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When only a cheque will do

by Gordon Madgwick, Independent Cheque Industry Consultant and previously Operations Director, Cheque & Credit Clearing Company

UCN Plus® ISF

Picture the scene. A payment needs making to a supplier. Mobile and internet banking is unavailable due to internet issues. Cash is not a secure option to send in the post. The local bank branch has reduced opening hours or is closed permanently. Step up the ‘good old dependable cheque’. Whilst the old adage, ‘the cheques in the post’ may conjure up intriguing cash flow manipulation techniques, it holds true that this payment method is a veritable treasure when it comes to financial control and business processes.

Whist the personal use of cheques has fallen in recent years as bank customers have opted to use other payment methods such as cards, online banking and mobile apps to make transactions, payments by cheque are still very important to many individuals, businesses of all sizes, charities and many other sectors. In 2020, at the height of the pandemic, 188 million cheques were processed with a value of over £230 billion. The cheque remains one of the most secure means of payment, and is certainly the only (non-cash) mechanism available where all that is known of the payee is their name, or their name and address.

Recent figures published by UK Finance; ‘Fraud the Facts -2021’ provide a definitive overview of payment industry fraud. According to the report, “Unauthorised financial fraud losses across payment cards, remote banking and cheques totalled £783.8 million in 2020, a decrease of five per cent compared to 2019. 

Banks and card companies prevented £1.6 billion in unauthorised fraud in 2020. This represents incidents that were detected and prevented by firms and is equivalent to £6.73 in every £10 of attempted fraud being stopped.” (Note: Cheque fraud prevented, same period, was equivalent to £9.51 in every £10 attempted. See below). 

Historically, in 2019, cheque fraud losses rose to £53.6 million, an increase of 161% compared to 2018. Fraud intelligence suggested this increase was largely driven by a number of high-value transactions targeting business accounts, with personal customers only accounting for a small fraction of total losses.  However, this raised the question of whether large firms need to enhance the security features on cheques to deter fraudsters. In 2019, over £550.8 million of attempted unauthorised cheque fraud was prevented, an increase of 152 per cent compared to 2018. This is equivalent to £9.11 in every £10 of attempted cheque fraud being stopped before a loss occurs. In 2020 prevention increased to £9.51 in every £10 attempted.  The cheque still remains a secure payment option when compared with other payment methods. 

Total 2020 Fraud loss totalled £1.26 billion of which 45% came from Card Payments, 38% Authorised Push Payments, 16% Remote Banking and just 1% from Cheque payments. In 2020, 185 million cheque payments were made. This represents less than 1% of the 35.6bn total payment volumes in the UK. 

The introduction of the Image Clearing System (ICS) in the UK, which replaced the paper-based cheque clearing system, allows bank customers to pay in cheques using an image rather than the paper document itself through Remote Deposit Capture (mobile and desktop/tablet cheque image scanning) or imaged at the branch. This use of the cheque image in the clearing system has provided customers with the benefit of reduced payment processing times from up to six days down to next working day receipt of funds.

Cheque security remains at the forefront of this innovation in cheque payment and clearing. Without the paper document to validate in the clearing system, fraudsters immediately recognised the potential to exploit a potential ‘weak link’ in transactions. The payment processing industry, banks and cheque producers fought back against such attacks with the implementation of Image Survivable Features (ISFs) printed on the face of the cheque to deter cheque fraud. These images, as the name implies, survive the cheque scanning process and remain on the cheque image into clearing where the cheque contents can be automatically verified against the data held in these encrypted features.

The introduction of ISFs, and work by law enforcement to target organised criminal gangs operating cheque fraud, has seen cheque fraud losses fall from the £53.6 million in 2019 to just £12.3 million in 2020 in value, (a 77% reduction) with a corresponding 56% reduction in the volume of fraudulent cheques.

This reduction in cheque fraud achieved with the introduction of ISFs, and the added security that these bring compared to other mechanisms, adds weight to the cheque’s position as the payment tool of choice for many. Charities, for instance, say that the cheque is vital to many of their customers, particularly the elderly, who feel uncomfortable using other payment methods. For many the idea of internet banking or mobile apps are anathema. Despite branch closures, the elderly often prefer the cheque as a payment method, feeling confident in the tangibility of the paper document in their finances. Indeed, the recent U-turn by National Savings & Investment (NS&I) over Premium Bond prizes paid by cheque shows the depth of feeling many have for the cheque. 

