Cheque payments to become quicker and easier

07 March 2014

The government has today unveiled detailed plans to modernise cheque payments through 'cheque imaging'.

The government is proposing legislating for “cheque imaging” which will speed up cheque clearing times and give customers greater convenience and choice in how they deposit cheques. The reforms will enable banks to clear a certified, digital image of a cheque instead of a traditional paper cheque. This will secure the future of the cheque as a reliable method of payment in the UK, using proven technology which has been in operation in the United States for 10 years.

The changes will make a real difference to cheque users. Not only will it reduce the time it takes for a cheque to clear, to as little as two days, it will increase consumer convenience and choice of ways to pay. While customers will continue to be able to deposit cheques at branches, cash machines, Post Offices or by post and still benefit from a faster clearing cycle, banks will also be able to offer the option of paying in cheques via smartphone or tablet. For customers in rural areas or with limited mobility, for example, this extra option could help overcome current barriers to financial inclusion. Additionally, banks may be able to offer later last times of deposit to customers if they no longer require couriers to collect paper cheques daily from branches.

Cheques are a crucial part of the British payments landscape - nearly £840 billion of cheques were processed in 2012 – accounting for 10% of all payments made by individuals. They are especially important to small businesses – sole traders and other micro businesses who continue to make over a fifth of their outgoing payments in cheques. Cheques continue to be a vital channel for charitable donations. Nearly a third of smaller charities receive over 75% of their income by cheque.

And because they are so important the government is taking steps to secure their long term future. It is seeking views on proposals that will enable banks to process images of cheques rather than paper as they do today. That means that time spent transferring it between different banks and centres for processing, exchange and clearing is saved, as well as reducing the overall costs. In the future it could be quicker to cash a cheque than to complete a Bacs transfer.

The government has published a consultation on cheque imaging and is seeking views from consumers, businesses, charities and the banking industry on how best to implement changes that will boost the status of the cheque, reinforcing their relevance in 21st century Britain. The option to respond to consultation questions is also available via LinkedIn.

CIPP comment

The policy team will be reviewing this consultation and will publish a survey shortly if deemed necessary.