Cashless in the Country

Cashless vents on banks’ reluctance to support legacy channels

Ask someone how they like to pay, and you’ll get enthusiastic stories about Apple Pay, Samsung Pay, contactless, tap ‘n go and all sorts of stuff. People recount their first time with a digital wallet with the same kind of giddy excitement that is normally associated with tales of first kisses. But ask them how much they know about payments and most likely you’ll just get a blank look followed by ‘How do you mean?’

The fact is, for the all the excitement that possesses the payments industry – and believe me there’s a lot – most people don’t get that excited about payment channels: what they are interested in is the thing they are buying, not how they are buying it. Use any of the new channels a few times and the stardust fades and you’re back to taking it for granted, just like you do with the universally accepted (not any more), immediate transfer of value that is the good old bank note.

Frictionless exchange – that’s what the payments industry calls it by the way, ‘frictionless’ – is the big thing about all of these new payment channels and technologies. Look at any conventional channel and there’s friction. Cash: friction – you have to physically go and get it or bank it; it’s slow and cumbersome at the point of sale; it’s not very secure; once you’ve got it it’s hard to change it back into digital for, say, an online transaction; it leaves you with annoying change to carry, and; it’s not traceable, hence its importance in the black economy. Cheques: severe friction (see below). Direct Debit: friction– Direct Debits take time to set up; they take time to clear, and; by definition they put a lot of the control in the transaction in the hands of the payee (seller) who can vary the amount without reference to the payer. Other kinds of payments, mostly B2B transactions, encounter all sorts of obstacles and slowdowns caused by systems conflicts and reconciliation issues where the money and the data that identifies the payment run on different rails (for now). All these instances of friction in the payments system create delay and frustration and, and while they may not cause chaffing or a rash, they do prevent people and businesses from accessing their money and … well … doing what they want with it.

The drive for cheque scanning

Chaffing aside, my most recent experience of friction was having to pay in some cheques. I know, don’t bother saying it: ‘Cheques?’ That’s so last century!’ And you’re right, cheque use is falling rapidly, with just 401 million payments made by cheque in the UK in 2018, compared with more than 1.3 billion in 2008. Like many cheques these days, these were gifts for the most part and they do lend weight to the old adage that it’s better to give than receive, especially if receiving means a 45-minute round trip to pay them in (thanks Nana). And, while my daughter’s mutual building society, Nationwide, allows you to pay in cheques simply by inserting your card followed by each cheque, First Direct, which used to be the big noise in banking innovation back when it was a teenager, requires you to fill out a paying-in slip – an actual piece of paper using an actual pen (if you can find one). Seriously? Hardly the stuff of digital disruption is it?

And don’t even think about paying in your jar of small change – you know, the one in the kitchen where you deposit your annoying pocketfuls and which is raided for extra pocket money by your kids who think you don’t know – until you can face taking them to a bank and brazening out the ill-concealed contempt of the teller and all the other customers as you clog up the counter for days with your incorrectly bagged change and your pathetic, self-loathing small talk.

To be fair, the staff in both branches were very smiley and pleasant, helpfully explaining to me that mobile cheque scanning (paying in cheques via a mobile phone) is definitely something that they are considering thinking about, in the future. HSBC, First Direct’s parent, along with some other big banks does offer this but its once-cool internet and phone-based subsidiary seems to think that no-one has elderly relatives anymore – or maybe they think we should all be too embarrassed to accept cheques?

I might add that the other transaction on that trip, paying 30p for parking, had been accomplished digitally in the time it took me to step around the dog excrement on the pavement – and that included my registering a different car on the payment app.

Paradoxically, it’s not just the First Direct that is dragging its heels with digital cheque scanning. Monzo, perhaps the biggest name among the pack of challenger banks, has announced that it has abandoned its plan to join the UK’s cheque image clearing system (ICS), saying that less than 0.1% of its achingly hip customer base have ever deposited a cheque. Instead it plans to focus on its business banking offer. Fine, it’s not like the established banks are exactly over-delivering to small and micro businesses.

Gateway drug

But I wonder whether both cool new banks and the more established brands are missing a trick by not supporting digital cheque scanning. While millennials and gen Z’s may struggle to get their heads round the concept of a cheque – though heaven knows why when they have embraced vinyl, cut-throat razors and pot noodle so enthusiastically – there are plenty of gen X and even baby boomers still to be brought into digital banking. Cheque scanning, like ‘weed’, could serve as a gateway to more hardcore, addicting and profitable aspects of the digital offer. It could actually help to accelerate adoption among the older, harder to reach demographic that watches Countdown and remembers an older, gentler time, when things seemed less hurried and people still covered their mouths when they yawned. It’s just a thought.

For me, writing a cheque has one singular quality: it’s the only time, save Christmas and important family birthdays, when I know for certain what the date is. Because, in this era of digital payments the date is always now, the time is always now and banks are always open. Unless you want to deposit a cheque.