Premium Bonds are the most popular savings product in the UK, having been launched by Prime Minister Harold Macmillan in April 1956 and popular with older investors. In September, NS&I announced plans to phase out paper warrants – like a cheque – which are sent in the post to some Premium Bonds winners. It encouraged people to receive pay-outs directly into bank accounts, claiming that system was more efficient and that fewer prizes would go unclaimed. However, complaints from regular savers who were worried about the changes flooded in. NS&I chief executive Ian Ackerley admitted to MPs that the timing of the proposed change had been an error, so that in December 2020, the plan had been put on hold. Now, in June 2021, it has been scrapped entirely.

It was this type of groundswell and reaction that also drove the Payments Council back in 2011 to announce that “cheques will continue for as long as customers need them”. The Payments Council had previously set a target for closing the cheque clearing system by 2018. However, they bowed to public pressure and listened to both the Government and many sectors in society as to the future of the cheque, with the members of the Payments Council committing to continue to provide customers with cheques ‘for as long as they are needed’. In 2015, this commitment resulted in the legislation, “The Small Business, Enterprise and Employment Act”, that created the Image Clearing System (ICS), an innovation promised as part of the move to bring the cheque into the 21st century. An innovation that has been seen to provide a new lease of life for the cheque.

As society in general relies more heavily on digital processes and applications, it is heartening to many that the introduction of the ICS has reinvigorated the cheque as a payment method. The digitisation of the ‘back-end’ cheque clearing process, allowing customers more choice in how they pay in cheque payments, either by remote deposit or in branch, has the added benefits of reduced payment processing times and greater security that will appeal to many as businesses open up following the COVID-19 pandemic.

This reduced clearing time has obvious advantages for the payee as funds are available sooner than the previous 6 days within the paper clearing system. However, an unseen advantage for the payer in using cheques comes when making large numbers of, say, relatively low value payments for items such as bonus payments, tax, insurance or utility refunds. According to The Times, “More than one in ten cheques sent to taxpayers by HM Revenue & Customs (HMRC) have not been cashed.”

“Responding to a freedom of information request, HMRC said that according to its most recent figures, it issued about 31.83 million cheques from 2015-20, 28.05 million of which have been cashed. This leaves 3.78 million cheques, almost all of which were for tax refunds, that have not been deposited in accounts.”

Even for an organisation like the HMRC, in the first instance bank charges mean that making a cheque payment may cost far less than those charged for making faster payments. But secondly, as many of these cheques are simply not presented, or are deposited many months later, this self-evidently improves their cash flow. However, it should be remembered that, despite the convenient 6-month cut-off date for cheque deposits made by banks, according to the Cheque & Credit Clearing Company, part of Pay.UK, who run the clearing system in the UK, “A cheque is valid for as long as the debt between the two parties (i.e., the person writing the cheque and the person they give it to) exists. In other words, cheques do not have an expiry date. However, it is common banking practice to reject cheques that are over six months old to protect the person who has written the cheque, in case the payment has been made another way or the cheque has been lost or stolen. This six-month timeframe is at the discretion of individual banks. It should not be assumed that cheques older than six months would automatically be rejected as the only definite way to cancel a cheque is for the person who wrote it to request that a stop be placed on it. If you have a cheque that you want to pay in that is more than six months old, your best course of action is to not pay it in and instead obtain a replacement from the person who gave it to you. Where there is a dispute, a cheque remains legally valid in order to provide proof of the existence of a debt for a period of six years, which is the Statute of Limitations.” The cheque remains a powerful payment method. The ability for a payee to make remote deposits digitally (should their bank allow it and provide the necessary apps) through the ICS can make it far easier for customers to deposit received cheques, even from the comfort of their own home. 

Digitisation is not restricted to the back end of the process though. Accredited security cheque printers, such as the TALL Group of Companies, whose members include TALL Security Print, Checkprint and DLRT, provide bona fide bank customers with the option of issuing cheque payments on their behalf. Using the TALL Send-A-Cheque™ service, customers supply, via secure data links, cheque data from which the TALL Group then print cheques, including the latest bank-recommended ISFs and either return to the customer, or post on their behalf. This type of service provides a digital option to hand-writing, or printing cheques in-house through proprietary software packages requiring pre-printed cheque stock, saving both time and resource for customers, many of whose finance departments have been remote working or furloughed as a result of COVID-19.

