UK Wants To Phase Out Checks By 2018

The board of the UK Payments Council has set a date to phase out checks in a bid to encourage the advance of other forms of payment. They added, however, that the target of Oct. 2018 would only be realized if adequate alternatives are developed. "The goal is to ensure that by 2018 there is no scenario where customers, individuals or businesses, still need to use a cheque. The board will be especially concerned that the needs of elderly and vulnerable people are met," the Payments Council said in a statement.

Comments

How do people pay eachother?

[Anonymous Coward]

If I wanted to buy a car from somebody, how would I do it? Right now the only reasonable options are PayPal, check, cash, or credit card. The only tender an ordinary person would accept for a car are cash and check, and most people wouldn't want to handle enough cash to pay for a car.

dom

Re:How do people pay eachother?

[Richard_at_work]

You get a Bank Draft, which is accepted as cash at any bank but for the purposes of the transaction is the same as a cheque - just a convenient single bit of paper. In the UK this is the main alternative to paying for a vehicle by financing - quite a few dealerships will not take several thousand in cash.

Re:How do people pay eachother?

[Valdrax]

There are usually some unreasonably high fees associated with bank transfers like that. Checks are virtually free. Should it cost $20-$30 to make every transaction in the future when you could have wrote a check for free?

There aren't such high fees in countries where that's the normal way to do business. Heck, you can do it for free in the US between many credit unions, including credit unions on other sides of the country. I've borrowed and repaid money to my family that way.

A check is nothing more than a bank transfer form with your account and other info written down on it. The only reason bank transfers cost money in the US is because they can. (Should you at this point have any surprise left at the fact that 90% of bank fess are set up to screw you instead of cover costs?)

Re:How do people pay eachother?

[bbtom]

That's exactly the right point. The Payments Council don't seem to have really thought out person-to-person transfers or small business transfers. If someone wants to pay me money using a cheque, all they need to know is my name (or the registered trading name of a business etc.). With a bank transfer, you need to know the bank account details of the person - and nobody is quite sure as to how public bank account numbers ought to be. Cheque still rules for getting paid expenses too. I've done the PayPal thing, which is cool - except PayPal take a slice of the transaction. I've done the online banking stuff and it's painful - crappy websites, no notification (how about an e-mail from my bank every time a transaction goes through my account? GPG exists, goddamnit - use it!), security designed for the sort of people who set their passwords to "password1" and tell all their idiotic friends their MySpace password and then wonder why they get "hacked". If you think writing a cheque is inconvenient, how about carrying a laptop and 3G dongle around with you in order to do bank transfers on the website instead?

Yeah, in shops, use a damn debit card. But for person-to-person transactions, cheques are pretty convenient. The security sucks, admittedly - a shared, public key that anyone can copy is not really security at all (a bit like credit cards: credit card fraud, at least until a few years ago, consisted of writing down the number and details that was given out to the merchant upon every purchase - that's real secure). But with cheques, you can post them - slip 'em inside birthday cards. You can give them to third parties (children, employees etc.) who can hand them to their eventual target. You can use them even where there isn't an Internet connection - and, well, outside of the big cities, there's plenty of rural countryside with no 3G service. You can post-date them, and the recipient can return them - my old school used to do this with their after-hours activity programmes - you'd give them half in a current-dated cheque and the other half in a post-dated cheque, so if you don't decide to finish the activity, they just return the second half of the payment.

The only problem with cheques is that I have to walk to the bank to pay them in and it costs the banks money to process them. The walk is quite good exercise, and since the banks got £300 billion of taxpayers money last year under the Special Liquidity Scheme, and they pay themselves HUGE FUCKING BONUSES, I figure the odd 25p here or there to process my damn cheques is pretty reasonable. Not to mention the huge amounts they've had in fees and fines - fines they've charged me due to the ineptitude of other banks (who have web security models designed for the aforementioned idiots). Not to mention interest they make off the money we keep in them. They seem to want to have it both ways: they argue that cheques cost a lot to process AND nobody is using them. But if nobody is using them, surely the number of people you need to employ processing cheques is pretty minimal.

While I'm ranting about banks, here's another thing: it's only in the last year that UK banks have actually got their shit together to be able to move money between accounts and it take less than four fucking days. A family member moves the housekeeping money from one account to another every month. He does this by going to one bank, drawing out however much it is (a few hundred pounds), walking down the street to the other bank and paying it in. Every time, the helpful bank assistant seems to suggest that he could do this electronically. The difference is, if you pay in cash, it is immediately available - while a BACS transer takes 3-5 days. They've only recently changed this so that it takes at most a few hours. But Christ-on-a-fucking-wheel, why did it take until 2009 to be able to move money instantly from one account to another? And it's still only certain banks that do the same-day transfers. These guys are absolutely retarded. With the billions they make every second, you'd think they'd be able to install a few broadband lines between their offices and make it so money can get transferred quickly. Three days - seriously?!

