The end of Cheques? - Treasury Contents

Written evidence submitted by A Albert

  The press reports that your Committee is launching an inquiry into the UK Payment Council Announcement that cheques would be phased out by October 2018. According to the council cheques are a means of payment in a "long term terminal decline". We are told that the use of cheques has declined by 40% in the last five years.

  The objectivity of these statements should be viewed in the context of their source. The Board of the UK Payment Council is composed of 15 members, 11 of which handle the bulk of cheque transactions. To be specific these are members of the banking industry. The remaining four are purportedly, independent. Collectively they could veto Board decisions.

  Associate Members (11) include firms involved in IT services, IT consultancy, Information Security, etc. Despite the presence of a Consumer User Forum, one of three, the membership appears to be—to a naive observer—somewhat incestuous.

  The terminal decline could be better described as assisted death, since the move away from cheques is due to a massive barrage of measures taken by major industries, in addition to Banking, to discourage individuals from using this system of payment.

  As a former banker, I would surmise that the introduction of same day value, and the consequent disappearance of free float has stifled the appetite for cheque processing, once a most sought after Correspondent Banking business.

  Some of the measures adopted are in the category of negative incentives, if not outright illegal.

  BT charge a £4.50 "Payment Processing Fee" per cheque in settlement of their bills. The fee in question is levied by BT Payment Services Ltd. It is, of course, the prerogative of BT, or any other company, to handle their administrative and operational matters as they deem fit. However the consumer should not foot the bill for their proclivities, particularly since cheques are—to the best of my knowledge—a legal means of payment. This is part of a general trend to burden consumers with more and more charges, once clearly part of product/service delivery (eg. Orange: £1.28 to produce an itemised bill). The farcical aspect of this is Ryanair's proposed £1 charge for the use of WCs in flight. In terms of macroeconomics, these charges must impact on the cost of living, though I doubt they are reflected in the CPI.

  What is disturbing is the apparent indifference of Governments in this and other countries towards the present, consumer unfriendly trend.

  The financial crisis visited upon the world at large is part and parcel of this benign neglect. Given the amount of reporting that banks have to submit to regulatory authorities it is difficult to understand how the risk of derivative products, packages bonds insured against default because of their questionable nature and the proliferation of ad hoc offshore vehicles could have aroused the interest of inquiring minds.

  The increasing encroachment of computers in our daily life would require a separate, in depth analysis. The loss of freedom that the introduction of ID may bring about, so bemoaned by the various liberty advocates, would pale in contrast to the slavery the computer will impose on our society in the very near future.

  For one, no government can protect the consumer from online financial scams, that cost all of us, at present, £3 billion per year.

  The abolition of a means of payment that has been in existence for some 350 years should not be left to experts, who are notoriously unable to see beyond their expertise, but should be a matter for a referendum. This would allow those who actually use cheques—smaller businesses, the elderly (of which there are 11.58 million)—to express their wishes directly and not by proxy.

February 2010

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