Bank plan sees hi-tech future for cheques
People will be able to pay in a cheque by sending a smartphone image of it to their bank under British Government proposals to bolster the long-term future of the payment method.
The Government described cheques as a “crucial” part of the British payments landscape and plans to bring them into the modern age could cut the length of time it takes to process a cheque payment from six days currently to just two days.
Barclays plans to pilot technology to enable people to scan cheques using a smartphone or tablet early next year, with the full launch of cheque imaging on its mobile banking app pencilled in for the second half of 2014. Barclays’ Mobile Banking App is for use by Barclays’ customers only.
Plans to kill off cheques from 2018 were dropped two years ago after the UK Payments Council faced an outcry from small businesses, charities and pensioner lobby groups, who said the needs of millions of vulnerable people were being ignored.
Next year, the Government will consult on introducing legislation to speed up cheque payments and help make sure the cheque remains fit for 21st century needs.
It will consider the possibility of making the process faster by enabling banks to use images rather than paper as they do now. This technology is already widely used in the United States.
“Cheque imaging” does not require a hard copy of the cheque to be present at every stage of the paying-in process. That means that time which would have been spent transferring it between different banks and central clearing depots is cut as well as the overall cost.
Under the proposals, people without smartphones will be able to use similar technology at cashpoints or branches or, if they want, to continue paying in paper cheques as they do now.
Despite the increasing popularity of new technologies such as online banking and mobile payments, nearly £840 billion worth of cheques was processed last year – accounting for 10% of all payments made by individuals.
Meanwhile, businesses accounted for over 370 million cheque transactions in 2012 and one quarter (25%) of payments made by small businesses in 2012 were by cheque.
The Government recently announced plans to set up a new body, provisionally called the Payment Systems Regulator, which will be up and running by spring 2015 and will be tasked with ensuring that consumers’ payments needs are fully taken on board.
The Payment Systems Regulator will sit under City regulator the Financial Conduct Authority (FCA) and it will work to prevent a repeat of debacles such as the previous decision to scrap cheques.
Financial Secretary to the Treasury, Sajid Javid, said: “This Government is determined to create a banking sector that works for consumers and serves businesses.
“We want to see more innovation so that customers see the benefits of new technologies. That is why we’re creating a new payments regulator and why we are going to consult on speeding up the cheque clearing process.
“We want to take the very best of the current system and make it better. We want cheques to have a crucial role in the ongoing success of the UK.”
Barclays’ Mobile Banking app was launched just before last year’s Olympic Games and it has picked up 2.5 million regular users in the last 18 months.
The bank has also achieved considerable success with its ground-breaking Pingit app, which is available to both Barclays and non-Barclays customers and allows people to make payments using mobile phone numbers. Almost £1 million worth of payments a day are now sent via Pingit.
Barclays reassured customers that they will still be able to pay paper cheques into its branches if they want to.
Steven Roberts, managing director of Barclays, said: “These changes mean you will be able to pay cheques in instantly, not just in branch, but also using your smartphone or tablet computer.
“When you can download a book or a film in seconds, we believe you should be able to deposit a cheque in the same way.
“This is just the beginning of how we want to transform the ’cheque clearing cycle’ for our customers driving down the six days it currently takes a cheque to clear. We are planning to test the cheque imaging technology early in the New Year with a range of customers.”
The plans were welcomed by consumer campaigners and businesses.
John Allan, national chairman, Federation of Small Businesses, said: “Speeding up cheque payments into business accounts is to be welcomed as many find the current process frustratingly slow.
“Using smartphones is an interesting idea which should allow firms in areas, particularly where bank branches are closing, to be able to accept cheques as a method of payment.”
Gillian Guy, Citizens Advice chief executive, said cheques can be a “vital” method of payment.
She said: “It’s good to see plans to bring cheques into the modern age.”
Adrian Kamellard, Payments Council chief executive, said: “It’s clear customers want as much choice as possible and given that customers have made it clear that they want cheques to stay it’s entirely right that the Government consult to understand the public’s view on speeding up the clearing of cheques.”