'Too big to fail' presumes the banks aren't the epitome of fail to start with.

I thought they were already gone in EU

[Anonymous Coward]

I hadn't seen a check in Finland for over 10 years. Then I come to US and find out it's the common way to pay bills. And transfers from bank account to another one are difficult or even impossible between two random people.

Re:I thought they were already gone in EU

[eggnoglatte]

Well, except that the recipient of the check has to run to the bank for the deposit instead of just verifying online that the money has arrived. Likewise, I have to hand-write a check for my rent every month, rather than just going online and clicking a button to transfer a pre-registered amount to a pre-determined destination account (or just setting up a completely automatic monthly transfer).

Banking in North America is so far behind Europe, it is not even funny. Quite an adaptation when I moved back to Canada.

In ong run should just switch to digital cash

[JoshuaZ]

We have cryptographically secure algorithms for anonymous digital cash. These schemes are easy to implement using blind signatures. http://en.wikipedia.org/wiki/Blind_signature. If properly implemented such a system provides far more anonymity than cash, checks, credit cards or debit cards. We really should be working to switch to such a system.

Re:Good Riddance

[MakinBacon]

As a former cashier who worked at a nationwide chain, I believe that the death of the check will be welcomed by those at all levels of retail. I have been involved in many horror stories caused by my registers check scanner accidentally tearing the check in half. Also, I had the awkward duty of explaining to people that their checks are no good and cannot be accepted without being able to tell them why (when the cashier scans your check, the register automatically does a background check).

Sounds Hard

[pgn674]

Every month, I pay my landlord (a professor; I'm his only tenant) with a check. I wonder what system would replace that, that would be significantly different from checks, but that my landlord could accept?

Also, what if I run over someone's bicycle, and I want to give him a blank check to pay for it? Or, more realistically, what if I need to pay an individual that I have only just met more money than I have in cash? What system could replace that that would be significantly different from checks?

I guess it could be done, but it might take some creativity.

Re:Sounds Hard

[adolf]

Back in context: This delay seemingly inherent in current implementations of Electronic Funds Transfer, is worse than a paper check...how, exactly?

Sure, with a check you've got a bit of paper (at some point) which states that so-and-so promises to pay $x from the account in the MICR code at the bottom. But once you pass that on to your bank, you're still waiting, and you still don't know if the transaction was valid until the money actually lands in your account some days later.

(Not that I'm arguing against what may be your main point: There should be a much faster means of conducting a transaction between layfolk than exists now.)

Re:Good Riddance

[AliasMarlowe]

not all customers have access to electronic funds transfer.

That's your problem, right there. Fix it.
The capability for electronic funds transfer should be automatically granted with any bank account - both via debit card and via internet. In the Nordic countries, cheques are essentially extinct. If you try to present one at a bank, it is treated as a truly exotic item, and may cause confusion. The only cheques deposited are invariably from countries with backward retail banking (UK, US, Canada, etc.), and the clearing time and fees can be significant. On the other hand, electronic transfer to or from other accounts (worldwide) is fast and cheap, and provides immediate confirmation of receipt of the payment.
I regularly pay vendors in Germany, Sweden, and Finland with direct electronic transfers via internet when making purchases or handling invoices. There is no risk of "delayed/lost in the mail" as happens to cheques with remarkable frequency. On-the-spot payments (small stores and large, petrol stations, vending machines, parking meters, etc.) are made using the debit card for the account. There is no need to carry wads of cash in your wallet, and shops do not have to handle or transport large amounts of cash.

Re:Good Riddance

[iamacat]

Not every business is a nationwide chain. Any two people can use a cheque for a transaction without paying a transaction fee or going through inconvenience of setting up a credit card processing service. If I have personal means to verify your trustworthiness I may accept your check regardless of your eligibility to get a credit card. And a pen works just fine when there is no possibility of a network connection to process a card. Just because something works for Wall mart doesn't mean that a street cornet vendor or a one-off private seller should be denied additional options.

