The Chancellor of the Exchequer in the UK gave a speech earlier this year that included criticism of the UK's payment systems and put forward some specific ideas for making 21st-century Britain a better place to do business. Conversely however, writes Dave Birch of Consult Hyperion, he also cited "saving the cheque" as one of these new and better services. It seems the UK Treasury has ignored my suggestion to reintroduce the deposit cheque system from Victorian times and instead decided to make the 17th-century invention of the paper cheque central to Britain's financial renaissance. What on earth was he talking about?
Can the cheque really still be viewed as a viable transaction banking payment method in the 21st century in the UK? Did the Chancellor George Osborne really view it as a valuable asset when opining about the UK’s payment system earlier this year?
To understand what is going on here, you have to remember that a couple of years ago the UK Payments Council put forward the suggestion that around a decade from now, the cheque clearing system should be abandoned. They did not, as is sometimes said, say that cheques should be banned. There is nothing to stop anyone at all from offering their own cheque system. But the Payments Council said that given the decline of cheques in the UK, it made sense to plan for their subsidised end. Indeed, the shared UK mobile m-payments service, which won’t now start until 2014, was mooted at the time as a suitable hi-tech replacement service.
Hardly radical, you might think to advocate abandoning cheques but the financial services industry was soon forced to abandon the idea in the UK in the face of opposition from pensioners and small businesses, which liked the free cheque clearing service and was used to it. There are many countries in the world, however, where cheques are a distant memory.
No-one in Scandinavia has used a cheque for years. And even in the UK I note that while both of my sons have bank accounts, they have never had chequebooks and I cannot imagine that they ever will. Even the British Chamber of Commerce last year called for the industry to scrap cheques and move to electronic invoicing and one of their reasons for calling for the ending of cheque clearing was the negative effect the use of cheques is having on other businesses' cash-flow, apparently the opposite of the Chancellor's vision for a payment system forged in the ‘white heat’ of new technology as a platform for the future.
Back to the Future?
So why does the UK Chancellor think that paper cheques are a new and better service that the banks should be incentivised to provide? Even the most rudimentary analysis of the economics would reveal that cheques are a waste of time and money. I wonder if it is rooted in demographics? Newspapers such as ‘The Daily Mail’ and ‘Daily Telegraph’ focused on the plight of the elderly who would be unable to pay their cleaners or their gardeners without cheques, when it seemed the payment system was under threat. I don't want to sound too middle class about this, but I pay my cleaner and my gardener using the near real-time UK Faster Payments Service (FPS), which is operated by VocaLink. I access it via my Barclays Pingit mobile banking app and I don't think it is beyond the bounds of the imagination to think that a Barclays Bank smart television app might fulfil a similar function for my Dad in future.
But what if the Chancellor is right, and cheques are truly ‘the future’? …Well, here is my suggestion: Why don't the people who want to keep cheques pay for them then in future and leave the rest of us alone to use more modern systems!
Cheque Users Should set up Their Own System: Freeing the Rest of Us
The paper-based ‘chequists’, as I like to call them, could band together and form a joint venture. They could obtain a Payment Institution licence and run their own UK cheque system if they liked, freeing the rest of us up to use more modern technology. Which set me thinking: how would it work if you set out to design a modern cheque-like system?
If you were to design a cheque system starting right now, you wouldn't bother with magnetic ink and optical character recognition (OCR), you'd design it for an app-based world from the beginning. So that you can "write" a cheque on your mobile or your PC, or your telly and it displays a QR code that can then be scanned or printed out and posted. When the gardener and the cleaner gets the "cheque" in the mail or via email, they can then scan it using their mobile phone and have the money transferred to their account.
This is just of the many ideas I have for the Chancellor, so I would appreciate all of your support in trying to convince him to make me the UK payment supremo, the head of the soon-to-be-created regulator for the payments industry, PayCom. I offer a progressive campaign that will not only see cheques at the heart of UK plc for all time but will also see the Queen's head on currency replaced by Dot Cotton from BBC TV’s ‘Eastenders’ show.
I’d also like to see the introduction of a 99p coin so that we don't end up with all those pennies in our change and a £1,000 note that will persuade the world's drug dealers and money launderers to stop making allegedly indefinite interest-free loans to the Federal Reserve and the European Central Bank (ECB), and make indefinite interest-free loans to the Bank of England (BoE) instead. Only one of these ideas is stolen from an old manifesto from the Monster Raving Looney Party, by the way. I'm all about the future me and I’d like to hear what you think the future UK payments system might look like.
• To read about alternative cheque-replacing technologies, such as mobile P2P payments, please visit the bobsguide blogger page of Sirpa Nordlund, the executive director of the bank-led Mobey Forum, who write about mobile FS for bobsguide.