The end of Cheques? - Treasury Contents

Written evidence submitted by the Communication Workers Union

  I am writing to express the CWU's concerns at the UK Payment Council's announcement of its intention to phase out the use of cheques. While recognising there has been a decline in the use of cheques in recent years, we believe they continue to be of importance to a significant minority of the population and that viable alternatives are not in place to make the phasing out of cheques an acceptable course of action.

  The CWU represents around 250,000 employees in the postal, telecoms and financial services sectors. Moreover, we represent 300 people employed by Intelligent Processing Solutions Ltd (iPSL), a joint venture between Unisys, Barclays, HSBC & Lloyds TSB and the leading cheque-clearing operator in the UK.

  Clearly, as a representative of employees engaged in cheque-clearing, we have concerns over the impact the UK Payment Council's decision will have on their jobs and for employment in the banking sector more generally. iPSL operates large sites in Bootle on Merseyside and Northampton and its operations contribute significantly to the local economies. We are keen that consideration should be given to the future of employees in the sector when any decision on the phasing out of cheques is made.

  We recognise that there has been a significant decline in the use of cheques in recent years and we welcome new technology that improves the efficiency of financial transactions for the public. However, we do not believe it follows that the option to pay by cheque should be phased out; it remains a secure and practical payment method for many.

  For a large number of individuals, small businesses and sole traders, payment by cheque remains the most effective option. There simply are not appropriate alternatives. Acquiring the technology necessary to accept electronic payment is prohibitively complicated for many sole-traders and small businesses. This leaves payment by electronic transfer or cash. Payment by electronic transfer requires an exchange of bank details and is burdensome for the consumer. It is also far from being a commonly-used transaction by many consumers. The alternative, moving to further payment by cash because of the artificial demise of the cheque, would be a step backwards for many small businesses, creating a security risk and increasing the burden of administration.

  We also believe that the phasing out of cheques will have a disproportionate impact on certain sections of society, particularly the elderly and those on the margins of financial inclusion. For many elderly people, using bank cards and chip and pin services is difficult. Remembering a pin number and paying by card is not always an option. As we have seen through the introduction of direct payment of benefits and pensions and the Post Office Card Account, many people find these services difficult to adjust to and consequently remain dependant on friends, family and Post Office staff to assist them with transactions. And while many elderly and financially excluded people may have made the transition to payment by card for face-to-face transactions, for non-face-to-face transactions payment by cheque often remains the only option.

  Direct debit, telephone and internet payment, while an alternative to cheques for many, are beyond the experience of some people and being limited to such options could be a cause of great concern. Direct debits are often not possible for those on low incomes. Paying by cheque remains a simple and efficient alternative.

  Telephone and internet banking presuppose a degree of technological and financial literacy. While it is desirable that all should have access to such services it is unlikely that this will be achieved in the near future and unlikely that it would be achieved by removing access to financial transactions by cheque. As the Committee itself pointed out in its 2006 report "Banking the Unbanked", almost two million households in Great Britain were without access to a bank account. Given this degree of financial exclusion it does not seem that the UK is ready to embrace a system of solely-electronic financial transactions. To do so would be to leave behind those who are already at the margin of financial inclusion.

  Payment by cheque remains the system of choice and convenience for a significant section of society and for a notable range of transactions. We do not believe there are sufficient viable alternatives available at this time and believe the phasing out of cheques by 2018 would be ill advised.

February 2010

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