Countdown begins - one year to go until guaranteeing a cheque with a card becomes a thing of the past

The year-long countdown starts today (30th June 2010) to the closure of the UK Domestic Cheque Guarantee Card Scheme. This means that after 30th June 2011, it will no longer be possible to guarantee a cheque using a plastic card. To help businesses and consumers, the Scheme has today published two fact sheets.

Banks and building societies with customers who have cards carrying the cheque guarantee function - indicated by Shakespeare’s hologram or logo - will be managing its removal in different ways. Typically cards will be issued without Shakespeare’s logo on renewal: this may be before or after the closure date. This means that although Shakespeare will still be on many customers’ cards after 30th June 2011 it will be redundant. In all instances customers can still pay by cheque but just cannot use a plastic card to guarantee it.

Over the next year businesses still accepting guaranteed cheques are likely to be contacted by their bank to make sure that they are aware of the closure. Whilst a large number of businesses, big and small, have the ability to accept guaranteed cheques, research undertaken in 2008 showed that only about 350,000 businesses had accepted one in the previous six months, and most of those rarely.

The decision to close the Scheme was taken by the Payments Council in June 2009 in response to the long-term decline of guaranteed cheque use. It followed consultation with Guarantee users and acceptors, and concluded that it was in all parties’ interests to manage the Scheme’s demise in a coordinated fashion.

The Scheme was first introduced over forty years ago (in 1969) before debit cards, when no one left home without their chequebook, because cheques were the only cash alternative. The Guarantee was designed to give businesses certainty that a cheque wouldn’t bounce or be returned unpaid. Times have changed; the use of debit cards has grown thirty-fold from 1990, and now four in ten non-cash payments are made by debit card compared to one in one hundred being guaranteed cheque payments. The use of guaranteed cheques has been in rapid decline over the past 20 years. Their use peaked back in 1990; since then their numbers have dropped twelve-fold from 1.1 billion, to 88 million last year – making up only 7% of cheques written.

Closure of the Scheme is separate to the Payments Council decision to set a target date for closing the central cheque clearing in 2018. As the Council made clear at the time of its announcement, the closure of the clearing will only go ahead if suitable alternatives to cheques are in place and being successfully used by individuals and businesses, so that there are no circumstances where people are still obliged to use cheques.

Alternatives to guaranteed cheques:

• debit cards – 92% of cards carrying the guarantee are also debit cards. About a million businesses accept card payments and know that they should get their funds much quicker than if they accept a cheque.
• Cheques – the withdrawal of the Guarantee does not mean you can’t pay by cheque or that a business can’t accept one. Since 2007 cheque funds have been guaranteed* after a cut-off point which means that a cheque won’t bounce – providing the recipient isn’t a knowing party to a fraud – and it’s safe to hand over goods and services.
• electronic transfer – paying someone online or over the phone. Since the launch of Faster Payments in 2008 it has been possible to pay someone almost instantaneously, 24 hours a day and seven days a week. Unlike a cheque, businesses don’t have to wait several days to get their money: you can pay anybody from your window cleaner to someone with a stall at a craft fair in this way.
• Cash – cash will always have a place, about a third of all retail spending is still in cash.

Of the 1.3 billion cheques written in 2009, only 7% (88 million) were guaranteed. Four million customers regularly used guaranteed cheques in 2009 but often the Guarantee is not an essential part of the transaction. For instance customers often put their card details on the back of a cheque when they are posting it to a business but, in fact, the Guarantee can only apply if the customer is physically handing the cheque over. Last year 69% of customers did not write a guaranteed cheque at all. Use of guaranteed cheques has fallen by 65% over the past five years. This sharp decline is the result of many businesses taking the decision to no longer accept cheques.

In the research conducted as part of the Payments Council review of the Scheme, only a quarter of all businesses, around 350,000, said that they had received a guaranteed cheque in the previous six months.

At the end of 2009 58.6 million cards (59.9 million at the end of 2008) carried the Shakespeare logo that provides the Guarantee and shows the guaranteed amount. Three value limits exist: in 2009, 46.1 million cards had a £100 limit (79% of guarantee cards); 7.1 million had a £250 limit (12%) and 5.3 million a £50 limit (9%). The average value for a personal cheque is £268, outstripping the guarantee maximum limit. Even before the decision to close the Scheme over a quarter of all debit cards did not carry the guarantee functionality.

ENDS

For further information contact the UK payments industry press office on 020 3217 8316 or press@ukpayments.org.uk


Notes to editors:

*In Nov 2007 an industry-wide initiative known as 2-4-6 resulted in customers being given certainty on cheque funds for the very first time and maximum clearing timescales for cheques being established. More information is available from www.chequeandcredit.co.uk/246/

The bank and building society members of the UK Domestic Cheque Guarantee Card Scheme are:

Airdrie Savings Bank	National Australia Group
AIB Group (UK) p.l.c.	Clydesdale Bank plc
Allied Irish Bank (GB)	Yorkshire
First Trust Bank	National Bank of Egypt International Ltd
Bank of England	Nationwide Building Society
Bank of Ireland	Northern Bank Ltd
Barclays Bank plc	Northern Rock plc
C Hoare & Co	Reliance Bank Ltd
Chelsea Building Society	Royal Bank of Scotland Group
Citibank International Plc	Adam & Co Plc
Co-operative Bank plc	Child & Co
Cumberland Building Society	Coutts & Co
Harrods Bank Ltd	National Westminster Bank plc
HSBC Group	Isle of Man Bank Ltd
First Direct	Royal Bank of Scotland (Gibraltar) Ltd
HSBC Bank plc	Royal Bank of Scotland International Limited
HSBC Private Bank (UK)	Limited Royal Bank of Scotland Plc
Lloyds Banking Group	Royscot Trust plc
Bank of Scotland	Ulster Bank Ltd
Bank of Scotland Banking Direct	Santander
Capital Bank plc	Alliance & Leicester plc
Halifax plc	Cater Allen
Lloyds TSB Bank plc	Santander UK plc
Lloyds TSB Private Banking Ltd	Standard Chartered (Jersey) Limited
UBS AG

The first guaranteed cheque was written in 1965, and the industry-wide Scheme was established in 1969, before many of us had a plastic card, and at a time when cheques were our main non-cash method of payment. The Scheme’s initial guarantee limit 40 years ago was £30; today there are three limits of £50, £100 and £250. Since 1 October 1990, the common identifier on all cards with cheque guarantee functionality has been William Shakespeare, and his image is used within the cheque guarantee hologram or logo on all cheque guarantee cards.

The logo below is an example that appears in the hologram on cards that are part of the Scheme. Copies of the logo are available from press@ukpayments.org.uk