Back in December 2009, the board of the United Kingdom Payments Council set 31 October 2018 as the date when paper cheques (or checks) would be totally phased out in the U.K. The Payments Council believed [PDF] that with the public using fewer cheques every year, with most major retailers refusing to accept cheques, and with the advent of mobile checking and other electronic forms of transferring money promising to appear in the next few years, cheques could easily be eliminated within a decade.
But things didn’t go quite according to plan.
The Payments Council’s announcement was soon met with opposition from various groups, especially those representing the elderly. They wanted a guaranteed paper-based alternative, which would defeat one of the main purposes of getting rid of cheques in the first place: their high processing cost (about £1 per cheque). Charities were also unhappy, fearing a major reduction in donations if cheques were eliminated because of what they said was an ingrained U.K. culture of charity cheque-giving.
It didn’t help that soon after the announcement, stories like this one in TheTelegraph appeared, claiming that the elimination of cheques meant a cashless society was just over the horizon. These stories further heightened the concerns of the elderly and charity groups. By the end of February 2010, the ruckus was such that the House of Commons Treasury Committee opened up an inquiry into the proposed cheque abolition plan.
It quickly became obvious to the Payments Council that their plan to eliminate cheques by 2018 did not have either public or political support. In July 2011, the Council withdrew [PDF] its 2018 date, proclaiming that “cheques will continue for as long as customers need them.” The Council also indicated that it would still revisit the idea in the future, no doubt hoping cheques would soon die a natural death [PDF] as they had in the Scandinavian countries, Poland, Germany, Belgium, the Netherlands, Switzerland, and Denmark.
The Treasury Committee was pleased with the Council’s course reversal, as it made clear in its report [PDF] a few months following the Payments Council’s decision. However, the angst that the Payments Council’s decision to eliminate cheques created also drove the Committee to recommend that the “unfettered power to make decisions” by the Payments Council be legally curbed. Legislation subsequently passed in 2013 created a new Payment Systems Regulator, which implemented the recommendation the Treasury Committee made.
Despite the backlash over the decision to eliminate cheques, there was little disagreement that paper cheque processing was indeed inefficient, costly, and archaic. Worse, it took up to six days for a paper cheque to be cleared by U.K. banks.
As part of an effort to address the problem, the U.K. government decided in 2014 to allow the introduction of “cheque imaging,” where a person could take a picture of a cheque and send it to the bank via their phone.
It was felt that while this capability might not necessarily reduce the number of cheques, it would at least reduce the overhead of processing paper checks by banks. It would have the added benefit of allowing the money to be transferred into a person’s bank account within 24 hours. Cheque imaging began in 2017, and has rapidly expanded to nearly all U.K. financial institutions.
Cheques continue to be popular in the U.K., with more than 405 million being used for payments or to acquire cash last year, according to the Cheque & Credit Clearing Company. Furthermore, its research in the spring of 2017 showed that 87 percent of U.K. charities, 75 percent of U.K. businesses, and 55 percent of personal account holders stated that they had either made or received a payment by cheque in the past month.
The 405 million cheques used in 2017 represented about half the number used in 2009, but that still was about 10 percent higher than was predicted in 2009. Ironically, while cheque use is still strong, the move away from the use of cash has accelerated, with the amount of cash in circulation dropping to 1972 levels earlier this year. The United Kingdom might move to a cashless society before a cheque-free one.
The use of cheques/checks is as culturally entrenched in the United States as it is in the United Kingdom. While check use has declined over the years [PDF] from some 40 billion in 2000 to 17 billion in 2015, the decline has slowed significantly over the past few years to everyone’s surprise. Americans still receive or write about 38 checks on average a year.
Banking analysts expected checks to “have disappeared entirely by the year 2021,”[PDF] given the decline in check volume seen from 2000 to 2013. Instead, not only has check use leveled off, it has increased slightly. One reason analysts give is that there isn’t any compelling technology to wean people off of checks. While Paypal, Venmo, and iPay and other electronic payment applications have emerged, none have become the “check killing” app for those committed to writing checks.
As the analysts note, “what’s available now isn’t making [check users] come rushing” to use them. More likely what is happening is that the apps are competing for existing users of electronic means of transferring funds rather than changing check users’ behavior.
Furthermore, banks have become very efficient at processing paper checks, so there aren’t long delays to access funds once a check is deposited, and many banks support check imaging as well. However, with banks increasingly charging for checking accounts, there may be more incentive to once again drive the American public away from using checks.
The U.S. Federal Reserve wants an improved payments platform [PDF] in place in the next few years to permit ubiquitous, real-time secure payments. Then, the perceived benefits of using checks may finally begin to fade. This advanced payment infrastructure exists in other countries like Denmark, and has encouraged the public to use electronic transfers of money instead of writing cheques. Cheque use dropped so much that the country decided to eliminate them altogether beginning in 2017 without any public outcry.
However, even then it took Denmark more than a decade for cheque use to drop to a negligible amount. In the United States, it will likely take much longer given how culturally embedded cheque writing is, at least for the baby boom generation. Millennials, on the other hand, are not so wedded to checks, and seem more open to their elimination. Perhaps when the majority of baby boomers pass away around 2035, checks will finally disappear.
Coincidentally, the 2030s is also when bank analysts now expect [PDF] checks to fade into oblivion as well.
Robert N. Charette is a Contributing Editor to IEEE Spectrum and an acknowledged international authority on information technology and systems risk management. A self-described “risk ecologist,” he is interested in the intersections of business, political, technological, and societal risks. Charette is an award-winning author of multiple books and numerous articles on the subjects of risk management, project and program management, innovation, and entrepreneurship. A Life Senior Member of the IEEE, Charette was a recipient of the IEEE Computer Society’s Golden Core Award in 2008.