Once again, the cheque proves its value and flexibility in the modern business setting, and those detractors who seek to undermine its worth should do well to remember that any organisation, no matter what their size, typically relies on a steady cash flow to maintain its existence. Having a reliable, secure and efficient method of payment is essential. Whilst many organisations are set up and organised to embrace electronic payments and online transactions, there are many who prefer to use cheques for some or all of their business banking. The ability to make and receive cheque payments can still be the perfect payments solution, offering organisations a differentiator in their particular marketplace.

 Long live the cheque…

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The Return of ‘Blankety Blank’… a Firm Favourite

by Peter Thomas, Managing Director, DLRT Limited

Peter Thomas, Managing Director, DLRT Limited muses on the return of this 1980’s family favourite and the part played by the ‘good old dependable cheque’ in its making.

The recent news that the iconic ‘Blankety Blank’ game show was returning to our screens under the masterful Bradley Walsh brought back many great memories.

Originally a firm family favourite on the BBC back in the 1980’s under fellow Irishman, Sir Terry Wogan and again reprised under the always funny Les Dawson, the premise of the game was a fun quiz where a prize was a “Blankety Blank cheque book and pen”. As a family we sat and enjoyed it together, grandparents, parents, my siblings and I.

This was the heyday of cheques as a payment instrument in the UK. In 1990, over £3bn cheques were written annually. Now, as we progress through 2021 new digital and online technologies are slowly replacing the humble paper cheque.

The cheque though as a payment instrument dates back to the 1600’s in the UK and even further back in Italy. It has been a staple of worldwide payments since this time, being accepted as a mainstay of business transactions.  There are still many people today using cheques whether they are small businesses, charities or individuals making ad hoc payments. It continues to be simple and easy to use. It is convenient and secure. In 2020, volumes of the ‘good old dependable’ cheque were still in excess of 188m. The introduction of Image Clearing back in 2017 in the UK breathed new life into the cheque allowing a reduction in the payment cycle to two days using an image of the cheques rather than the paper document to transfer payments via mobile phone or via desktop scanning equipment.

Over the last few years as newer payment methods become more prevalent, the place of the cheque has been somewhat side-lined as a legacy or old technology much the same as is happening now with cash. We will be the lesser for it as we remove physical methods to online alternatives. The tangible transaction, the physical action of making a payment by cheque or cash still has its place. Sometimes an alternative, or even a back-up, is a good thing particularly as we see increasing levels of cybercrime, hacking and banking IT blackouts.

Back in 2017, the footballer Neymar was bought by the football club Paris St Germain (PSG) using a rather large cheque payment for €222 million. When we raise money for charitable causes, we present a BIG cheque. Indeed, the return of the TV quiz show “Who wants to be a millionaire” hosted by Jeremy Clarkson, I believe was the lesser for it when they decided not to present a cheque, an act ‘mocked’ by Clarkson in the first episode. The suspense, the jeopardy of physically holding a cheque for a substantial amount and potentially losing it was replaced to appear more updated, but not sure it worked particularly for older viewers.

A lesser-known fact is that DLRT’s sister company, TALL Security Print produced the cheques used in the original “Who wants to be a Millionaire” hosted by Chris Tarrant, and many of those Big cheques that continue to be presented today. As cheque experts, TALL have also developed the innovative patented security algorithms that are securing the next generation cheque that is being imaged through the banking systems in the UK today. Recent statistics (Fraud the Facts 2020) show that cheque fraud as a percentage is a fraction of that of other payment instruments at just 1% and is in fact reducing due to the introduction of bank-recommended image survivable security features (ISFs) on cheques.

Through the COVID-19 Pandemic when people were working remotely, TALL have been hard at work developing new and highly successful payment options to support our customers. The TALL Send-A Cheque™ service, for instance, allows businesses large and small to remotely make payments using TALL Group as a bureau and hosting service. Whether they are making refunds, paying dividends or paying suppliers, this service reduces administration and drives efficiencies but still uses the ‘good old dependable’ cheque as the payment method.

As banks continue to close branches on the high street, the introduction of remote deposit capture solutions (RDC) negates the need for Corporate and business customers to take cheques to the bank. Instead, they can image in real time thus maximising treasury control and cash management.

The cheque then still has its place. It continues to be more than a ‘prop’ for popular game shows. Under the Bills of Exchange Act, it is still a means of payment used by many. People should be allowed the choice to continue to make their own decision if they wish to make and accept cheque or in fact cash.

I am very hopeful that the producers and Mr Walsh recognise the continued significance of the humble cheque, its history and how robust it remains. The ‘Blankety Blank Cheque book and pen’ were as much part of that show as Terry Wogan’s fancy microphone.

