English banks are phasing out checks:
After more than three centuries, the humble check is set to become a historic relic after British banks voted to phase it out in favor of more modern payment methods.
The board of the UK Payments Council, the body for setting payment strategy in Britain, agreed on Wednesday to set a target date of October 31, 2018 for winding up the check clearing system. The board is largely made up of Britain’s leading banks.
As others have suggested, it’s likely that this move will be redundant. Probably not for everybody, though. The advantages of checks is that anybody can cash one. I assume that between now and 2018 that they will work it so that it will be easy for people to accept funds into their bank account with a minimum of fuss. It’s not difficult now, of course, but you still have to kind of get set up for it. Right now, when I go to an automatic draft, all of the information I need is… on my checks. Just the other day I was trying to figure out if there was a good way that I could buy my sister-in-law an iTunes gift card without having my having to open an iTunes account. Apple does not seem to want things to work that way, so I thought about finding someone that did have an account, paying them, and then having them buy the gift card. But right now it’s an open question as to who can easily accept online payments. While checks presented their own problem (in this case, it would take too long), it’s still the universally accepted form of payment.
For credit cards to have worked in the first place, one of the things that needed to happen was for the consumer not to be charged to use it. This means that the retailers could not charge you an extra 50c for a credit card transaction over the regular purchase price*. This was a bitter pill for a lot of retailers to swallow (and many ignore the rule), but it ended up helping the retailers as well as the banks because it got people used to using credit cards. Since they do charge retailers and vendors, though, this would not be the case for people that presently accept checks for free. On the other hand, I don’t know if they get charged when you send money directly from your account to theirs.
However they do it, though, they’re going to need to find a way to differentiate between businesses and people. If you make money transfers simple and easy, you’re going to see a lot of businesses preferring that to credit cards and the banks lose a significant form of revenue. Likewise, if you treat individuals like banks, they’ll just wants checks or cash. Or they could charge everybody for everything to make sure they get their cut. Sure seems like this is where everything is headed. On one hand, if it actually costs the banks $1.60 to cash a check (that was a shock) then passing that on to consumers could be fair play (although, it’s worth pointing out, that’s precisely what they prohibit retailers from doing). On the other hand, the whole thing could simply reinvigorate the cash economy for all person-to-person and maybe business-to-person (instead of person-to-business or business-to-business) transactions.
That brings me to James Joyner’s supposition that the question is not whether checks will go the way of the dodo, but whether cash will. As much sense as that makes in the eyes of many, I find it extremely unlikely that will ever be the case. Privacy concerns would create a tremendous backlash. I say this as someone that believes that Americans’ supposed concern for privacy is generally overestimated. By making everything digital, you’re turning over every single transaction over to either the government or corporations. Sure, we mostly do that now, but that’s because most of the time we don’t care. Sometimes we do.
Further, the assumption that it would even be possible is only valid insofar as everyone has an account from which they can stuff and draw money. That’s true a good bulk of the time and if necessary could be true even more, but we live in a country where some people still don’t even get a valid form of photo identification. In order for this to work, you would have to give everybody an account and you would have to force there to be no minimums. You’d need some entity to look over all of this. Banks often do it now, but they do it because there is money in it for them. For those that they right now do not serve? Not so much money in it for them. So do we create a Public Option for banks? That’s a path fraught with peril.
Ever since credit cards first really hit the seen, a lot of “forward thinkers” have said that they’re eventually going to replace cash. There are reasons to believe that they may, but honestly I put it in the same category where I put cloud computing and the notion that all computers in the future will be smartphones/PDAs. I’ll believe it when I see it and not a moment before.
* – They are, however, allowed to have “cash discounts”. What’s the difference? As near as I can tell, the credit card companies are saying that you can discriminate against credit cards as long as you discriminate against personal checks or any other non-cash forms of payment.
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