When cheques were first introduced they were utilized by those British that had bank accounts. The introduction of the cheque guarantee scheme in 1969 brought even more popular usage. Yet it is predicted by the UK Payment Council that by 2050 cheques will be no more than a historical curiosity.
Many retailers already refuse to accept payments by cheques, and their usage is in rapid decline for purchases. Cash and plastic are more popular choices for purchases, whilst cheque use is primarily limited to financial transactions such as paying credit card bills and depositing funds into savings accounts. Even the old stalwart of travellers cheques are in decline due to their inconvenience when compared with more modern methods of accessing funds abroad.
Standing orders and direct debits meet most people’s requirements to pay bills, with cheques largely being utilized by the older generation who are used to this traditional method of payment. In contrast, the under 24’s are largely oblivious to cheques with only one in sixty making use of them.
Most retailers find cheques a time consuming and inconvenient payment method, even whilst criticising the high chargers which result from their acceptance of credit card payments. Only 0.8% of retail spending is done via cheque, as opposed to 65% by debit and credit cards, with debit cards proving the most popular choice.
Within just the last five years, cheque use in the UK has fallen by 40% and it is predicted that by 2018 less than 1% of all transactions will be by cheque. In 2009 6% of workers received their salaries by cheque, 5% by cash and 89% by direct payment to their bank accounts. It is estimated that by 2018 95% of all salaries will be paid directly into personal bank accounts and only one in fifty likely to still receive a pay cheque. Cash will remain a preference for those with no access to a bank account.
Banks favour consumer use of plastic as they are able to profit more from the costs applied to the retailers, with innovative payment methods such as mobile payments and contactless cards being touted as the way of the future. It is in their interest to encourage card payments, and payments through BACS which are returned insufficient funds net healthy charges.
The demise of cheques will only really be felt by the older generation who are used to this familiar method of payment. The UK Payment Council will advertise the phasing out of cheques so that those who do rely on them won’t be caught out unawares. A target date has been set as 31st October 2018 for cheque use to cease, but a final decision will not be made until 2016 when the Payment Council will conduct a thorough analysis.
Source: The Payment Council UK.