The displacement of cash by alternative payments is not a new thing

Issue 168 (Online) | 4 September 2021

A few days ago we were pleased that LINK (the UK’s ATM scheme) published our cheque pointers article - you’ll find the whole piece here: The displacement of cash by alternative payments is not a new thing.

Here’s a bit of cheque history that introduces the full article:

Innovation at a pedestrian pace

Bills of Exchange began to be used as an alternative to cash for domestic payments during the 17th Century. The earliest surviving cheque printed with the name of the issuing bank is dated 1759 and was drawn on Messrs Vere, Glyn & Halifax.

Innovation followed, albeit at a somewhat pedestrian pace, after 52 years The Commercial Bank of Scotland is believed to have been the first bank to issue personalised cheques and 19 years later customer demand led to the Bank of England issuing bound or stitched books of 50, 100 or 200 cheques.

From these humble beginnings, cheque usage grew over three centuries as the cheque took centre stage as the pre-eminent non cash payment instrument.

Cheque volume growth in the 1970’s was between 4% and 10% per annum but during the 1980’s growth had reduced to between 2% and 6% per annum.

Share Payments:Unpacked

Peak Cheque

Peak volume was reached in 1990 following 30 years of rapid innovation which included the introduction of MICR reader / sorters (1962), the introduction of cheque cashing cards (1965), the launch of cheque guarantee cards (1966), abolishing cheque stamp duty (1971) and an increase in the cheque guarantee limit to £50 (1977) which was followed by a further guarantee limit increase to £100 and then £250 (1989).

In 1990, 4 billion cheque payments were made. Of these, 2.5 billion were cleared through the inter-bank clearing managed by the Cheque and Credit Clearing Company, the remaining 1.5 billion being in-house cheques which were either paid into the branch on which they were drawn or processed intra-bank without going through the clearings.

A steady but profound decline

In the 30 years since the 1990 peak cheque volume, there has been a steady but profound decline in cheque use. This rapid decline is brought into sharp focus by the latest published cheque data: in the 12 months to June 2021 only 173 million cheques were processed representing a 26% reduction in volume and a 34% reduction in the total monetary value of the cheques.

With 330 years of cheque growth, followed by 30 years of decline to a point that cheques are on the cusp of becoming an historical artefact can the humble cheque predict a likely pattern in the future use of ATMs?

After a long and illustrious career

After a long and illustrious career, the use of cheques is in terminal decline however the humble payment instrument offers some insights into the challenges that cash will face as it too experiences declining use.

You’ll find the whole article here: The displacement of cash by alternative payments is not a new thing.