Nicholas Vanacker wrote his own name into the history books when he signed the world’s first — possibly — and certainly oldest-surviving cheque. Dated February 16, 1659, it is made out to a Mr Delboe for £400. About 350 years later, an era in British finance may be about to end.
Bankers will decide this month whether to do away with cheques altogether. The decision will be taken on December 16 by the Payments Council, which sets the strategy for payments in Britain, including those used by all the UK’s main high street banks.
Banks have long debated tearing up the cheque, for an obvious reason: “There are a lot less cheques being issued than there were ten years ago,” Sandra Quinn, a director of the Payments Council, said. Since their peak in 1990, when 11 million cheques a day were issued, volumes have fallen to just over 3.8 million cheques in 2008 and are expected to drop to 1.6 million by 2018.
And where consumers lead, businesses follow. A third of British companies plan to stop using cheques to pay other businesses by the summer of 2010. One in nine plans to stop accepting cheques in the next 12 months, according to a survey by Creditsafe, a business information company. As with the banks, the reason is financial. Small to medium-sized enterprises (SMEs) could recoup at least £65 million in labour savings each month if they stop handling cheques, according to David Knowles, Creditsafe’s marketing director.
On average, a small business can save half a day of accounting time each month by not accepting cheques as a valid form of payment. Cumulatively these savings would amount to more than £788 million every year for SMEs in the UK. “Cheques are viewed by many businesses as inefficient, time-consuming and a security risk compared with BACs transfers and card payments,” Mr Knowles said.
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The Federation of Small Businesses (FSB) is not impressed — “We would strongly oppose any move by the banks to get rid of the chequebook,” Stephen Alambritis, its spokesman, said — but big, consumer-facing companies are voting with their feet. Famous high street retailers including John Lewis, Tesco, Marks & Spencer, and Sainsbury’s no longer accept cheques.
John Lewis said that it took the decision last year to abandon cheques after a six-month trial in two stores. “We found customers appreciated the faster service at the tills that we were able to provide by only processing cash and card payments,” Louise Cooper, a spokeswoman, said. “Implementing this change was straightforward and customer feedback continues to confirm that shoppers are happy with the situation.”
Richard Dodd, spokesman for the British Retail Consortium, said: “Customers have shown progressively less and less interest in paying by cheque and retailers have got to the stage where it is no longer worthwhile to be geared up to take cheques and keep the back-office facilities.
“Most transactions are done by cash and bigger transactions are done on cards. There has never been a decision by retailers to kill off cheques.”
Should the Payments Council decide to call time on cheques, it will brace itself for a backlash, especially from older people, who prefer cheques to plastic cards and who are less likely to have access to the internet to carry out electronic transfers. Ms Quinn says that such a decision, therefore, will be dependent on ensuring that alternatives are in place. “If we set a date, there needs to be a suitable period so we can be sure alternatives are in place and we will set targets about what needs to be done.”
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So whatever happens on December 16, cheques will be around for a few years to come, as the proposal is to abolish cheques by 2018. But industry trends seem to point to only one conclusion: the cheque’s in the past.