Cheque clearing for the 21st Century

Barclays instant cheque processing app which will speed up the time it takes cheques to clear and allow people to submit cheques by submitting scans from their smartphones. Credit: Professional Images

It was recently announced that the introduction of the new Image Clearing System, which will revolutionise how cheques are processed in the UK is almost ready to go live.

Cheques have been in use for over 350 years, but they are still a crucial method of payment with around 1.3 million written every day.  Cheques continue to be a valued and trusted payment method and are the preferred way to pay people in certain situations.  Research shows that over half of all consumers, 75% of businesses and almost 90 per cent of charities have written or received a cheque over the past 12 months.

That is why all of the players in the UK payments industry have been working hard to introduce cheque imaging. The new system will go live with some banks and building societies from 30 October 2017 and all banks and building societies will be using it by the second half of 2018. Not long now.

Customers will still write paper cheques as they do today and give them or post them to recipients in exactly the same way that they always have.  Cheque recipients will also still be able to pay in cheques in the normal variety of ways, however some banks and building societies are likely to offer their customers the additional option of paying in an image of the cheque by using a secure mobile banking app on their smartphone or tablet, rather than having to go to their bank to pay the cheque in. Great for people and businesses in those more remote and rural areas.

If paid in at a branch, an image of the cheque will be created by the bank or building society and it will be this image, rather than the actual paper cheque itself, that will be exchanged electronically between the relevant banks and building societies.

This is in an effort to reduce the time taken for a cheque to clear. The new system will speed up the time it takes a cheque to clear from the current six working days, to the next working day (bank holidays excluded).  Many banks and building societies are likely to allow customers to access their funds even quicker than this.

However, it’s important to know that the new process will also mean that when a cheque is paid in, not only will the recipient receive the money in their account more quickly, but the money will also leave the account of the person, business or charity that wrote the cheque to the faster timescale too.

The introduction of the new cheque imaging system will also make it easier for new challenger banks to enter the market with cheque products, which could help increase competition within the sector.  More competition means more choice, and this should lead to better products for cheque users.

Following the announcement of the cheque’s 21st century makeover, banks will need to reassure their customers that if they don’t want to change, they don’t have to. While some customers may want to use their smartphone to take an image of their cheque, it is accepted that many cheque users are very happy with the current process. The beauty of the new system is that customers can decide for themselves as to how they pay cheques into their accounts, but all will benefit from the faster clearing timescales.

This modernisation of the cheque will safeguard the future of cheques and will bring cheque processing firmly into the 21st century.