Scrapping Cheques will be Expensive, Warn Business Groups
Plans to scrap cheque payments could be expensive for small firms, business groups have warned, as business owners will be forced to buy chip and pin card machines as replacements.
Last year, the UK Payments Council announced plans to abolish cheque guarantee cards by June 2011, and cheques are due to be completely phased out by October 2018. The changes mean businesses will be forced to consider alternative payment systems such as chip and pin.
The Federation of Small Businesses (FSB) has warned that costs of such systems could be high. On average, chip and pin card readers cost around £30 a month to rent from banks, with additional charges per transaction. This means businesses could incur additional overheads of hundreds of pounds a year.
“Getting rid of cheques and cheque guarantee cards would hurt many small firms, particularly those in rural areas or small communities,”
said the FSB’s head of public affairs, Stephen Alambritis.
“To expect them to spend hundreds of pounds a year on a card reader at a time when every penny counts is not on.”
“Banks have a social duty to keep cheques and cheque guarantee cards as they are valued by both small firms and consumers.”
However, the UK Payments Council said that the use of cheques was in “terminal decline” and that the use of cheque guarantee cards had dropped by 70% over the past five years.
Forum of Private Business spokesman, Matthew Goodwin, said that banks needed to find an alternative to cheques, in order to make their phasing out more manageable for businesses.
“Around half of our members still use cheques and we fully appreciate that many individuals, particularly older people, rely on their chequebooks to make payments,” he said.
But trade body UK Payments Administration’s chief executive, Paul Smee, said that the target date was still a long way off, and businesses were not likely to see any “immediate changes”.
“The decision to abolish cheques followed extensive consultation with small firms,” he said. “A review has been set for 2016, before the final phase out goes ahead.”