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Digital Technology

‘Where do we go from here?’

by Lynton Buxton, TALL Group Marketing Manager

With news that the UK could face another six months of lock down, business leaders around the country will be understandably concerned as to how they can continue to keep costs to a minimum with potential falling revenues and business activity. Even those businesses that have made their premises ‘COVID-19’ safe will now be unsure about the numbers of staff who will be present on site with the new Government advice to ‘work from home where you can’.

Yet the economy continues, and businesses still have to perform day-to-day tasks. The pandemic has seen a tremendous surge in the use of digital technology whether for conference calling, e-commerce or business processing. Simple tasks like going to the bank to make payments or deposits have been replaced with electronic payments and digital banking. How many of us will return to the bank branch networks in the future will be hard to predict? The idea of visiting a branch, or using an ATM, will be too much to handle for some customers. As we become more used to using the emerging technology, contactless payments, on line shopping and remote cheque deposits have become second nature.

The ‘good old dependable cheque’ still has a place in our lives though. Whilst we may not be writing so many cheques and posting them to recipients, or getting in our car and driving to the bank, queuing to pay in cheques received. and then having our paper cheque scanned into the cheque image clearing system, we still need to make payments. The cheque has its use, and for many, is the familiar face of making a charitable donation, paying for a local service or sending ‘birthday wishes’ to young relatives. For businesses, the cheque is about managing cash flow, maintaining a corporate image and a part of an easily and tangibly reconcilable business transaction such as refunds, dividends and bonuses.

The use of remote deposit capture to process incoming cheques into a business has been the preserve of large businesses or those that process large numbers of cheques on a daily basis. Cheque imaging is still in its infancy in retail banking but, driven on by ‘lock-down’, bank customers are slowly realising the potential of using this digital technology to prevent unnecessary contact with the ‘outside’ world.

Certain high street banks have been slow to roll out this digital capability. Whether to protect branch networks, reacting to market forces, or simply hoping that the humble cheque will slowly disappear, the march towards the introduction of cheque imaging has not matched the uptake of other digital technology particularly during the pandemic.

 For businesses looking to continue with their ‘love’ of the cheque, help is at hand. Secure accredited cheque printer, Checkprint, a member of the TALL Group of Companies, can provide products and services to both receive and issue cheque payments. Checkprint’s award winning Banking Assistant is a cheque and cash deposit management system that supports customers receiving cheque payments, (and wishing to deposit cheques remotely, depending on the individual bank or building society). It combines a desktop cheque scanner to capture the image and details from the cheques with comprehensive software that then uses this data to create and balance your batch of receipts for banking together with generating a searchable archive of cheque data and images from the cheque scanner. By using Banking Assistant, companies can save both time and effort in recording cheque receipts, avoiding lengthy trips to the bank, and allowing electronic deposits to be made to corporate accounts remotely.

Checkprint has worked with banks for more than 25 years to provide their customers with innovative banking products. During the current COVID-19 restrictions, Checkprint has identified with the pain many organisations have endured as staff are working from home, furloughed or absent from the workplace. The Send-A-Cheque™ Business Cheque Service provides a secure outsourcing option for the production of Business Cheque requirements, including the addition of bank’s recommended Image Survivable Features (ISF’s), features designed to help prevent cheque fraud.

The Send-A-Cheque™ service can be easily accessed on a regular basis, for normal, contingency, disaster recovery or any ad-hoc situations, such as ‘lock-down’, that present themselves.

Send-A-Cheque™ allows customers to source securely printed infilled and signed business cheques without having to purchase and administer their own cheque printing software. In addition, Checkprint can save time and cost, with no capital investment in cheque infilling equipment, where relatively low volumes of cheques are required. Checkprint’s customers will have the peace of mind knowing that their business cheques will be managed and printed by an experienced team, on time, securely and trouble free.

Checkprint acknowledge the slow decline in use of the cheque but are offering corporate customers the opportunity to maintain cheques as part of their accounting routines. Even relatively low numbers of cheques (from one to several hundred), either received or to be sent, can be processed using Checkprint’s products and services. Under the new restrictions imposed recently and threatened to last for a further six months, is it not time to look at alternatives that can save both time and money, vital to organisations at the moment.

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‘Brexit is Looming’

by Peter Thomas, Managing Director, DLRT Ltd

While COVID-19 has rather overshadowed the UK’s looming departure from the EU, DLRT has ensured they are prepared for the potential impact of Brexit.

