RIP The Cheque
During my career, which is longer than I will admit to without a pint in my hand, I have experienced an evolution in the way businesses operate. It is incredible that I have seen the introduction of the World Wide Web; mobile phones becoming commonplace and computers going from green screen “tanks” to slim, next to nothing hardware. However, nothing amazes me more that in 2014, the use of electronic payments and collections (EFT) in business is still not as all-encompassing as one would expect.
Europe, the U.K in particular, seem to be leading the way on EFT but the United States is still holding onto cheques. In a survey by the Association for Financial Professionals, over half of US companies prefer cheques over EFT. Over 70 billion cheques (checks) are written in the USA every year in comparison to 20 billion ACH (local) electronic payments. To put this into perspective, the number of cheques written in the US by consumers and business in one year alone was four times the amount that the whole of the European Union! Why, when the cost of a cheque is estimated for a U.S business between $4 and $20?
In use for over 350 years, the U.K cheque was going to be consigned to history in 2018 but has had a stay of execution. However, it is likely that it will be gone within the decade. The UK Payments Council have said that the volume of cash transactions will tumble from the current 20.8 billion a year to less than 13.7 billion a year by 2022.
Let’s face it, when was the last time you wrote a cheque? I only seem to use them nowadays for the odd school trip or school meals. But even that is being reduced by the introduction of technologies such as fingerprint (biometric data) purchasing in the school canteen and the likes of www.parentpay.co.uk.
Also, Direct Debits, in use in the U.K since 1966, seem to be the best way of managing your cash flow in this time poor period. And they are more cost effective for your bank when the estimated cost of processing a cheque (bank fees) is around 44p compared to a direct debit of 21p.
All of this is good news for business and consumers alike. Some banks like Santander, now actually give you money back if you pay certain bills by direct debit. I am now the grateful receiver of over £120 a year back from my bank.
I for one welcome the death of the cheque!