10 CHEQUE GLOBAL FACTS

Cheque has been in the market for more than 35 decades. It is mostly used by SMEs in B2B transactions. See it in some perspective, some major historical occurrences and probably the way forward...

1.       It was first used in 1659 in the City of London. (Wikipedia)-over 35 decades ago.

2.       It started declining in early 90s as a result of competition from e-payments. (E-payments emerged as a result of PC revolution and birth of internet; Pay Pal (1998) and others emerged)

3.       Decline has been steady (72% in UK in about 2 decades(4bn to 1.1bn)- UK payment council statistics) up to 2009 and to 644m in 2014.

4.       Later, decline has slowed (2011-onwards) and its ultimate death; either seems impossible or possible with real demise. (Global Market Crisis)

       

Graph from research paper: Stabilizing the Global Market. (By Steve N. King’ori)

5.       Nowadays, mostly used by SMEs (UK, India, Australia). Why? 

6.       If it ends, each economy, globally, will save from 1-2% of their GDP, in terms of time taken for clearance and cost.

7.         A couple of interventions have been made to ease cheque payment.  Some of them are;

Ø  Introduction of CTS (cheque truncation system) to reduce fraud as well as reduce time spent/ number of days spent in clearing them.

Ø  Cheque image-capture by payee who sends it to their banks instead of going there by themselves.

But will these - and probably others to follow- make cheque equal digital payments when it comes to cost, time and other efficiencies? 

1.      An average cost per leaf is between US$ 3-4 whereas for a digital payment, it is about US$ 0.25. Its inefficiencies continue to grow day-by-day as well as widening its gap with the e-payments, in terms of time and cost. But it is still in use especially in the crucial situation (B2B transactions) and by the crucial group (SMEs). 

An average cost per leaf is between US$ 3-5 (or even up to US$15) whereas for a digital payment, it is about US$ 0.25.

8.       In 2009, the UK Payment Council, which monitors payments in UK, came to a decision; to phase it out of the system come 2018 and close all the clearing houses. This was after the 72% decline since early 90s. Everybody, starting from Ministers, Charities, Businesses and others objected the move. In 2011, the council reversed the move indicating that, come 2016, they will make an informed decision. Meanwhile, people should still get them as far as they request them.

9.   Check more from Check-And-Credit-Clearing-Company-UK  

10.   Is it end of cheque? Hard to tell. Since its users, SMEs, (as noted in 7.) are mostly middlemen, what happens if cheque ends? Will enough goods reach the final consumer or the chain of distribution of goods will break? Will trade volume fall now that goods bought with cheque are no longer bought? What will happen to these SMEs going by the fact that their businesses seem more attached with cheque than ever?

Now, is cheque here to stay or here to end?. It all depends with your views, at least for now. But, time will tell- come 5-10 from today. 

And if cheque persists, at least for another decade, and the gap between it and e-payments continue to widen, will many SME-businesses survive its hardships?