The back and forth posturing and brinksmanship by our politicians on both sides has begun to intensify over the last number of weeks as we drift towards another Red-Letter day at October’s end.

Personally speaking, I have been defined as a Cross Border Worker (CBW) under the terms of the Northern Ireland Agreement and freely access Northern Ireland daily from my home in the Republic. This is a frictionless and ordinary everyday occurrence which is carried out by more than 30,000 people, trucks and vans daily. However, I’m am now listening to what our hauliers and business leaders are saying about potential delays at ferry ports from increased form filling and how the availability of raw material is going to affect our supply chains. We have already seen shortages for certain goods and services during the COVID pandemic, will Brexit not make a bad situation worse? We have been working with our partners to make sure we have secondary and alternative supplies and that we are in possession of the facts on the ground with our European suppliers. We have ensured we have sufficient raw materials in a Vanilla state to mitigate delay and give us flexibility if required. We are lucky that we have space and that our raw material stocks are not perishable or date reliant.

However, personally, I am concerned that a ’No Deal, crash out’ will increase costs as WTO rates begin to bite and potential shortages appear in otherwise solid supply chains. Delays which I believe will be inevitable as both Blocs create Red Tape to justify their positions.

COVID-19 has created huge upheaval, misery and uncertainty for Global economies and its citizens. Locally here in Northern Ireland, we are a land bridge to Europe. We are protected by International Treaties. Uncertainty for our community is not what we need on top of everything else that has happened in 2020. Now is not the time for brinkmanship. Now is the time for ‘Big Gestures’ from both sides whether it is deferment or something else. Here’s hoping!

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COVID-19

‘COVID-19 – The Irish Experience’

by Peter Thomas, Managing Director, DLRT Ltd

While COVID-19 has rather overshadowed the UK’s looming departure from the EU, DLRT has ensured they are prepared for the potential impact of Brexit.

The back and forth posturing and brinksmanship by our politicians on both sides has begun to intensify over the last number of weeks as we drift towards another Red-Letter day at October’s end.

Personally speaking, I have been defined as a Cross Border Worker (CBW) under the terms of the Northern Ireland Agreement and freely access Northern Ireland daily from my home in the Republic. This is a frictionless and ordinary everyday occurrence which is carried out by more than 30,000 people, trucks and vans daily. However, I’m am now listening to what our hauliers and business leaders are saying about potential delays at ferry ports from increased form filling and how the availability of raw material is going to affect our supply chains. We have already seen shortages for certain goods and services during the COVID pandemic, will Brexit not make a bad situation worse? We have been working with our partners to make sure we have secondary and alternative supplies and that we are in possession of the facts on the ground with our European suppliers. We have ensured we have sufficient raw materials in a Vanilla state to mitigate delay and give us flexibility if required. We are lucky that we have space and that our raw material stocks are not perishable or date reliant.

However, personally, I am concerned that a ’No Deal, crash out’ will increase costs as WTO rates begin to bite and potential shortages appear in otherwise solid supply chains. Delays which I believe will be inevitable as both Blocs create Red Tape to justify their positions.

COVID-19 has created huge upheaval, misery and uncertainty for Global economies and its citizens. Locally here in Northern Ireland, we are a land bridge to Europe. We are protected by International Treaties. Uncertainty for our community is not what we need on top of everything else that has happened in 2020. Now is not the time for brinkmanship. Now is the time for ‘Big Gestures’ from both sides whether it is deferment or something else. Here’s hoping!

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The Brexit Issue

‘The Brexit Deal’

by Peter Thomas, Managing Director, DLRT Ltd

My comments are in no way a negative comment on the Brexit vote nor those who exercised their right to vote. Specifically Brexit for me relates to a , Hard border or not! Everything else is peripheral for me currently. I am sure other unintended consequences will arise.

I was originally asked for a comment on Brexit for a magazine article back in 2016.This is now early 2018 and we have run the gamut of emotions in terms of will there, won’t there be a tangible difference after 2019 deadline to the border status between Northern Ireland and the Republic of Ireland. Like so many others I watch news feeds, read papers and listen to experts, ultimately it will be down to the politicians to iron out a plan. I said at the time that business on both sides of the border doesn’t need added uncertainty or increased complexity.

As MD of DLRT in Lisburn Co Antrim, I commute daily from my home in County Kildare across a seamless border without issue or delay. The same is true for the products we deliver on a daily basis on behalf of ROI customers back into Southern Ireland and the An Post mail system. This activity I am sure is mirrored across many thousands of businesses using the virtual border daily on both sides.

