There are plenty of representatives of client groups who make valid statements why they should remain. And indeed, some of my colleagues disagree. But it does pose a broader conundrum. No major retailer accepts cheques, with most refusing them since 2006, and with more announcing every month. Others penalise payment by cheque. It raises the question on what happens next, and perhaps more importantly, who pays for it. With payments from banks in the UK being free to the consumer, the costs have to be recovered in other way, such as lower interest and account fees and penalties. That means the majority, the non-cheque users, are paying for something they don’t use, and increasingly, can’t use. Coming back to the initial point, it would seem that Government policy is one thing, but that the group that shouts loudest will get their way, over-riding that policy. I wonder how long it will be before an anti-cheque consumer group demands that they shouldn’t be paying for cheques at all? In a previous post, only slightly tongue-in-cheek, I suggested that perhaps the Government should nationalize the cheque clearing system. In fact more fundamentally, the Government needs to think more strategically about payments. For example, do we really want competition in payments – who benefits? Should all payment types be treated equally? What’s most appropriate – oversight, regulation or intervention? The list goes on. Until some of these points are at least acknowledged, then these disconnects are only likely to continue.