We already have the cheque replacement technology

There’s a fun piece by Mark Kitto in this month’s Prospect magazine. It concerns a chap who was visiting a friend in Shanghai. The visitor borrowed some cash from the host and wanted to repay it, so he posted a cheque drawn on a major international bank (which took 34 days to arrive). In order to cash the cheque, the host had to go through a time-consuming and expensive process, which culminated in having to open a bank account that now lays dormant (my good lady wife had to go through a similar process in the US a couple of years ago).

The piece is bylined “Shanghai is the financial capital of the far east. But just try cashing a cheque.”

Surely, I thought, reading this piece that only someone with virtually no understanding of retail payment systems and completely cut-off from modern technology would write a cheque in these circumstances? I then I realised that I’d missed a clue at the start of the article: the visitor was described as a “a banker friend from Britain”.

A cheque? Crackers.

I’m actually writing this article while visiting China, and tonight I’m going to dinner with an English friend who is visiting here from Thailand. (To be fair to British bankers, he did tell me that his HSBC Beijing account and HSBC Bangkok account do play together nicely.) Anyway, if I end up owing him money I will either PayPal it to him, post U.S. dollars in an envelope or leave him a Travelex prepaid Visa card which I’ll load for him via the internet, or if he (like all wise travellers) has a spare pre-paid card in his back pocket, I’ll top his up for him. Or I’ll top up his Thai mobile using my credit card, or I’ll load an Oyster card for him to use next time he comes to London, or…

Anything but a cheque, actually. It’s time we started to get serious about getting rid of them: British bankers who write cheques should be made to feel silly. When the UK Payments Council announced a roadmap for getting rid of cheques, the reaction was predictably, well, reactionary. Here’s some typical stuff, in the case from The Guardian, for example.

I’m a sole trader who runs a window cleaning business, and many of my customers pay me by cheque. What am I going to do?

This group is expected to see the biggest impact when cheques disappear in 2018, not least because many won’t be able to invest in the technology the industry is relying on taking over from cheques.
[From Cheques out, but what does it mean for everyday payments? | Money | The Guardian ]

What? Sole traders don’t have mobile phones? What a load of old rubbish. In a list of “8 Things Your Phone Will (Probably) Replace”, the payment terminal shows up as no. 4 and I can’t say I disagree.

Handsets already connect to the same networks as mobile payment terminals so to think they will be able to mimic the same functionality isn’t too hard to imagine.
[From 8 Things Your Phone Will (Probably) Replace – Consumerologist’s posterous]

We already have the cheque replacement technology in our hands. What many people don’t yet have are cheque replacement systems, but we’re getting there as more non-banks move to open up this sector, as has long been obvious to most non-bankers. Of course, cheques are only one part of the payments business that could be replaced by non-bank alternatives.

Indeed, banks have been extremely slow to meet the evolving customer demands of the digital age. With the rise of these new Web 2.0 business models we are experiencing a complete change in the way money is transacted. In the future, it won’t be the banks that are sending out thousands of cheques or triggering tens of thousands of micro bank transfers to these users.
[From Financial World Online]

This isn’t bad for banks – as we were discussing with reference to M-PESA – provided they have a strategy for using these new payment systems to everyone’s advantage.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers