Wednesday, March 11, 2015

Cheques not dead yet, but demise is in the mail

The future of cheques as a payment method for many Australians is continuing to slide with transactions falling by almost 14 per cent in 2014.

In a sign that rusted-on cheque users are adapting to changing times, electronic payments grew in the same period with payment card use up by 8.8 per cent and direct debits by 7.5 per cent.

The Australian Payments Clearing Association, which regulates the payments industry, says while cheques are gradually falling out of everyday use they are still being used for major business transactions and property settlements.

The research adds to evidence that cheque use has been declining over the past decade with a 71 percent demise between December 2002 and December 2014.

APCA's chief executive Chris Hamilton told AM that although a "hard stop" to cheques was unlikely,  users should consider switching to electronic alternatives which are now secure, cheap and reliable.

"Older people are much more likely to use cheques than younger people. What the most recent figures show us is that cheques are falling out of general ordinary everyday use quite quickly," Mr Hamilton said.

"Cheques reached their sort of high point in the mid 90s and they've been in decline ever since. The first part of that was quite slow but I think now we're seeing the volumes of them dropping off. So I expect that within the next few years I'll be quite rare to see a sort of cheque in everyday ordinary usage, although they will still be used for specific types of transactions."

But Mr Hamilton says while cheque usage is unlikely to bounce back, banks are unlikely to cease accepting them for the time being.

"It's unlikely that in Australia we're going to have a sort of hard stop. That's been talked about in various countries around the world that perhaps didn't have as strong a tradition of cheques as we do where they have actually turned the cheque system off," Mr Hamilton said.

"What's more likely to happen is if people want a cheque book then they'll have to find an organisation that wants to supply that. Increasingly their biggest problem will be the payees don't want to accept their cheques. So over time it's going to get harder and harder to use them."

Mr Hamiton said the biggest concern for banks and consumers is the cost of processing cheques which can cost five dollars per payment.

But he says the increasing trend for merchants to switch from accepting cheques to electronic payments only will ultimately encourage ever "rusted-on" cheque users to make the switch.

"It is very cultural. And I'm not sure that it's to do with specific issues about security or anything like that. In fact according to our statistics the fraud rates on cheques, while they're low, are still higher than for example what we would call a direct entry payment, which is the sort of basic electronic payment that goes through the system," Mr Hamilton said.

"So I don't think it's really a security issue. I think it's much more what you grew up with and what you feel comfortable with. And so we see it as a process of gradually saying, hey look, there is another alternative. It might be easier for you to use it once you get yourself set up."

Research by APCA shows the Australians are using less cash with the number of ATM cash withdrawals down by 4.8 percent to 714 transactions valued at $143 billion.

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