Wednesday, 13 July 2011

Cheque-Mated Banks

A couple of years ago banks put pressure on the Payments Council to abolish cheques and this resulted in the announcement that the national cheque clearing system would be phased by 2018.

The banks insisted 'only a few' used them and plastic was the preferred method of payment, but the truth is that cheques are more expensive for banks to administer and it was nothing to do with the number of cheques - around 1.1 billion - which are written in the UK every year. The reduction reflects the high street's decision to stop accepting them at tills, but some small shops continue to welcome them.

I have a cheque book and although I don't use it as regularly as I once did, I still use it to send money to various children for birthdays and Christmas and to pay local bills.  The demise of my cheque book would not be filled by electronic banking or plastic, unless I spoke to each child's parent and asked for a bank account which could be used to transfer a small gift.  It wouldn't be worth the hassle.

However the Payments Council, having been soundly blasted by charities who very occasionally do represent their older client group rather than their own self-interests, has backed down.

Regularly older folk are having their lives disrupted by 'modern' technology overtaking many tried and tested methods, but the proposal to rid ourselves of cheques was just wrong.

How will the banks respond?  Quite probably by taking even longer to process a cheque. Forty years ago a cheque was cleared in 3 days.  After that time we were confident that the money was in our bank accounts.  Nowadays as soon as a cheque is presented the bank adds the sum to the relevant account, yet it can take up to a fortnight for it to clear. My bank states 'the usual clearance time is 5 working days' - note the word 'usual'. How strange it is that modern technology takes so much longer than the old-fashioned paper exercise of a few decades ago.

I see the banks reacting by making a charge for each cheque as they do with business accounts. Nevertheless I'm pleased my cheque book isn't to become redundant. A few children will be too.



RMcGeddon said...

SR. The banks have started writing to customers stating that their cheque guarantee cards will soon no longer guarantee their chequs. This is probably their underhand way of getting rid of cheques. Shops are free to accept cheques but the banks won't cover the cheque if it bounces. Previously the shop would get up to £50 irrespective of whether the cheque bounced as long as they had copied the card number and issue date etc.

Keith Ruffles said...

I'm glad cheques are being retained, too; they're a very useful way of sending money through the post relatively safely, for one thing.

You're right to highlight the length of time it takes for a cheque to clear. In this electronic age it could be transferred pretty much instantaneously but the banks like to sit on the money for a few days because they can earn a decent amount of interest on it. It's the usual kind of profiteering we've seen so much of in recent years.

But then I used to hate the banks before it became fashionable...!

Hamish said...

Couldn't agree more, subrosa, and good points made above by RMcGeddon and Keith Ruffles.

The banks have been milking the cheque system for years. Since the introduction of cheque-sorting equipment and automated reconciliation between banks, it is obvious that the clearing time could have been reduced.
The fact that the clearing time has been increased is sheer profiteering.

The puzzle is why the banks would want to kill the goose. I wouldn't rule out stupidity as the answer.
But I notice that automated bank transfers are taking longer and longer to process.

There must be bankers reading this blog. Would any of you care to comment on the public perception that you delay money transfers to benefit your coffers?

subrosa said...

Ah RM, I knew they'd react somehow. Haven't received a letter yet though. Will ask when I'm in next week.

subrosa said...

I've hated banks too for some time Keith. Years ago I received a letter from mine asking me to make an appointment with them. Worried, I did so and took time off work.

Was left waiting for nearly an hour then saw a youngster, possibly mid-twenties, and the 'interview' involved her trying to sell me a mortgage and insurance.

I wrote to the HO and told them if they ever involve me in such scams again I'll take them to court for harrassment.

subrosa said...

Auch Hamish, you don't expect a banker to comment do you? The answer is profit. We're not customers anymore, we're stakeholders. How I hate that label.

Strathturret said...

I'm something of an insider, at present. So pleased to be anonymous.

The banks back office systems are a mess. Their IT systems are a mess and (laugh) they can't afford to upgrade them.

Their solution to their problems are to make their mostly decent, poorly paid staff work harder, while they threaten them with dismissal if their performance dips.

Crinkly & Ragged Arsed Philosophers said...

We all loath Banks - and its not without reason.

However the pending demise of cheques is primarily down to the banks not wanting to have much to do with people. By people I mean both customers and employees.

The ubiquitous plastic is in their eyes far more efficient. Their 'holes in the walls' give 24hr service and can be tied in directly with automated check outs and paypoints; cutting employment at both banks and corporate service providers.

This's the Catch 22 for modern society, its governance and relationships with mega cartels of corporations. Technology creates profit for the few in control by making people redundant and leaves governments in a quandary in how to square the circle.

At the moment we have headless chickens claiming they're creating a balance when in fact they haven't got a clue towards a solution. Other than, just like the banks, they see people as the problem.

subrosa said...

Strathturret, I'm sure none of us will break your anonymity. :)

That doesn't surprise me about the IT. I was in the bank the other week and, once again, the lassie had to wait over 5 minutes to access my account. They've had the same computers for as long as I remember.

Now, the NationWide have no such problems. Maybe I'm just lucky when I go to see them.

subrosa said...

Governments don't like people either Crinkly. They certainly don't respect them in any way.

Strathturret said...

...and I forgot to mention offshoring as much as possible to India.

We really need some joined up thinking don't we. The banks need a decent ecomomy to prosper yet they wish to reduce staff and offshore as much as possible. If everyone does this...

Hamish said...

Thanks to Strath for popping his head above the turret.
Like me subrosa, you are tending to cynicism as you enter your prime. But we should resist it.

As Strath said, most bank workers are decent hard-working people.
As you said, the banks are in it for profit. I kinda knew that. All businesses are.

It is facile to blaim and demonise the people at the top of the banks.
The hard-working bank workers, if they have any ambition, aim for promotion. Perhaps even aspire to a top job. If they had a principled objection to banks as such, they wouldn't work for one.

Shock horror, I once ran a small business myself. It was work I loved doing, but if my company hadn't turned an honest penny, we would have ceased to exist.

subrosa said...

It's the heid bummers in banks who are to blame for greed Strathturret. Nothing to do with the lassies who work in the branches. They're just doing what they're told. I've no gripe with them but those in my local branch haven't smiled for a long time now.

subrosa said...

I think those at the top have grossly over-extended their businesses Hamish and I've no sympathy for them. They merged banking with playing with paper which has caused distrust from their customer base.

What they did wasn't an honest penny. It was putting the savings or honest folk at risk. It still is at risk because it's earning nothing for savers who expected a few bob for their loans.

Strathturret said...

As one who worked most of his life in'blue-chip companies' in chemical industry/pharma business I was shocked with how the bank I'm connected with deals with employees. Their HR practices seem to have been taken from the Victorian mill owners handbook. That's why the wee lassies behind the counter look so unhappy.

And the people at the top need wheelbarrows to cart away their earnings while lowly staff get no/or tiny pay increases.

And the guys at the top talk about 'role modelling'!

subrosa said...

I have to admit banking, like many businesses, is still male dominated Strathturret. The Nationwide seem to have a better balance but then it's a mutual.

Woodsy42 said...

Card payments can be automatically controlled and are instantly logged into the transactions database for perusal by HMRC, police, counter-terrorism and all the other helpful and altrusitic figures of authority who work tirelessly for our benefit*. Cheques are harder to control.


subrosa said...

Interesting comment Woodsy and something I wasn't aware of although I knew the police had access to details.

Many thanks.

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