The idea that the future border may not be as fluid or smooth as it has been for over a decade is a real concern. Whatever is put in its place needs to be technologically advanced enough to allow ease of movement of people, product and capital, delays will result in loss of competitiveness and increased costs .Customs Controls will create delays, introduce additional administration and bureaucracy .  

On a personal note it will also ruin a pleasant spin home.

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remote deposit capture

The Cheque Remains the Payment Tool of Choice

by Martin Ruda, TALL Group Managing Director

In light of the ongoing Fintech revolution, increasing accessibility to online banking, innovative third-party payment platforms, and the phenomenal growth in smartphones and their capabilities, the number of cheques issued by both businesses and consumers continues to fall. Figures from the Cheque & Credit Clearing Company (C&CCC) reveal that there was a 15% drop in the volume of cheques cleared (n.b. cleared, not issued), between 2015 (404,134,000) to 2016 (344,621,000). Adding items known as inter-branch and in-house cheques brings the number of cheques used to 644m in 2015, compared to 558m in 2016, being a reduction of 13%.

In response to this trend, the TALL Group of Companies recently conducted a detailed cheque usage analysis, and I wanted to take this opportunity to share this information with the readers of this blog. We have monitored the motivations behind customer cheque issuance applications within our Bureau Service, a cheque outsourcing fulfilment service, to understand for what purpose customers utilise cheques, this most traditional payment solution.

First of all, we discovered that the many businesses continuing to issue cheques were doing so in order to make primarily B2C payments, rather than B2B. When we examined the activity further, we were able to identify a number of specific payments types:

  • Insurance Claims Settlements

Many insurance companies continue to utilise cheques when issuing settlement payments to their policyholders.

  • Compensation

Similarly, many individuals receiving compensation payments will do so in the form of a cheque, including those receiving mis-selling settlements, or remediation payments for interrupted, late or failed consumer services.

  • Cashback Initiatives or Prize Giving

Cashback incentives continue to grow in popularity and are often distributed by cheque, as are the fulfilment of prize awards.

  • End of Agreement Payments

With many of us reviewing our utilities, mortgages, and other financial services in an increasingly competitive market place, it is a regular occurrence for consumers to receive an ‘end of agreement settlement’ upon switching service providers.

  • Dividend and other general payments

Company dividends are regularly distributed by registrars by cheque, as are ad hoc and emergency supplier and general payments.

Fundamental to this analysis are the reasons why organisations continue to favour cheques when making payments of this nature. Firstly, many of these businesses will only have limited personal information regarding the beneficiaries of the funds. It is not uncommon for companies to only possess the name and address of the payee – and in such a case the cheque remains the only method for fulfilling the transfer of funds. Whilst a bank transfer may see the recipient obtain their funds more quickly, in turn they must agree to share sensitive banking details, which is not always the preferred option, or even possible where no dialogue exists between payer and payee. In other cases the beneficiary of the funds will have just severed the relationship with the payer, and an arms length relationship is all that is available, or required. The cheque ticks that box.

One of the current downsides for consumers receiving cheques, particularly for small sums of money, is the inconvenience of cashing them immediately, with many not being cashed at all. However, the introduction of the widely anticipated Image Clearing System (ICS) will potentially allow them to activate these payments without leaving their homes using Remote Deposit Capture (RDC).

Once ICS is fully implemented, every bank will be required to clear all cheques on the image and data files alone, and no further paper cheques will be exchanged between banks in achieving the clearing process. With permission from their banks, individuals and businesses will be able to use RDC to scan their cheques, using a desktop scanner or smartphone, sending the image securely to the bank at a keystroke. This innovation will in turn give businesses peace of mind that those issued cheque payments can be quickly and simply cashed by their payees. In conclusion, whilst cheque volumes may decline further, many businesses and consumers will continue to realise the benefits of using the cheque as an effective payment tool, especially for the provision of those payment types outlined above. The introduction of ICS will also help to streamline the model, leading to efficiency gains for both issuers and their payees.

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integrated payments solution
Cheque scanners

Future Cheque Clearing Model Places Emphasis on Speed and Innovation

by Martin Ruda, TALL Group Managing Director

Cheque volumes in the UK may have dropped from four billion in 1990 to 644 million in 2014, however the introduction of the Future Clearing Model will modernise the payment method, with banks using digital images of the cheques to process all payments. Martin Ruda, Managing Director of the TALL Group of Companies, explains how this innovation will benefit the payments industry, businesses and consumers alike.

