Cheques to become extinct by 2025?
12 August 2005
The end could be in sight for cheques, according to Halifax. New figures show that cheque usage has hit an all-time low as people switch to other more convenient forms of payment such as debit cards.
New industry figures show the number of personal cheques written each year has continued to fall and based on the current rate of decline they could almost be 'extinct' within the next 20 years. The number of cheques written has declined each year since their heyday in the 1960s.
Key findings:
The number of cheques issued in 2004 was 2.1 billion — a reduction of 7% from the previous year. Business cheque use has also fallen every year since 1997, with companies switching to direct credits for salary and trade payments. The number of payments made by cheque has dropped from a peak of 3.7 billion in 1990 to their current level of 2.1 billion.
Debit card payments and payments made electronically and via the telephone or internet have clearly taken over from cheques. The increase in this form of payment has been evident over the last few years particularly as over 90% of salaried adults are now paid by direct credit to their bank account and 40% of state benefits are paid in this way. Based on the current growth rates of debit card usage there are likely to be well over 20 billion debit card transactions each year by 2025.
The latest industry figures from APACS show that there were over 3.7 billion debit card transactions in 2004 (compared to just 522 million debit card transactions in 1990) as shoppers abandon cheques as a way of payment. The introduction of Chip and PIN technology will have certainly contributed to the growth in debit card transactions and they are the fastest form of payment in the UK and are now worth in excess of £269 billion each year.
Meanwhile, the total number of banknotes issued by the Bank of England fell by 25% between February 2001 and February 2005, from 982 million to 735 million. Although the number of £5 notes issued each year more than halved to 107 million over the same period, the number of £10 and £50 notes remained virtually unchanged.
£1 and £2 coins continue to be popular. The Bank of England withdrew its £1 note in March 1988, due to its relatively short nine-month lifespan and decline in purchasing power, but notes of this denomination are still issued in Scotland and in the Channel Islands. The £1 coin was introduced in April 1983 and an estimated 1.4 billion of these coins are now in circulation. Although the first £2 coin was issued in 1986 to commemorate the Commonwealth Games which were held in Edinburgh, the Bank of England began issuing general circulation £2 coins in June 1998. An estimated 232 million £2 coins are now in circulation.
Peter Jackson, head of banking at the Halifax, said: "The use of personal cheques dropped last year for the tenth year running and customers now prefer quicker and easier payment methods. It is very clear that the cheque is no longer the main payment method and based on the current rate of decline they are likely to virtually disappear within the next 20 years. Cash and debit cards are clearly the preferred method of payment in the UK today."
