Cheques to Stay Following Push from Community Sector

An industry investigation into the future of cheques in Australia has found that there is currently no need to consider closing Australia’s cheque system despite its irreversible decline, after significant advocacy from the Not for Profit sector.

However, the report by the payments industry self-regulatory body, the Australian Payments Clearing Association (APCA), says there is a need to address the challenges presented by persisting cheque use and proposes a number of measures to help assist current cheque users participate in the emerging digital economy.

The report follows an extensive public consultation process undertaken by APCA over the last 12 months including submissions from dozens of Not for Profits and peak bodies including ACOSS, Council on the Aging and the Fundraising Institute of Australia.

The report says that over the past decade cheque use in Australia has dropped by more than 60% in favour of more efficient electronic alternatives. APCA conducted the consultation to ensure that as cheques become scarcer and inevitably more difficult to use, community payment needs continue to be met.

The report confirms that on current evidence there is no need to consider closing Australia’s cheque system despite the irreversible decline of cheques.

Instead, it says Australian cheque providers and users can continue to make their own choices about replacing cheques with electronic alternatives. APCA concludes the market for payments is sufficiently flexible and responsive to user needs that providers can continue to offer cheque services as long as there is demand.

APCA CEO Chris Hamilton said: “We believe competitive forces will see providers and users make their own decisions about cheques, but as volumes continue to drop, cheques are likely to become a niche service. Our plan is designed to manage the transitional challenges that this will present.”

Already, the average cost of cheques to the community is estimated at $7.69 per cheque, as compared to less than $1.21 for each electronic payment, according to the Reserve Bank.

The report’s Recommendations and Commitments include industry collaboration to enhance the payments system to support emerging payment products, deeper engagement with government and stakeholders to address existing barriers, and efforts to boost public awareness of the benefits of electronic alternatives, and how best to access these alternatives.

Research commissioned by APCA found that 75% of Australians no longer use cheques.

However, 5% of people believe they would struggle to find an alternative to using cheques.

APCA found those groups of Australians most likely to be affected as cheques continue to decline are the aged, those living in rural and regional Australia and Not for Profit organisations.

According to APCA, access and usability issues that make it challenging for these groups to move away from cheques also make it difficult for them to share in the benefits of the emerging digital economy. Both the payments industry and Government can do more to make this easier.

“It is clear that the issues affecting cheque users can’t be viewed in isolation. Industry needs to work with policymakers and stakeholders to ensure our payments system enables access to the digital economy for all Australians,” Hamilton said.

In June 2011, APCA commenced the ‘Have Your Say’ public consultation process to ensure that as cheques becomes scarcer and inevitably more difficult to use, community payment needs continue to be met.

In submissions to the APCA, community groups representing the elderly identified that cheque use persisted due to the perceived safety of cheques, lack of computer literacy,
and the needs of the elderly for whom cheques provide a degree of financial independence.

Any increase in the cost of cheques to users was also raised as a concern, given that many cheque users are on fixed and low incomes.

It says the vulnerability of the elderly and, in particular, those whose mental or physical capacity is compromised, was raised as a series of related issues.

One issue was that cheques could be initiated without leaving home, where alternatives such as withdrawing cash from an ATM exposed elderly persons to a greater likelihood of physical harm.

Similarly, it says cheques afford a degree of protection for the elderly by enabling them to direct specific payments to particular payees direct without relying on third parties to access their accounts. This is particularly an issue when the elderly person is suffering from some form of physical incapacity, such as failing eyesight, that can make use of internet banking difficult.

A related issue concerning explored in the report was the use of cheques by the elderly is that organisations, such as charities and church groups, often rely on donations from these individuals for financial support. One body representing fundraising organisations noted that many of its member organisations rely on cheques for donations, with some organisations reporting that over 70% of their donations were paid by cheque.

In addition, it says welfare organisations noted that their clients who were itinerant and homeless often have no established banking arrangements and can only be paid by cheque. This includes recent arrivals to Australia who are without a bank account and with little experience of banking.

The report says often welfare organisations use cheques to make emergency payments and offer no or low interest loans for the purchase of essential household goods.

“The Decline of Cheques: Building a Bridge to the Digital Economy” is available at www.apca.com.au.