Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Getting rid of cheques

The UK Payment Council this week announced a plan
to abolish cheques in less than a decade. Actually, it is the clearing
of cheques that would be closed on October 31, 2018, but that is as
good as abolishing cheques themselves.

The report points out that “A number of countries including
The Netherlands and Sweden have already largely or totally eliminated
cheques. However volumes of paper credit payments in these countries
remain significant. The cheque replacement programme in the UK would
be going beyond these countries in aiming to modernise the payment
system …”

The usage of cheques in the UK peaked nearly two decades ago in
1990 and has been falling relentlessly since then. “Cheque use
is in long-term, terminal decline.” The UK therefore proposes to
shift remaining users of cheques to paperless channels (ATMs, mobile
banking, internet banking and stored value cards) over the next decade
and then get rid of cheques completely.

The report has a section on “cheque dependent
consumers.” This group consists mainly of individuals with
degenerative conditions and individuals living in care homes or with
mobility problems. The main advantage of cheques is that they allow
third parties to assist the user by filling up the cheque before the
user signs the cheque. My own sense is that biometrics would be safer
than reliance on a third party in such situations.

Interestingly, the report also discusses a few UK statutes which do
not allow any alternative to paper payment – these include
penalties for dog fouling, litter, releasing greenhouse gases and
cigarette smoke.


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