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End of cheque guarantee system
Comments
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remind me
how many cheques were issued in the last 12 months?
what was their total value?
-remind me of any other industry that would reject such a volume of trade
Good point, but it is predicted to decline rapidly over the coming seven years.
And the banks know that they are not rejecting the volume of trade, as people will still have to make payments. They know that they'll just get it in a more cost-effective form.what is the alternative for people without internet banking?
Telephone banking.what is the alternative for small clubs
Electronic payments, via internet or telephone banking.
It works brilliantly.
I am the acting treasurer of a small charity, and it really eases the administrative burden for me to receive them electronically. I can just tick off names against the bank statement, rather than dealing in cash and cheques. And none of those making the payments (typically people aged 30-45 with a low income) have said that this is inconvenient at all.
It does take a slightly forward-looking treasurer to do this; someone who is happy to change the way that things are done. And that is the stumbling block here - people do not like change.
Six months ago, my charity received 60% cheque payments, and 40% cash. In December 2010, I took in 60% BACS/FP, 20% cheque, 20% cash. I am working hard to increase BACS/FP further still this month.
Payments out are slightly more difficult. Only two banks (CAF & Unity Trust) currently allow dual-authorisation BACS debits from an account, but HSBC will be implementing this from March 2011, and the Payments Council has agreed with all banks that they'll have dual-authorisation systems in place for charity accounts by December 2013.paying friends / family presents etc?
Again, telephone or internet banking. If I need to pay a friend, the first thing that I do is ask for their sort code and account number.what protection does the user have if they use internet banking and mistype a single digit... what protection does the law give and what practical help do the banks give to retrieve the money....
Check digits. You type in a number incorrectly, and there's a 98% chance that the payment will bounce back, as it's not a correct account number. Double check that any 1's and 9's in the number are correct, and this percentage rises still higher.
Cheques have been useful in the past, but their time really is up now. Not only are they expensive and time-consuming to process, but they are also frequently misunderstood by customers. Many people still believe that you can post-date a cheque. People also believe that it's 'cleared' as soon as your bank makes it available to spend. And another common misunderstanding is ...If fraud is committed with a cheque then at least there is some sort of audit trail compared with a plastic fraud
Cash is the only payment method for which no audit trail exists. Use your card at an ATM or in a shop - audit trail. Log into internet banking - audit trail, whether or not you actually make a payment. Just because you don't see the audit trails here doesn't mean they don't exist.
No, there's only one way forward, and that's to get rid of cheques.
Three changes that I would like to ease the transition are:
1) The banks will save a lot of money through the closure of the cheque clearing system. Wouldn't it be nice if they could put these savings towards making card processing terminals cheaper to rent and use for small traders? Otherwise, it's going to be difficult for the window cleaners etc.
2) A system where I can link my mobile number to my bank account. Then, someone can send a payment to me, using my mobile number, and it goes into my bank account. This would be much easier, as most of my friends and family have my mobile number, but few have my bank account number.
3) Future-dated BACS/FP payments can be set up to go out on Christmas Day. This would mean that my Grandmother can phone up her bank the week before Christmas, and the money will arrive in my account on Christmas Day.0 -
rb10
Thanks for your detailed reply
1. I don't doubt that cheques are declining but the alternatives are not yet adequate.
One would expect, in a competitive environment that adequate alternatives would be invented and then cheques would just die out naturally.. a bit like film has been replaced by digital media, tapes by CD or downloading
But here we have a cartel dictating the way forward apparently without any regulatory intervention to protect ordinary people.
2. Telephone banking is not an alternative for many people, as many are simply too frightened to use the telephone and some are (rightly) concerned that a small mistake will cause major headaches.
3. Check digits are not enough... completely 50 years out of date ... 2% un-deteched error rate is out rageous... on 1,200,000,000 transactions that could be 240,000,000 potential mistakes.
Now if they introduced a proper self correcting check digit system that reduce the potential error rate to 0.00001% then we would be looking at something approaching fit for purpose.... but of course that would be expensive to introduce
As I've already said, once a mistake has been made its hugely difficult to get it corrected.
If there was mandatory regulations dealing with the error issue then I think a lot of the problems with online or telephone banking would be massively mitigated.
4. Congratulations of persuading 60% of your donors to pay by internet banking. I wonder if, after all your best efforts, 10% of your donors refused to give electronically and just stopped donating, would you be happy about that?
5. The problem with asking for sort codes/ account numbers from friends and relatives is the pain of doing so and the again the scope for error. One can't e.g. assume that they haven't changed their bank account since one last sent money.
