A Victory for the People but a Giant Loss for Common Sense?

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13 July 2011
Gareth Lodge

Reader, I had to bite my tongue yesterday. A lot. Indeed, I had to wait until today so my blog was a blog rather than a rant.

Yesterday, the UK Payments Council said it had cancelled any plans to retire cheques in the UK , after severe pressure from MPs and from consumer groups.

The industry, more than 2 years ago, announced plans to sunset cheques by 2018, but promised to ensure that adequate alternatives in place. Cheques peaked in the late 90’s and have fallen continually ever since. They are still used by certain groups today, but equally, the average number of cheques written every day has fallen by 70%, and many large retailers will no longer accept them as payments.

Consumer choice is obviously important. I don’t blame the consumer groups here at all. A promise of an alternative is difficult to sell. That said, I note the same arguments were used for the move to chip & pin, yet a compromise was reached and Henny Pennys’ vision failed to materialize. 6 years on and it feels very strange to sign a card receipt.

What I do object to though is the politicians stance. The Cruickshank into UK Payment Systems, and the subsequent work by the Office of Fair Trading highlighted a series of issues that it felt the industry needed to respond to. Amongst them was the performance compared to other comparable nations, and a lack of innovation. This is why Faster Payments was born and almost forced through by the government, and on unachievable timescales. Yet, they’re keeping cheques, a method of payments with its roots in the 17th century. Only France in Europe has any volume of cheques. Most other countries got rid of cheques years ago. Did we even notice? In the global top 10 cheque users, the UK, at no. 5, is sandwiched between India and Iran, places (no offense to those countries) that the average UK citizen would feel are less sophisticated than the UK.

Equally at a time where the banks are under pressure to manage costs, especially those owned by the UK government, the banks are being asked to maintain the most expensive of all the UK payment systems, where the average transaction cost will only increase as volumes continue to decline.

The danger is that there is no longer clarity. Whether you approved of the plans or not, at least there were agreed objectives, timetables etc. Now, there is nothing. Consumer Focus, the UK government body, expects the payments industry to continue to develop alternates. Why? For who’s benefit? There is little incentive to create a replacement whilst maintaining cheques. This is the argument with SEPA and why the regulators are having to mandate a move away from the legacy schemes to the new schemes. Why does Consumer Focus believe that this will be any different? Furthermore, banks are wary about collaboration. Discussions around pricing cheques to consumers (they’re currently free) have always been avoided because of a belief that if they did it as an industry, it would be seen as a cartel action; and equally no one bank wanted to be the first in case others didn’t follow, leaving a catch-22.

My suggestion? Nationalize the cheque system. Let the government carry the cost. I suspect there will be quite a few people in the cheque world who’d be glad to pass the responsibility on to someone else.


  • No! Make the people who want to use cheques pay, not the rest of us. Let Saga get a PI licence and run the cheque system themselves.

  • A slow, painful death for cheques isn't all that bad of an outcome. Consider cash. It's a far more dreadfully expensive payments mechanism than Cheques, and the UK Payments Council isn't advocating its eradication.

    Pricing would solve the problem of stubbornly resiliant consumer usage. US banks haven't thus far been willing to stomach potential backlash either.

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