Cheques checking out? Not any time soon
I was pleased to be able to speak at Payment Strategies 2011again two weeks ago. I think this is the third year I’ve been asked to share my thoughts, and as always there were some good speakers on the agenda. The page has videos of the speakers, so I’ll let you decide whether I was one of them! But there was one particular thing I wanted to draw out.
The theme of the event was very much around efficiency and improvement of payments processes. Peter Finlayson of The UK Payments Council as always gave a very frank and balanced view of where the industry was, and where it ought to be going, with much of the focus on cheques. Those of you who have been following the UK payments industry will remember the announcement by the Payments Council to manage the decline of the use of cheques in the UK by 2018. There have been a number of carefully worded statements, such as the need for there to have been a suitable replacement product in place. This is partly a reflection of what is in the power of the Council to deliver – it is a strategic body for the industry, and in effect only has power to close the clearing scheme, rather than ban paper altogether.
Why does this matter? In context, cheques have been decline since 1990, with a fall of over 40% in the last 5 years alone. In 2010 cheques accounted for 7% of non-cash transactions in the UK, down from 27% in 2000. A number of large retail organizations, such as Shell and Tesco, have already stopped taking cheques as a method of payment. Surely then corporates are in the vanguard of removing cheques altogether? Isn’t everybody in agreement about the move to end cheques?
In my session, I spoke about the efficiencies that a corporate could achieve in its payment processes, highlighting things such as data validation to improve STP and e-invoicing. Recently I’ve been discussing (and more on the theme soon) the fact that payments is entering into a third age, where its not so much a “payment is a payment is a payment” but "data is data is data".As such, I decided to informally poll the audience on how data or paper driven they were. I asked which corporates still sent and/or received cheques as a method of payment. Bearing in mind that the audience was primarily multi-national organisations rather than SMEs, I was shocked to see that every hand went up.
This shows the scale of the challenge. Whilst much work (and quite rightly) is being focused on more vulnerable groups such as the elderly, there is obviously still a massive gap still close on corporates. With Faster Payments available for corporates, its not as if there aren’t viable, and frankly, better solutions available. The reality is that this will not be a cheque replacement project, but a business process transformation project. Paper is as much a habit and process, as it is a payment type.