It is hard to believe that the cheque as we know it celebrates its 357th birthday this month. To put this into context the payment method was first used whilst England was still a Republic following Parliament’s victory in the Civil War. In fact the cheque had already been in circulation for several years before the Great Fire of London tore through the City’s streets in 1666!

The process for banking a cheque in the 17th century may have been somewhat different to that of today, but the basic premise has remained largely the same. However, this year the cheque industry will undergo the biggest transformation of its long and illustrious history with the introduction of the Future Clearing Model.

The Future Clearing Model

In preparation for an initial go-live in March 2017, the cheque clearing industry is committed to exchanging some cheque images and data, instead of a physical paper document, as the first stage of legislative changes laid out by the Small Business, Enterprise and Employment Bill. By the end of October 2017 all banks will be required to clear all cheques based on just the image and data files alone, and no further paper cheques will be exchanged between banks. As a result, the time taken to irrevocably clear a cheque will be significantly reduced from the current six-day cycle, an archaic timescale more suited to our 17th century cousins.

An emphasis on speed

I recently had the pleasure of listening to a presentation from Jane Bevis, the Independent Chair at the Cheque & Credit Clearing Company, who was discussing the Future Clearing Model. During her speech she said that, “the good old dependable cheque is set to become the innovative, new, dependable cheque”. I applaud Jane’s comment, and I believe that businesses, consumers and the payments industry as a whole will benefit from a modernised process for clearing cheques.

The key benefit of the Future Clearing Model will be the ease and the speed with which funds are paid from one account into another. Rather than waiting for the best part of a week, the new system will guarantee that funds will clear by the end of the next working day. However, under the new model, some financial institutions could choose to make the funds available even quicker than that, depending on the customer, their appetite for customer service and the amount being transferred. The clearing process could even be reduced to just a couple of hours and eventually be in near real-time.

Initially, I believe most banks will stick to the maximum timeframe of the new system (the end of the next working day), but as the model takes hold and the industry becomes more confident and comfortable with the implementation of the new technology, irrevocably cleared funds will be made available more and more quickly.

Even if near real-time cheque clearing becomes the norm, there is no customer requirement to make the cheque a competing payment instrument against mobile, debit and credit cards or e-payment tools. The cheque exists and persists because it serves a purpose for certain categories of user. This new clearing model has been put in place to benefit this host of users who prefer to use cheques. These are people who may be less comfortable with technology, prefer a physical paper document and a manual record of activity, require a payment method that accompanies a letter, or provides a detailed reconciliation to a payment request, and so on.

Further innovation

Moving forward, I believe the Future Clearing Model will also act as a springboard for further innovation as FinTech suppliers to the payments industry support the new clearing world by developing exciting new solutions that will further benefit financial institutions, businesses and consumers.

For instance, we have recently developed a new solution, TALL Group’s CheckMate™ (patent pending), that highlights potentially counterfeit cheques, as well as items that may have been fraudulently altered after being issued by the account holder. Using a range of automatic checks, including the invisible ultraviolet (UV) print content present in all UK cheques, the solution delivers a confidence level assessment of the validity of the item, removing any manual, subjective checking process at the very start of the reduced clearing time cycle.

Conclusion

The Future Clearing Model will be the catalyst for true modernisation and the cheque, whilst rich in history, is set to become more innovative, efficient, dependable and cost effective. The 21st century cheque will deliver benefits to businesses and consumers alike, whilst encouraging organisations to invest in technology-enabled innovations that deliver real value.

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The TALL Blog Page: Ethiopian Business

Ethiopia’s Burgeoning Economy Makes Secure Financial Transactions Essential

by Martin Ruda, TALL Group Managing Director

Africa’s economy has grown significantly in the last few years and even some of the historically poorest countries are really booming. Just recently, Ethiopian Finance Minister, Mr. Sufian Ahmed, confirmed that the expected GDP growth rate for the coming years in Ethiopia will be an impressive 7.5% p.a.

With this bright future many predict that this developing country will look to open its banks up to foreign investors. This is sure to generate international interest, as there are currently over 50 banks in Ethiopia. Coupled with the fact that it is now East and Central Africa’s largest economy by GDP, there are positive prospects ahead.

From an expert financial perspective, according to Mr. Zemendeth Nagatu of Ernst & Young, the overall size of Africa’s economy has trebled since 2002. This has led to more ‘middle class’ in Africa than in India and looking ahead it is expected that 75% of African countries will have achieved ‘Middle Income’ status by 2025. This means more disposable income in future for many ordinary Africans.

