Cheques have been in decline for many years, both for point of sale transactions (for which credit cards and debit cards are increasingly preferred) and for third party payments (e.g. bill payments), where the decline has been accelerated by the emergence of telephone banking and online banking. Being paper-based, cheques are costly for banks to process in comparison to electronic payments, so banks in many countries now discourage the use of cheques, either by charging for cheques or by making the alternatives more attractive to customers. The rise of Automated Teller Machines (ATMs) has also led to an era of easy access to cash, which made the necessity of writing a cheque to someone because the banks were closed a thing of the past.
In some European countries, cheques are now very rarely used, even for third party payments. In these countries, it is standard practice for businesses to publish their bank details on invoices in order to facilitate the receipt of payments. Even before the introduction of online banking, it has been possible in some countries to make payments to third parties using ATMs. One of the essential procedural differences is that with a cheque, the onus is on the payee to initiate the payment in the banking system, whereas with a bank transfer, the onus is on the payer to effect the payment.
In Germany and Austria
In Germany and Austria, as well as in the Netherlands, cheques have almost completely vanished in favour of direct bank transfer and electronic payment. Direct bank transfer using so-called Giro accounts (current accounts) has been standard procedure since the 1950s to send and receive regular payments like rent and wages, even mail-order invoices. It is very common to allow the payee to automatically withdraw the requested amount from the payer's account (Lastschrifteinzug). Though similar to paying by cheque, the payee only needs the payer's bank and account number. Since the early 1990s this method of payment has also been available to merchants. Due to this, credit cards are rather uncommon in Germany and Austria and are mostly used for the credit function rather than for cashless payment. Acceptance of cheques has been further diminished since the late 1990s, because of the abolishment of the Eurocheque.
In Finland
In Finland, banks stopped issuing personal cheques in about 1993. All Nordic countries have used an interconnected international Giro system since the 1950s, and in Sweden cheques are now totally abandoned. Also electronic payments across the European Union are now fast and low-cost, and in effect much more efficient than payments within the United States.
In the United Kingdom and France
In the United Kingdom and France, there is still a heavy reliance on cheques by some sectors of the population, partly because cheques remain free of charge to personal customers, but bank-to-bank transfers are increasing in popularity. Since 2001, businesses in the United Kingdom have made more electronic payments than cheque payments. In a bid to discourage cheques, most utilities in the United Kingdom charge higher prices to customers who choose to pay by a means other than direct debit, even if the customer pays by another electronic method. Many shops in France no longer accept cheques as a means of payment, and Shell announced in September 2005 that it would no longer accept cheques in its UK petrol stations. ASDA announced in April 2006 that it would stop accepting cheques, initially as a trial in the London area, and Boots announced in September 2006 that it would stop accepting cheques, initially as a trial in the Sussex and Surrey. Cheques are now widely predicted to become a thing of the past in the United Kingdom.
In the USA
Despite having a long history of well-developed, complex financial networking, the United States still relies heavily on cheques, caused by the absence of a high volume system for low value electronic payments. When sending a payment by online banking in the United States, the sending bank usually mails a cheque to the payee's bank rather than sending the funds electronically. This is changing rapidly, however, and certain companies with whom a person pays with a cheque will turn that cheque into an ACH or electronic transaction. Banks try to save time processing cheques by sending them electronically between banks.
In Canada
Canada's usage of cheques is slightly less than that of the USA. The Interac system, which allows instant fund transfers via magnetic strip and PIN, is widely used by merchants to the point that very few brick and mortar merchants accept cheques anymore. The system appears to have far lower fees than credit cards for merchants and therefore many merchants accept Interac debit payments but not credit card payments, even though most Interac terminals can support credit card payments. Banks also facilitate transfers between accounts within their own institutions, or for a ~$1.50 fee between any two bank customers via the Interac system, however, neither feature has really caught on. Cheques are still widely used for government cheques, payroll, rent and utility bill payments, though direct account deposits and online/telephone bill payments are catching on.
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Saturday March 20th 2010
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