Once again cheques in the UK are facing their demise, this time as a consequence of their being excluded from the New Payments Architecture project, or “NPA”.
This time it will be a slow and lingering death over a 10-15 year period, as investment is channeled into other services and the cheque service withers on the vine.
Ten years ago a specific project was announced to phase out cheques, which met with such resistance that its sponsor – the Payments Council – was disbanded, and replaced with the Payment Systems Regulator, the Payment Strategy Forum, UK Finance and NPA’s sponsor Pay.uk.
The actors change but the result does not. Pay.uk have issued their February 2019 NPA Programme Industry Newsletter, and in it they cannot quite disguise the extremely long timeline of the NPA project, in which the relationship between “NPA Core Go Live” and the migration of existing business is sequential and not parallel as their project chart infers.
This means that the project will not deliver very far this side of 2030.
The paragraph in the newsletter entitled “Transition of Back Book (Phases 3,4,5)” (or “Migration” to you and me) states that…
- “Following the launch of the NPA, a controlled migration of payments from legacy to the new real time and bulk architecture.
Pay.UK will consult with the wider community and industry in 2019 on the transition of bulk and multi-day transactions.”
In plain English this means that Migration will be slow and extended over several years, and can only commence once NPA Core has gone live in around 2024.
But worse than this is the self-awarded de-scoping: up to now NPA was meant to take over the processing of all non-card retail payments, including cheques.
Cheques would be cleared and settled through NPA without any need for exchange of the paper cheque itself, because cheques were supposed to have been de-materialised long before NPA came into existence, via the project to clear cheques as images and not paper. This is Pay.uk’s Image Clearing System project. It was self-evident that NPA would not clear and settle paper cheques, because the clearing and settlement would be via image anyway.
We now have two developments: firstly the very slow migration to the Image Clearing System, and secondly the get-out clause that Pay.uk has awarded itself about whether cheques will be cleared and settled through NPA or not. This doubt is delivered in the same paragraph quoted above: “We would also want to test the feasibility of including image-cleared cheques (ICS) in the future, should a business case for migration be identified.”
This echoes and socialises what is in the newsletter’s Introduction: “It [NPA] will take over the processing of Bacs, Faster Payments and, potentially, cheque payments”
We can derive Pay.uk’s attitude to cheques from the Board Minutes of their meeting on 7th November 2018 under para 210 “CEO’s Report” and para 211 “Legal Issues” where the progress of migration onto the Image Clearing System (“ICS”) system was discussed:
- Para 210 – “The Cheque Imaging Service was operational but lacked volume. This was predominantly down to issues being experienced by participants which were delaying the rollout”
- Para 211 – “It was noted that the current contract was shortly to expire and an extension was required as a consequence of the delays in the migration process to image clearing”.
Were cheques to be viewed as important by Pay.uk, a delay in roll-out of the new image clearing would have resulted in extra resources being devoted to it, and urgent extra oversight, with other projects being delayed until this project was back on track. Of course, because Pay.uk regards cheques as a sunset product they could not care less if it is late or if it happens at all. Their responses to the poor take-up of their own new service are to cast doubt on whether cheques will have any role in the UK’s retail payment landscape, and to place a burden-of-proof on proponents of the survival of cheques to come with a business case for image-based cheques to continue. This should be an unacceptable response, but those supposedly holding Pay.uk to account do not seem to have batted an eyelid.
The genesis of all the changes in the UK payments landscape that have resulted in NPA was the objection to the plan of the Payments Council (predecessor of Pay.uk) in 2009 to abolish cheques:
Ten years on and we are no further forward.