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Costs to rise for small firms as cheques are phased out
Small businesses already struggling with cashflow pressures and lack of access to bank loans face a triple financial whammy as cheques are phased out and they are forced to use electronic payments, warns Geoff Holland of the British Cheque & Credit Association (BCCA).
There were 1.4 billion cheques written in 2008 but the UK Payments Council, which is effectively controlled by the banks, has confirmed today (16 December) that it is aiming to phase out the national cheque clearing system by 31 October 2018.
"The majority of our 800 members are small firms with few staff, and they will see costs rise as they have to spend time and money introducing new electronic payment systems," explained Geoff Holland. "Banks are expected to save around £200m per year in processing costs when cheques are abolished, but this is unlikely to be passed on to small firms.
"We also have significant concerns about increased fraud risks to small businesses if they have to rely on electronic payments. For example, not all online banking systems offer an online security device which will replace the need for two signatures on a cheque. Nor can companies always allow employees to pay bills electronically up to a certain amount without giving them access to all the company's bank accounts. The cheque clearing system provides a valuable audit trail, and is not vulnerable to IT problems or hackers, unlike company computer systems."
The BCCA is urging the Payments Council to look closely at the impact of phasing out cheques, particularly the problems of higher costs for small businesses and the likelihood of more fraud. In 2008 cheque fraud was only 5.9% of the total bank fraud reported, at £41.9 million. Online banking fraud was £52.5 million - up 132% compared with 2007 - and plastic card fraud was £609.9 million.
Added Geoff Holland: "The Payments Council should hold off agreeing a target date for the demise of the cheque until we have reliable alternatives in place that are widely accepted. Any replacement system needs to be convenient, easy and secure to use, for businesses, and their customers.
"People don't object to change if it brings benefits such as better service, but some major questions must be answered before we say farewell to cheques."
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The British Cheque & Credit Association (BCCA) represents around 800 businesses who offer customers third party cheque cashing facilities and other financial services. Members range from quoted public companies to sole traders, and provide a high quality service which helps customers to deal with temporary cash flow problems. www.bcca.co.uk
For further information please contact Jill Hulme on 07913 278514.