Re:Good Riddance

[ommerson]

You are labouring under the assumption that cheques are a cheap form of payment for small businesses. They are not, and as volume of cheques in use reduces, it is likely to become increasingly less competitive. I'd hazard a guess that payment by debit card is already a much cheaper way of doing business, and one in which payment is guaranteed (unlike cheques, which might bounce).

The future is almost certain to be mobile card payment terminals of the kind used in restaurants, with a GPRS/3G data connection to the merchant. These are already in common use amongst tradespeople.

If you consider that almost everybody trusted by a UK bank with a cheque book is also issued with a cheque guarantee card - which in almost all cases is some kind of debit card - it's hard to claim that this method of payment is any less available.

However, there are some definite accessibility issues to be addressed for disabled users, but cheques suffered from a different set of these.

Wireless Credit Card Processing

[Xerfas]

Here in Sweden there are lots of companies who buy products like these http://www.merchantexpress.com/wireless_credit_card_processing.htm which is a wireless credit card machine. As long as you use it in an area where cell phones work, most of these will also work.
It's perfect when you are on an outdoor market, a convention etc. Even our ice cream trucks in Sweden use wireless credit card machines.
Last time I saw a cheque used was more then 15 years ago, mainly because we have used credit/debit cards for so long that we no longer need or want cheques. For instance, cashing in a cheque from USA in a bank here can cost about $70-90 USD no matter what the amount is. So we rather do electronic payments, cash or debit/credit cards.

Re:Good Riddance

[QuestorTapes]

>> not all customers have access to electronic funds transfer.

> That's your problem, right there. Fix it.

It's a problem, but not the only problem in the US.

> The capability for electronic funds transfer should be automatically granted with any bank
> account - both via debit card and via internet. In the Nordic countries, cheques are
> essentially extinct.

Most other nations have different financial protections on EFTs than here in the US.

One root cause of this is that the banking system in the US grew from state-chartered banks, not federally-chartered banks. 50 states, all with different rules and regulations.

Much of the current legal and technological infrastructure to begin to _consider_ phasing out checks in the US was only put into place post-911. At that time, the federal government was confronted with the fact that they had been nursemaiding a check clearing system leftover from the early 20th century, and even a brief interruption of airline service significantly impeded the ability to move huge boxes of paper checks across long distances quickly.

The legal overview still isn't as good as it needs to be. People in the US are still advised by security and financial planners to use _credit_ not _debit_ cards, because the protections against errors and fraud are "bank policy" which can change in an instant, not "the law".

Correcting an issue with bank errors in clearing a check required banks to put the funds back in place and follow a real procedure for resolving the issue quickly.

With EFTs/Debit cards, banks are typically _very_ slow to restore the funds, and often glacially slow (and incompetent) at resolving the issues.

Personal experience: I've set up EFTs for recurring bills at various times in the past. In each case, the bank was unable to complete some transfers, unable to cancel the transfer, unable to resolve the issue quickly, and I was charged for late payments. Some of these took several _months_ to resolve.

> The only cheques deposited are invariably from countries with backward retail banking (UK, US, Canada, etc.)

As noted by another poster, it isn't all retail. In fact, it likely isn't even _mostly_ retail that deals with checks. Small service industries: appliance repair, contracting/home remodeling, charities and non-profits, small-business suppliers and wholesalers, shippers and transport firms, any companies dealing with Asian, South American, or former Soviet-block nations need to deal in checks all day, every day. Or lose the bulk of the business they do.

> electronic transfer to or from other accounts (worldwide) is fast and cheap,
> and provides immediate confirmation of receipt of the payment.

Not in the US, and the banks are shielded from the need to confirm _by law_. I'm also curious about the claim that it's fast and cheap (reliable implied) worldwide. I mentioned several regions above where checks are still common. I have no doubt that fast, cheap and reliable EFTs are available in all those regions. But are they reliable to all businesses in those areas? Sure, if you are dealing with a big Asian electronics, metals or chemicals supplier, I'm sure it's no problem. What about the small-lot specialty suppliers; do they have the same fast EFT access, with reliable transfers protected by law? I'm not so sure.

> There is no risk of "delayed/lost in the mail" as happens to cheques with remarkable
frequency.

Not in the US, where delayed/misdirected, effectively "lost" EFTs are commonplace.

> On-the-spot payments (small stores and large, petrol stations, vending machines,
> parking meters, etc.) are made using the debit card for the account.

Mostly true in the US; some things (parking meters) are not usually equipped for debit cards. In part, this is due to the fact that there are more parking meters in some major US cities than there are _people_ in some of the Nordic countries you mentioned. Since ownership and management of t