The messy break-up with cheques

The Australian Payments Clearing Association (Apca) recently confirmed it will not be closing the country's cheque clearing system, following a year-long consultation with payment stakeholders.

The review was commissioned on the basis of evidence showing a widespread decline in cheque use which came down by 60 per cent over the past decade and a third in the past three years alone.  However, Apca found an uncompromising five per cent of the Australian population to be reliant on cheques, made up of older Australians, those in rural and regional areas and industries such as real estate.

Similarly a recent Javelin report that looks at the future of payments for purchases in the US indicated the use of the cheque would fall significantly. So even without any form of campaign, this type of payment in the US – traditionally known as the “home of cheques” – looks also to be in decline.  

It’s not the first time a nation has backed away from abolishing cheques. This decision follows the one made in July 2011 when Britain's banks were obliged to scrap their plans to abolish cheques by 2018. This came after pressure from MPs, consumer groups (especially representing the elderly) and charities which still use cheques widely both for making and receiving payments.

With many forces driving progress including the changing banking infrastructure, the growing popularity of mobile and social media payment channels and rising number of non-traditional payment institutions, it’s clear the writing is on the wall for cheques and yet “the end” is not going to be as straightforward as financial institutions had hoped.

Considering the concerns of some segments of the consumer base – like all other regions experiencing the same downward trend – alternative efficient mechanisms are required to ensure a smooth transition otherwise banks could end up in a difficult position of having to continue what will become a very costly niche payment method.

The fact is anything that changes the way people have to make payments will impact financial institutions’ and the card payment schemes’ cause célèbre – the “war on cash”.  So whatever replaces cheques must also be able to replace cash.

There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement. Everyone understands and knows how to use cheques, but we are talking about a 300-year-old technology. This next phase will be as much about raising awareness of existing alternatives as finding new methods.