Electronic payments plan to reduce cash and cheques

16 Feb 2007

Ireland needs to move away from its outdated reliance on cash and cheques and begin moving towards electronic payments, an electronic payments expert has argued.

“If we have an archaic payments infrastructure it makes us uncompetitive,” said Barry O’Mahony, head of policy and development at the Irish Payment Services Organisation (IPSO).

The organisation, along with the Department of An Taoiseach, is co-ordinating the National Payments Implementation Programme (NPIP) which aims to reduce the dependence on cash and cheques in the Irish economy through the use of electronic payments and to ensure universal access to banking services.

Both parties are effectively acting as independent brokers, trying to bring various stakeholders together to address the issue. “This has an Ireland Inc agenda. There’s an onus on us too to create the visibility that something’s going on,” added Colm Butler, director of information society policy at the Department of An Taoiseach.

The background to this is that from next year the EU is to begin introducing the Single European Payments Area (SEPA), which will allow consumers and businesses to make and receive payments in euro, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of their location.

“SEPA represents an opportunity to take us out of the dark ages,” said O’Mahony. “My personal view is that every business in Ireland should have a SEPA strategy and cheques should not be any part of that.”

Ironically, Irish businesses – particularly SMEs (small to medium-sized enterprises) – lag far behind the State sector and the public when it comes to a continued reliance on cheques as a payment system. According to Butler, most Government departments use electronic payments, with the exception of some payments for welfare or agriculture in certain cases. “Consumers have walked away from cheques since 1997 when debit cards were introduced,” said O’Mahony, citing research conducted by IPSO last year.

Newer versions of online banking services are becoming more easy to use, he added. “The business community needs to know that the alternatives are attractive,” he said. “We can’t plug a product but we can promote a drive to a method that is electronically based,” said O’Mahony.

There are only three countries in Europe that still use cheques to any great degree – France, Ireland and Portugal. Some estimates put the cost of cash to an economy at €1.6bn per annum and O’Mahony believes that in Ireland’s case this figure could be higher. The amount of cash withdrawn at ATMs here, for example, is two and a half times the European average.

By contrast, Finland expects to be a completely cash-free society within 10 years.

The NPIP’s advisory group is an informal gathering of various government departments and representatives of consumer interests. Butler described the approach as “a gentle process of getting everybody pointing in the same direction”.

This year the group expects to conduct research into the impact of a reduced reliance on cash and to look at examples from other countries such as Norway and Finland which have similar populations.

Although the NPIP has been around since 2004, a significant milestone was the National Payments Conference which was held last December. This involved a range of interested and involved parties from government departments, academia, industry and community organisations.

The move to electronic payments won’t be an easy one and the programme sponsors acknowledged that one of the main issues is the number of people who do not have bank accounts or access to the internet. As such the aim will be to reduce cash and cheque usage in the economy rather than eliminating it altogether. O’Mahony and Butler confirmed that they hope to have made progress on the issue by the time of the next conference, scheduled for the end of this year.

By Gordon Smith