Pledge to have viable alternative to cheque

Banks are considering introducing a new paper-based payment system to replace cheques when they are phased out in 2018.

The Payments Council announced last year that it had set a target date of 2018 for closing the cheque clearing system following a steep fall in the use of cheques.

But it promised this week that consumers would not be left "high and dry" by the move, adding that it was working with charities, consumer groups and small businesses to ensure viable alternatives were in place when the system closed.

These are likely to include some form of paper-based payment system for people, such as the elderly and blind, who are highly dependant on cheques and who will find it difficult to switch to electronic alternatives.

But the group said it was also looking at ways of using mobile phones to make electronic payments, as an alternative for people who were happier using technology.

It added that it also planned to embark on a consumer education campaign to make people aware when cheques would be phased out and what alternatives were already available.

Around 55 per cent of consumers are not aware of the plans to phase out cheques, and among those who are, a quarter think the target date is either next year or 2012.

The Council stressed that, while it had set a target date of 2018, the final decision on closing the cheque clearing system would not be taken until 2016, and the move would only go ahead if a range of viable alternatives were in place.

Plans to phase out the cheque have proved controversial, with groups representing elderly people warning that the end of the payment method could lead to pensioners hoarding large amounts of cash in their homes, making themselves vulnerable to burglary.

The RNIB has also pointed out that using cheques gives blind people a greater sense of control, as they are often able to check the amount with a magnifying glass, but it is impossible for them to read a chip and pin terminal if they are paying in this way.

The Federation of Small Businesses has also warned that the abolition of cheques will have a detrimental impact on smaller firms, for many of whom cheques are the most convenient payment method.

Liberal Democrat MP David Ward is currently using Parliament's 10 Minute Rule to introduce a bill to save the cheque.

But the Payments Council has defended its decision, warning that unless the process was actively managed, there was a danger that banks would withdraw their cheque facilities before alternatives had been developed.

In the meantime, it said its members, who include the major high street banks and building societies, would continue to make cheque facilities available to customers who needed them, until acceptable and widely adopted alternatives were in place. Richard North, chairman of the Payments Council, said: "By setting a target date for closing cheque clearing, we know we have set ourselves a massive challenge in developing alternatives that work for customers and that people will choose to use in place of cheques.

"However, with the publication of the commitments we hope that we can reassure all stakeholders that we have their interests at heart, in what is actually a great opportunity to develop new ways to pay that are an improvement on the current options available."

Cheques were first introduced 350 years ago, but the Payments Council has said their use is in "long-term, terminal decline", falling by 40 per cent during the past five years.

No major UK-wide supermarket chain accepts the payment method, along with most petrol stations and high street stores, due to the relatively high costs of processing them – around a pound.

The Cheque Guarantee Card Scheme is being withdrawn from the end of June next year, meaning that while people will still be able to write cheques, the payments will not be guaranteed.