10:30 pm - Monday December 18, 2017

eChecks to replace paper checks

Setting:

In Dec 2009, UK’s Payments Council has decreed that Cheques will be phased out  by October 31st 2018 as paper cheques are in long term terminal decline. The Council has decided the time is ripe for the economy as a whole to reap the benefits of its replacement. However, small businesses, charities, individuals, elderly and disabled are not in favour of this announcement as they will still need to use a cheque. The Council has undertaken to work over the next nine years to promote and explain alternatives.

In Britain cheque use peaked in 1990, when an average of 10.9 million cheques were issued per day in 1990. By 2008 there were just 3.8 million a day. Cheques are very infrequently used in countries such as Sweden and Norway and their use is under review in Ireland, South Africa and Australia.

Reasoning:

Cheque usage has been falling by around 10% a year as debit cards gain ascendancy.

Solution:

One may consider replacing paper cheques by eChecks. These eChecks can be designed to accommodate needs of individuals and entities that might prefer to settle transactions through a mechanism other than cash.

Some salient features of echecks could be:

  • They would be issued in electronic format
  • The format may be provided by the bank
  • They may be numbered appropriately to identify, bank, branch and account number
  • The numbering can be alphanumerical too
  • They may be uniquely authenticated by the account holders with their digital signature; even biometric authorization can be accepted
  • They may be dated as at present (pre dated, current dated and post dated)
  • eChecks may be stopped for payment before actual payment as at present
  • eChecks may be made user friendly in internet banking as well as mobile banking
  • Records may be maintained by the banks of all such eChecks handled by the banks
  • There may be echeck clearing mechanism too.

The financial technology is there to take care and meet the requirements of these changing times.

Do you have any worries?

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