Cheque-ing out


7 Apr 2011

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Ireland’s reliance on cheques is slowing down businesses, but moving on won’t be easy. Laura O’Brien looks at what we can do to make the leap to e-payments.

Ireland is one of the heaviest users of cheques in Europe. Some 78pc of all transactions in the country are cheque-based at present.

Cheques in Ireland came to one-tenth of the value of all cheques written in Europe in 2008. In 2009, 102m cheques were written in Ireland alone.

Relying on this slow payment system has numerous drawbacks. Many Irish companies are forced to wait 60 to 70 days for payment from customers, thanks to the old ‘the cheque is in the post’ excuse, impacting on both businesses and employees.

There is a lot of talk about moving away from cash and cheques to new forms of payment, such as online business-to-business payments, contactless credit cards or new technologies like near field communications (NFC), which convert a mobile phone into a mobile wallet.

Issues to resolve

Paul Rohan, head of product management and global treasury services at AIB Capital Markets, points out that while these developments are exciting, issues like technology standards, cross-border standards and the Single European Payments Area (SEPA) need to be resolved first.

"We can merely hope that Irish entrepreneurs investing their efforts in this exciting space are successful. However, Ireland has a degree of control over unexciting factors such as our national adoption of modern international payments standards.

"In crude terms, we want Irish entrepreneurs to be able to test and perfect the first phase of their innovative products in the newsagents of Dublin and Cork – and then immediately be able to scale up and sell their tested products into the newsagents right across the single EU market without any localisation problems.

"Based on current timetables, the building blocks of common EU electronic payments standards through the SEPA programme will all be in place by late 2014. As such, I expect to see the first wave of mobile payments technology innovations using common EU standards being aimed at 300m consumers across the EU around that time," Rohan said.

A move into secure electronic payments is not only important to help us move with the EU, but to reflect our smart economy. Global internet e-commerce giants such as eBay, PayPal and Amazon have set up headquarters in Ireland. With such strong technological ties, Ireland should be at the forefront of embracing efficient, secure e-payment systems.

Indeed, by stubbornly sticking to outdated payment methods such as cheques, Ireland could be left behind as the rest of the world moves forward with innovative payment methods.

O2 Ireland sees the e-payment sector as an interesting area to introduce its own products using its technological background.

"We see the financial services as a really exciting area to bring our two pedigrees of customer service and product innovation together," said Aideen Chambers, head of financial services in O2 Ireland.

"If you look at the synergies between mobile and money, such as e-wallets and near field communications, we really see this as an opportunity for O2 to play a significant role in this area."

E-payment product

The company recently released the O2 Money Card as a start into moving into financial products. By topping their card up, people can pay for goods anywhere they see a Visa sign, providing a card-based payment solution without letting them spend more than they own.

"From a control point of view, customers can only spend what they have on their card so it really allows them to manage their day-to-day spending and budgets," said Chambers.

She agrees that Ireland needs to move on from cheques to more modern forms of payment.

"Ireland’s attitudes towards cheques is very interesting: we’re one of the highest users of cheques in Europe," said Chambers.

"Common sense would tell us it’s probably not the most efficient form of payment either for the payee or the payer."

Moving on will not be easy. We can’t simply drop cheque payments overnight, as many vulnerable groups, such as the elderly, will be impacted greatly.

If Ireland is still so attached to this payment system, how can we let go of cheques and enter the electronic payment world?

"It’s a personal view, but I think Ireland needs something along the lines of ‘Decimal Day’ in February 1971 or ‘Euro Notes and Coin Day’ in January 2002," said Rohan.

"Nothing concentrates minds, improves communications or helps the optimum use of resources like a firm, well-judged deadline.

"Of course, there are always the important issues of financial inclusion and education to consider and factor into these plans. However, just like the tax on plastic shopping bags and the banning of smoking in pubs, sometimes it’s best to just pick a date and go for it. A well-managed project with good communications and education should relieve much of the perceived pain," said Rohan.