If you are one of the millions of people in the UK using cheques or chequebooks for paying or receiving cash you will know what a nightmare it is to receive payment by cheque, or to have to make payment using a cheque. Cheques often take absolutely ages to be processed, meaning you are more likely to lose track of it or forget it is even going to be subtracted from your balance a few months down the line. This is all set to change in a new UK government move to make the use of cheques easier. This blog focuses on the news that it will soon be possible to pay cheques into a bank account by photo. We discuss the pros and cons of paying cheques in by photo and whether this will be a useful service.
Paying in cheques by photo: what is involved?
Paying in your cheque by taking a photo of it is quite a departure from the way things are done now where physical receipt of cheques must be waited for by paying and receiving banks. The new regime requires a receiver of a cheque to photograph it and send the photo to their own bank, who will contact the paying bank once the photo is received and arrange for the money to be released electronically.
Processing time of six days
The average processing time for a cheque in the UK is six days. That means from the moment your bank receives a cheque it usually takes up to six days for the cheque to be processed and the cash to reach the payee. This does not include the time the cheque is sitting in a wallet or elsewhere waiting for the owner to take the time to deliver it to the bank for processing.
These figures highlight just how outdated the process of cheque use really is in the UK. It is no wonder people end up using the services of payday lenders like Wonga to get quick access to cash.
The new government plans to allow photos of cheques to be used in their processing will speed things up considerably, but how useful is this move likely to be and if we do move towards processing cheques in this way, will this new method work well?
Improving speed of processing
Proponents of using photos to process cheques argue that the processing time for cheques will be reduced to two days if photos are used as proof of receipt as this means that banks will not have to wait for physical delivery of the cheque in order to pay it. This is likely to make a big difference to people who receive a pay cheque on a Friday and have to wait until the following week to get it cashed. On the other hand, other commentators have raised to issue of possible fraud and argue that if we dispense with physical receipt of a cheque as proof of payment we are possibly inviting more cases of fraud. On balance though, cheque fraud is already happening and signatures may be forged every bit as easily as a photo may be faked. The increased speed of the transaction means that people who are the victims of fraud are likely to notice anything unusual or suspicious in relation to their bank balance and so be notified of any losses. Moreover, some have argued that the use of photos in paying in cheques will actually increase the security surrounding the whole process. When a photo is sent via a smartphone to pay in a cheque, the photo is not stored on the phone so if the phone is stolen there is no risk that the photo may be used fraudulently. In these days of digital signatures and virtual security it is extremely hard to fake a photo and some have argued that this is more difficult to do than faking a signature.
10% of people still using old style cheques
Recent research has suggested that as many as 10% of people making payments today choose to do so by cheque, so the new plans for photos as proof of a cheque are set to impact lots of people!
What is your view?
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Catherine Smith is a freelance blooger with ten years of experience writing in the banking sector. She has written widely on finance and money issues in several countries including the UK.