A Sharp Decline: Cheque Usage In Britain

February 14, 2022
Although cheques are still used, usage continues to dwindle among consumers, businesses, charities and schools, research by Pay.UK suggests.

Although cheques are still used, usage continues to dwindle among consumers, businesses, charities and schools, research by Pay.UK suggests.

The once ubiquitous cheque has become an increasingly rare sighting in the UK. Back in 1990, more than 4bn cheques were written by consumers and businesses in the UK. Three decades later, this number had fallen to just 188m, and volumes continue to slide.

Nevertheless, there are still pockets of usage and it is widespread. According to scheme company Pay.UK, 44 percent of current account holders and 78 percent of businesses write at least one cheque per year.

The frequency of usage, however, is rapidly declining with three in five consumers and businesses now writing fewer cheques than they did three years ago.

According to the survey, two-thirds of current account holders and half of the businesses surveyed said that they now write fewer cheques because other payment methods are easier. The second most common reason cited by both consumers and businesses for writing fewer cheques is that recipients prefer not to be paid with them.

Meanwhile, the over-65s demographic are still the age group most likely to be writing cheques, but this is changing too. Three-quarters of this age group say that they use them less and almost half have now stopped using them completely.

For example, 51 percent of over 65s say they write at least an occasional cheque, but this is a marked drop from the 72 percent that said the same back in 2014. The pace of the decline in usage is also accelerating.

Why do people still use them?

Cheque usage began declining long before the pandemic, so much so that the then Payments Council (now UK Finance) announced back in 2009 a target to close the cheque clearing system by 2018.

It was a government intervention in 2011 that prevented this, with the trade association climbing down and stating that “cheques will continue for as long as customers need them”.

One of the questions that Pay.UK has sought to answer in its survey is why cheques continue to be used in the UK. It found that motivations varied depending on whether the user was a business or a consumer.

For example, the main reason that businesses claim to still use cheques is that recipients will not receive an alternative form of payment. A force of habit was the second most cited reason.

In comparison, security appears to be the main reason why consumers may opt to continue using cheques. Some 29 percent of respondents said that they feel it is safer than cash, 26 percent said that it is because it ensures it goes to the right person, and 25 percent said that it creates a paper trail.

Although usage is declining, a small section of businesses and consumers say they are increasing their usage. According to the survey, 7 percent of current account holders are using cheques more than they used to three years ago, while 17 percent of businesses say they are.

Nevertheless, there remains scepticism about the sustainability of cheques as a payment method going forward.

Half of consumers either think cheques will not continue as a payment method or do not know if they will. Similarly, although 37 percent of businesses think that cheques will continue to be used, 50 percent say they do not know or do not believe that customers will be able to use cheques for as long as they want.

Around the world

A decline in cheque usage is pretty universal. At the end of 2021, the Central Bank of the Bahamas began consultations with banks, credit unions and other payment services providers on a strategy to eliminate all use of domestic cheques by the end of 2024.

The small island nation was not the first. Finland eliminated cheques way back in 1993, while Denmark followed suit 15 years later in 2017.

In 2021, ING made headlines in the Netherlands when it announced that it would no longer cash cheques. It was the last bank to do so after Rabobank and ABN AMRO decided not to in 2020.

One of the reasons was fraudulent activity, a spokesperson for the bank said when asked why they had opted to abolish them altogether. The country had already stopped accepting personal cheques in the early 2000s.

In Australia, cheque usage has plunged more than 20 percent since 2016, and in the last decade, by 83 percent. Meanwhile, Kiwibank became the first New Zealand bank to announce it will stop processing cheques in 2020, and the country’s remaining banks followed suit in July 2021.

The last remnants of relevance for cheques are primarily in the United States, France and India. These three markets alone account for four in every five cheques written in 2020, according to VIXIO analysis. The United States, in particular, accounts for more than two thirds of all global cheques (69 percent), followed by France (7 percent) and India (4 percent).

Despite its global dominance, usage in the US is in decline. Between 2016 and 2020, cheques fell by more than a third from 17bn to 11bn. Data from the Federal Reserve Bank of Atlanta suggests that from 2015 to 2018, the proportion of consumers who state that cheques are their preferred payment method declined by 23 percent for bills and 8 percent for purchases.

Nevertheless, they are still used for critical social functions in the US. For example, the US government distributed welfare payments to its citizens via cheque during the COVID-19 crisis.

In the EU, France strikingly accounts for 85 percent of cheque usage across the region.

The next few years are likely to be a critical period for the cheque, whose origins date back to the third century BC. As usage continues to rapidly decline, expect to see more markets around the world announce an end to this practice.

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