6. we'll have to disagree about audit trails. The hassle of getting fantom ATM transaction recredited is massively more that a problem cheque. There may be an audit trail but its available only to the bank and not to me the customer whereas I can demand a copy of the cheque.
7. Let me say I have no problem with the principle of getting rid of cheques
but firstly sort out the error problem
then make the alternatives more acceptable.. maybe along the lines you outlined yourself
if this were done the decline in cheque usage would accelerate of its own accord
however at the moment there is no discussion about the error problem (not a problem for the banks but a problem for silly fallible people)
and there are essentially no new proposals on the table; just the threat/promise of withdrawing the service by a cartel basis so I can't even choose a different supplier.0 -
1. I don't doubt that cheques are declining but the alternatives are not yet adequate..
And cheques aren't being abolished yet either. The target date of 2018 is still seven years away. This is more than enough time for people to get used to alternative payment systems, but they need to start doing so well before then. Anybody who does nothing until 2018 and then complains they can't cope with alternative payment systems really has only themselves to blame.
Also, it's quite misleading to state that there were over 1,200,000,000 cheques processsed in 2009 without also mentioning that this was still a tiny proportion of the total amount of payments going through the system. The Payments Council reports that in 2009 cheques only accounted for one twelfth of all non cash transactions, and that only 2% of retail spending by value is still paid by cheque, compared with over 65% by debit or credit card.
http://www.paymentscouncil.org.uk/cheque_replacement/cheque_trends_and_research/
The Payments Council have lots of information about the cheque replacement project on their website:
http://www.paymentscouncil.org.uk/cheque_replacement/
Finally, don't forget that although 2018 is the current target date for the end of cheques, no final decision will be taken until 2016 when the Payments Council review the situation.0 -
And cheques aren't being abolished yet either. The target date of 2018 is still seven years away. This is more than enough time for people to get used to alternative payment systems, but they need to start doing so well before then. Anybody who does nothing until 2018 and then complains they can't cope with alternative payment systems really has only themselves to blame.
Also, it's quite misleading to state that there were over 1,200,000,000 cheques processsed in 2009 without also mentioning that this was still a tiny proportion of the total amount of payments going through the system. The Payments Council reports that in 2009 cheques only accounted for one twelfth of all non cash transactions, and that only 2% of retail spending by value is still paid by cheque, compared with over 65% by debit or credit card.
http://www.paymentscouncil.org.uk/cheque_replacement/cheque_trends_and_research/
The Payments Council have lots of information about the cheque replacement project on their website:
http://www.paymentscouncil.org.uk/cheque_replacement/
Finally, don't forget that although 2018 is the current target date for the end of cheques, no final decision will be taken until 2016 when the Payments Council review the situation.
I don't see it as 'getting used' to the alternatives
my point is that the alternatives are not fit for purpose
it simply isn't satisfactory that if you mistype a digit your money can disappear for ever
there are no satisfactory alternatives for the relatively small but nevertheless significant number of people/transactions that are not addressed by the current systems
your solution that people will just have to accept it by 2018 or suffer the consequences is not my preferred approach0 -
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Check digits. You type in a number incorrectly, and there's a 98% chance that the payment will bounce back, as it's not a correct account number. Double check that any 1's and 9's in the number are correct, and this percentage rises still higher.
Do the UK banks employ a standard check digit system? I know BIN's (the 16 digit number on bank cards) use the Luhn algorithm as a check diget as part of its format standard (its why an invalid credit card number can be reconsigned by a terminal). In addition CVC1, the 3 digit number encoded on the mag strip and CVC2, the 3 digit number on the back of the card provided additional checks for online transactions.0 -
Do the UK banks employ a standard check digit system?
I was wrong to call it a check digit - it's really a modulus check.
All the banks use a similar system, but it's not identical and varies slightly from one bank to another. However, the important bit is that if I made a payment from my Halifax account to an invalid HSBC sort code/account number combination, it would reject it immediately.
See here: http://www.vocalink.com/media/78967/vocalink%20-%20validating%20account%20numbers%20v2.00.pdf0 -
glider3560 wrote: »If I go to the bank and pay in cash, but write the wrong account number on the paying-in slip, the money will disappear forever.
exactly
do you consider that is satisfactory or should the law be that the money should be recoverable if an honest mistake is made and should there be a straight forward process to enable this to happen?0 -
exactly
do you consider that is satisfactory or should the law be that the money should be recoverable if an honest mistake is made and should there be a straight forward process to enable this to happen?
Maybe so ... but that's a completely different argument as to whether the banks should be getting rid of cheques.0 -
Surely all the die-hards who aren't prepared to give up cheques could switch to using postal orders. Yes, they're expensive, but so is the cost of handling cheques.0
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