UK Card Use Hastening Death Of Checks

Driven in large part by the increasing popularity of card payments, a banking trade group in the United Kingdom has voted to abolish central check clearing on 31 Oct. 2018, which essentially would kill off checks as a means of mainstream payment. “Central check clearing is the system that allows all the bits of paper to be exchanged around the country,” says a spokesperson for the UK Payments Council, the group that organized last week’s vote. “It’s a possibility that some checks may still be used, but our aim is that by 2018 there will be no need for any users to have to rely on checks for making any of their payments.” The group includes 25 members. The group’s board, which did the vote, includes 11 representatives from the banking industry, four independent directors and a chairman. Vote details were not released. Check use is in “long-term, terminal decline,” the council said in a statement. Only £7.1 billion (US$11.4 billion or 7.9 billion euros), or 3% of retail spending, involved the use of checks, a 4.1% decline from   2007, the latest full-year figures from the UK’s Association for Payment Clearing Services show. UK consumers wrote 711 million checks in 2008, down 47.3% from 1.35 billion in 2003, according to the Cheque and Credit Clearing Co., a British industry group that manages the country's check-clearing system. In a report that accompanied the vote to end check clearing, the UK Payments Council noted that “the strongest influence on the decline has been the decisions by many merchants to no longer accept personal checks. The other sector seeing the most-rapid decline was personal bill payment, where continued  migration to electronic payment methods has cut the proportion of all personal  regular bills paid by check from 16% to 8% between 2003 and 2008.” Meanwhile, UK consumers continue to increase their use of payment cards, initiating 2.01 billion debit and credit card purchases during the third quarter ended 30 Sept., up 6.9% from 1.88 billion during the same period last year, according to the UK Cards Association, a trade group that works with the Payments Council. Purchases using payment cards totaled 97.5 billion pound during the quarter, up 4.4% from 93.4 billion pounds a year earlier, the group says. Debit cards accounted for 75% of UK plastic card purchases during the quarter, the group adds. The Payments Council, which plans to promote “alternative” payment forms, including prepaid cards, direct debits, “virtual” vouchers and payments made using mobile phones, says it will review check use in 2016 before making a final decision to end the clearing system. “The [council] will be especially concerned that the needs of elderly and vulnerable people are met,” the trade group said in a statement, noting  for now consumers are unlikely to see any immediate changes. Check use also is declining rapidly in the United States. Though Federal Reserve banks have eliminated all but one clearing facility, in Cleveland, the Fed has no plans to do away with paper checks altogether.