Measured by GDP, just four countries represent 61% of the whole of Africa’s wealth. These are Nigeria, South Africa, Ethiopia and Angola. Ethiopia’s population, at around 94 million, is second only to Nigeria – giving it the manpower to really grow and prosper across all kinds of industries. Not least the banking industry.

So, many other countries are recognising the emergence of Africa as a potential super power in the wider world. However Ethiopia is at the top of this pile and is grabbing every opportunity. Sheikh Mohammed Hussain Al Almoudi, of MIDROC Saudi Star Agricultural Development, says: “There is no turning back from modernisation in Africa – and Ethiopia is leading the way in this turn around.”

Martin Ruda FRSA, Group Managing Director of The Tall Group – the experts in secure payments systems and printing solutions for leading companies and organisations around the world – says Ethiopia has a lot to gain by making the most of this burgeoning economy and progressively confident banking industry:

“In the face of rapid growth and an increasingly financially literate population, the development of Ethiopia’s banking industry is critical to the country’s prosperity. However their financial transactions need to be brought up to date and made secure in line with world banking, which can easily be done with today’s secure payment technology.”

Current projects highlighted by The Tall Group include the standardisation of cheques to enable Truncation; whereby cheques are ‘electronified’ and the clearing process is achieved based on images and data exchanged, rather than the physical movement of the paper cheques around the country – making the whole process much more immediate and secure.

Ruda continues, “These type of transactions require collaboration across the banks and Ethiopia seems to be progressing well towards this goal. Cheque clearing times will be reduced as a result, and the opportunity for fraud diminished with the introduction of intelligent cheque scanners. This clever technology can automatically detect the presence/absence of Ultra Violet inks; thereby trapping counterfeit cheques and potentially preventing any alteration to the variable data on the face of the cheque.”

Technology like this will enable financial transactions in Ethiopia and across Africa to become more secure, enabling them to speed up processes and be taken seriously as an increasingly important player on the world banking stage. Ethiopia looks to be a leader in this drive for financial modernity.

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The TALL Blog Page: Africa Means Business

The Payments Challenges in Emerging Markets

by Martin Ruda, TALL Group Managing Director

As the world changes its perception of emerging markets beyond the now well-documented BRIC success stories, other regions such as sub-Saharan Africa come into focus and offer potential growth opportunities. So, what challenges does the payments community face not only in terms of applications and processes, but also operating in these countries and regions?

The IMF’s ‘World Economic Outlook’ indicators identify Emerging Market and Developing Country GDP growth rates well in excess of 5% over the next 2-3 years, at a time when the US is forecasting 3% and Europe 1%. Therefore, there are considerable opportunities to deliver effective and secure payment solutions that will support this growth and contribute to the local banking infrastructure.

In sub-Sahara Africa (excluding South Africa), where typically less than a quarter of adult populations maintain a bank account, the challenges and opportunities for payments innovation and implementation come in equal measure. The well-known success of the M-PESA mobile payment system in Kenya has yet to find comparable penetration elsewhere, as local conditions vary immensely from country to country, but in recent years the service has been rolled-out in other countries such as Tanzania and South Africa with varying degrees of uptake.

M-PESA allows users with a national ID card or passport to deposit, withdraw and transfer money easily using a mobile device. With about 17 million M-PESA accounts registered in Kenya, the service is a great example of a payment solution that has been developed to address local challenges and needs, but it should also act as a warning that a “one size fits all” approach is not necessarily the way when targeting emerging markets.

Cash and cheques continue to be the principal instruments although electronic, card and mobile are all accelerating. Barclays recently suggested that a ‘Pan-African approach for money transmission architecture’ was an achievable priority for them and may be established as a model for the future. Elsewhere, interesting work is being undertaken in the mobile space and ‘host to host’ services for corporate payments processing.

Meanwhile, as cheque truncation takes hold in Nigeria and Zambia, two of the fastest growing economies in the region, the potential to dramatically speed up clearing cycles through the use of cheque image processing is becoming a reality. This fusion of traditional payments methods and the application of proven, value-adding technology is typical of the transition that is taking place in emerging markets, where customer preference and continuous improvement are key drivers that can co-exist. There are certainly lessons to be learnt here, even for the ‘old’ economies and their payments environments.

The banking sector is undergoing considerable growth within emerging markets and with this comes a need for effective and secure payment solutions. However, there is a definite need to take a measured approach that takes into consideration local conditions and cultures to make the most of the growth opportunities that exist.

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