Retail and banking IT systems specialist, Ed Brindley asks, “Is the UK ready for the abolition of cheques in 2018?”

Retail and banking IT systems specialist, Ed Brindley asks, “Is the UK ready for the abolition of cheques in 2018?”

As we move towards October 2018 – the date the Payments Council Board has agreed to close the cheque clearance system – the concerned voices of retailers and consumers are increasing in volume, according to Ed Brindley, business development director at Wincor Nixdorf.

“Just Google ‘cheque abolition’, and the top results will likely be articles from many of the national newspapers and magazines citing ‘concerns’ and ‘fears’ as the date grows closer, without any clear indication from government as to what payment alternatives will be available to those still dependant on the cheque,” he said.

As a result of this furore, in April 2011, the government announced an inquiry into the abolition. The findings of this will be announced in June but what Brindley says is evident is that there is more clarity needed about the alternatives to cheque payment, whether these are already available or are in development. “Only once retailers and consumers are comfortable with these options will cheques truly be able to disappear from the High Street,” he stated.

What is the issue?

“So just why has there been such uproar?” he asked. Although cheque payment is more costly to process than cash or card and is slowly being phased out in the UK, it does remain a trusted payment option for some businesses – particularly smaller or independent organisations who might not even accept electronic payments due to transaction fees or not having the technical infrastructure installed to accept electronic payments. “The idea that they will only be able to accept cash or card moving forward is therefore a genuine worry,” Brindley explained. “Not only will it mean a change to their existing processes, but as some customers are hesitant to use new forms of payment, it may well impact revenues.

“Simply put, despite claims of a fast-approaching ‘cashless society’ where cash and cheque payments are no longer accepted, the UK does not seem to be ready for a complete change just yet. But as cheques are already being phased out, with many High Street retailers no longer supporting cheque payments, predictions that this will mean a full transition to card or mobile payments are a little ambitious. Cash is still the most popular method of transaction and that shows few signs of changing.”

The Cost of Payment Collection Survey from the British Retail Consortium (BRC) recently indicated that cash-alternative forms of payment are growing in popularity, but at a slower rate that first anticipated. Between 2007 and 2009, the amount of cash used decreased very slightly from 33.8% of all transactions by value to 32.2%. Cash also accounted for 58.2% of transactions in 2009, compared with 60.6% in 2007. Clearly, the notion that UK payments will soon be 100% electronic doesn’t reflect what is actually happening on the High Street.

In addition to the general hesitance to move away from traditional payment methods, Brindley said that what has become apparent over the past few months is the lack of information about what alternatives will be put in place: “Retail is notoriously competitive and retailers simply cannot afford for customers to be deterred from any transaction because of uncertainty over unfamiliar payment methods. On the flip side however, retailers also cannot afford to stay away from new technologies that can help transform a business, generating new business from new customers. As such, retailers are understandably looking for more clarity as to what the alternatives are, the technologies needed to deploy them and what the cost implications could be.”

What are the options?

“While the cheque abolition inquiry might shed some light on the issue, it is unlikely to suggest cheques remain in circulation long-term,” continued Brindley. “So, simply put, retailers and consumers will need to adapt to the upcoming changes. However these changes will not be as painful as we might imagine.

“By 2018, as increasingly smart technologies are introduced into our everyday lives, businesses will be able to use a variety of intelligent devices that utilise mobile, wireless or even biometric technologies to capture payments.

“Of course cash itself is also a viable alternative. Over the next few years as the economy slowly gathers momentum we may well see an increase in cash payment, adding further doubt to the idea that we’re on our way to a 100% cashless society. Whether we like it or not, today’s consumer demands more choice than our legacy payment solutions can offer. Whatever channels retailers make available, those that restrict payment choices will not benefit – choice is what matters now.”

What is next?

The issue now is how to transition from one payment solution to others and ensure consumers have confidence in the security and usefulness of these technologies, added the retail and banking IT expert. “Without specific campaigns, advertising and education into the new solutions available; how to use them; ease of use; speed and how secure they are, consumers and retailers could be left unsure about the new available channels. These are the steps that should ideally have been laid out before announcing the ‘2018’ date. If this had been done, a lot of the worry could have been averted and the inquiry unnecessary.

“Once businesses and consumers are convinced that the new solutions suit them, and they recognise the reliability and cost effectiveness of moving away from cheque, the whole industry will be more comfortable by 31 October 2018. The fact is that solutions offering an alternative to cheque payments are in place. The next step to ensuring Halloween 2018 is not a payments horror story is to ensure that this technology is understood and available to all,” he concluded.