Cheque use plummets in the UK

There were one and a half billion fewer cheques written in 2014 than in 2004, but 44% of consumers and 64% of businesses still use them

There were almost one and a half billion fewer cheques written in 2013 than in 2003, but 44% of consumers and 63% of businesses still use them, according to research.

UK consumers and business wrote a total of 718 million cheques in 2013, which was 68% lower than the 2.25 billion written ten years before.

The 44% of consumers still using cheques do so to pay a bill by post, pay a tradesperson or to pay a club or society, while the 63% of businesses use cheques to pay suppliers.

“Although their use continues to decline, many consumers and businesses are still choosing to use cheques in certain situations,” said Angela Thomas, managing director of the Cheque and Credit Clearing Company.

"With nearly two million cheques written every day last year, it’s clear that for some of us – whether it’s paying the window cleaner or a business paying another business – there’s a preference to pay with a chequebook and pen.”

The use of technology to make payments through cards, online or even mobile phones has seen regulators plan for the end of cheques.

The cheque's last milestone

The use of cheques has been in decline and industry regulators had been planning for their end. In 2009, when the financial services industry celebrated the 350th birthday of the cheque, the future was pointing to certain death.

Speaking to Computer Weekly in 2009, a spokesperson at the Association of Payments and Clearing Services (Apacs) – later replaced by UK Payments Administration Ltd – said 350 would prove the cheque's last milestone.

"It would be fair to say this is the last big birthday the cheque will celebrate," said the Apacs spokesperson. "More and more people are using automated payment methods or plastic."

But banks such as Barclays recognise the importance of cheques to certain customers and are using mobile technology and automation to make cheques processing easier for customers to use and less expensive and time consuming to process.

Paperless cheques

Barclays this week enabled a million customers to pay in cheques online by taking a picture of them.

Barclays has been piloting the scheme with thousands of customers since June 2104 but the extension will see a million given the capability. The bank is also planning to try the scheme with corporate customers. The bank said these customers process around 46 million cheques each year, with a value of more than £100bn.

But the cheque as we know it will not continue. In January 2015 the UK government is expected to make the digital image of a cheque legal tender, paving the way to end paper cheque processing.

Following the change in legislation in the first six months of 2015, HM Treasury will set out rules and timeframes.

A case study published last year by analyst Forrester estimated that US bank Redstone Credit Union saved $3.60 – or 90% – of the cost of processing each cheque, by enabling mobile deposit transactions.

In other words, while a branch transaction costs around $4.00, the equivalent digital cheque-style of transaction would only cost Redstone Credit Union $0.40 to process.

Banks technology cuts services costs

Banks are using technology in other areas to support traditional services, while reducing the cost of providing them.

Barclays recently launched a 24-hour video banking services that customers can use to access face-to-face support from anywhere.

Premier account customers will be invited to do their annual account reviews from 8 December 2014. Mortgage, business and wealth customers will be able to use it early in 2015. The service will eventually be available to all retail customers. It will automatically match customers with a member of staff they have spoken to before.

Barclays is an example of a bank that has realised the importance of being seen as a leader in digital services. Last year Barclays rolled out 8,500 Apple iPads across its branches to improve interaction with customers.

ROI a false lead

Barnaby Davis, managing director of UK branches at Barclays, said the bank does not use a traditional business model – with a set return on investment (ROI) required – when investing in digital technology to support customers. “We did not have a traditional business case, but we had a strategic intent to demonstrate our digital credentials,” he said

Banks need to focus less on the return on investment, according to recent research. McKinsey found that investing in digital technology to support customers is not increasing profitability as much as back-office digitisation such as automation.

"The areas with the highest correlation with profitability were product back-office automation, digitisation of document management and automation of credit decisions, and big data analytics applied to sales campaigns," said the report. 

"The profit margins of banks with high levels of digital enablement in these areas were, on average, twice as high as the profit margins of other European banks.

"Investments in multichannel integration do not appear to have been as effective for these banks.”

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