Reports on the death of cheques premature
Technology has yet to solve paying for recurring expenses such as rent and school fees
Many feared that the final nail in the coffin for the cheque came when the federal government announced plans to phase them out for Canada Pension Plan payments and tax refunds by April 2016. After that it will be direct deposit only.
But reports of the death of this ancient banking device, a form of which was used in India in 300 BC, may be premature. It is still alive and well in the electronic age, even though you can now email money to your kids or landlord and use your phone to deposit an “e-cheque.”
Cheque use has been declining at the rate of 5 per cent a year for the past decade, according to the Canadian Bankers Association, but even so, Canadian financial institutions still processed nearly one billion of them last year.
We use cheques to pay rent, donate to school fundraisers and sign-up for children’s activities. We write them to buy cars, put down deposits and pay contractors for renovations.
That’s why cheques will be around for a while yet, says Charaka Kithulegoda, chief information at officer at Tangerine, the renamed ING Direct. Kithulegoda believes it will be a gradual thing much like the demise of the pay phone.
“Pay phones didn’t just disappear overnight,” he says. “It took a decade or more, and you still see the odd one around today.”
Last spring, a joint initiative of credit unions, led by British Columbia’s Westminster Savings, launched “Deposit Anywhere,” a smartphone app that lets you deposit a cheque from your phone or tablet. Two months later, Tangerine helped bring cheque deposit technology to the mainstream when it introduced the feature for its mobile-banking clients.
Customers were slow to adopt the technology at first. In June 2013, the month when remote deposit capture was introduced, the online bank’s email money transfers outnumbered mobile cheque deposits threeto-one. A year later, the number of mobile cheque deposits outnumbers email money transfers two-to-one.
CIBC became the first of the big banks to allow its customers to deposit cheques with their smartphone, or tablet, when it launched its eDeposit feature last November.
President’s Choice Financial, pioneers of no-fee banking in Canada, has offered customers free cheques since entering the market more than 15 years ago.
The bank has seen a slight decrease in the number of cheques requested by its customers, but they are still a popular option and will continue to be offered free, says Michelle Reidel, a public relations manager at the bank.
PC Financial is planning to introduce mobile cheque deposits this year. Other banks are expected to follow suit.
When Interac, the association that operates a national network of bank machines, launched email money transfers in 2002, it offered a new way to send money with just an email address or mobile number.
Teri Murphy, senior manager at Interac Association, wouldn’t provide specific numbers, but says e-Transfers have grown by an average of 47 per cent over the last three years.
Tangerine’s Kithulegoda says banks charges between $1 to $1.50 to send an e-Transfer, while 100 cheques will only cost you between $40 and $50 upfront, or about 40 to 50 cents each. Most banks limit how much you can send by e-Transfer in a day, but with a cheque, you’re only limited by the amount in your bank account.
Finally, you can write postdated cheques to pay for recurring expenses such as rent and school fees, but at this time it’s not possible to set up recurring Interac e-Transfers.
“Sending payments from business-to-person, and vice versa, are a more complicated process and will take time to develop,” said Kithulegoda.
As technology improves, and consumers and industry accept the shift toward mobile and electronic payments, cheques will slowly go the way of the Dodo. But for now, cheques still make up 40 per cent of all payments made in Canada and won’t disappear anytime soon. Robb Engen blogs at boomerandecho.com. You can reach him at robbengen@gmail.com.