Cheques have been in terminal decline since the birth of the internet, and cash could be next.
The financial services industry is often lambasted for its continued use of legacy systems, but this is not just applicable to technology systems, as its continued use of cheques, which celebrated their 350th birthday this week, shows.
The onslaught against cheques began in 1989, when First Direct launched its first telephone-only bank. In 1997 Nationwide launched the first internet banking service.
Cheques reached theirpeak in 1990, the year Tim Berners Lee invented the world wide web, when four billion were written in the UK.
The internet allows payments to bemade and cleared faster than ever. At the same time the cheque has become relatively expensive to process.
Last year the Payments Council published the National Payments Plan to manage the decline of the cheque. It predicts that the
cheque clearing system may close by around 2018. By 2007 there were less than half the number of cheques written compared with 1990.
The Association of Payments and Clearing Services (Apacs) says the cheque is unlikely to reach its 400th birthday, but it will not disappear until a viable alternative is available and used widely.
Mobile telephony is the latest threat to the cheque. People can use mobile phones to make all sorts of payments today. They include instructing a bank to pay a bill or even paying for a coffee using a handset fitted with contactless payment technology.
Terry Dirienzo, product and marketing director at Experian Payments, says the internet has introduced more efficient ways of doing business. "Cheques and cash are the most expensive things that banks have to process."
He says in the Netherlands and parts of Scandinavia cheques have disappeared, because banks started to charge back users the cost of processing cheques to encourage them to use electronic methods.
Chris Skinner, CEO at financial services think-tank Balatro, says UK banks would like to go down the same route, but wouldprobably not be allowed. "It could happen if there is an agreement between all the banks and the authorities such as the Financial Services Authority," he says.
Skinner says there are so many different methods of making electronic payments that paper money is hardly needed today. He maintains that the need for cash will erode but its "anonymity" will mean it will not disappear.
The introduction last May of the Faster Payments System, which enables online and phone payments that clear in near real time, could be a final nail in the cheque's coffin. Most major retailers stopped accepting cheques after the system was introduced, and about 83 million Faster Payments, worth £32bn, have been made since then.
The technology system that runs Faster Payments is in two parts: a front office that links to banks, via the internet, to capture all payment details, and a back office that records, stores and settles payments.
Dirienzo says banks still need to get together and find a way of getting rid of cheques because they are costing more and more to process. He says cash should eventually disappear as well.