The attack on off-line banking

Whichever way the UK Payments Council votes today with regard to setting a date for switching off the cheque clearing system it puts current debate on e-crime into context. From the perspective of the banks, major supermarket chains and the on-line world it is a nuisance factor – not a serious problem and certainly not a show-stopper. Their world appears to look rather different to that seen by small firms and the elderly and vulnerable. Who is right? 

No-one currently knows.

All that is certain it that different groups have very different perspectives.

Hence the need for the scoping exercise to help plan the e-Crime Reduciton Partnership.

According to groups like the Federation of Small Businesses and unpublished data from on-line services, few small firms are willing to transact on-line, even though most now advertise on-line. More-over the rate of take-up of on-line payment services is said to have slowed dramatically because of the way the card companies are using their verification routines to transfer the risk of fraud to small firms with little or no confidence in the security of their systems. On-line business may be growing but is also said to be imploding around trusted (i.e. currently dominant) brands. 

The change from canals to railways in the 19th century was driven less by market forces than by railway companies buying up canals and running them into the ground if not actually shutting them down. Is the move on-line about to be similarly driven by removal of choice rather than by superior service.  

Cheques are indeed more expensive to process and usage is undoubtedly shrinking but until the on-line world has earned the trust of small firms and the elderly with services that are fit for purpose, the attempt to drive consumers on-line by withdrawing off-line services risks a political backlash – as well as having the potential for making e-criminals even richer and enhancing the earnings of high street muggers as more people carry more cash.

Not that this year the UK cash economy has grown rather faster than the on-line equivalent (witness the sudden growth in circulation of £50 notes). 

Those who wish to reduce the volume of paper-based transactions need to focus on winning hearts, minds and fingers lest the other 30% of society votes with its wallets and transfers its funds to “alternative” trust and transaction networks – including the burgeoning range of cash-up-front debit cards available in every high street. 

That means basing services on market research into what the majority of customers actually want. Given that only the credulous respond to on-line surveys (the rest of us listen to the advice from Get Safe Online – don’t we) that presents an old-fashioned problem.  

I am awaiting a analysis of the OII Survey data on the growth of usage of on-line banking over time. The breakdown I received yesterday shows a pattern of growth that could well be seen to support the proposals being put the UK Payments Council today. Nonetheless I strongly suspect that planning to scale down and “re-price” cheque clearing would be a much “safer” option than announcing targets for withdrawal with no credible replacement options in place. Given the nature of the decision processes – UK Payments and its predecessors have an impressive track record for being right* in their judgements – I strongly suspect a kite-flying exercise – including to put pressure on those looking at alternatives to cheques.    

* I accept that others might disagree with the criteria by which one judges what is “right” – my criterion is “making judgements that the majority can make work and can live with, over the next decade or so.