Cheques to become payable by smartphone photos

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a businessman sitting in a table using a smartphone

New technology means customers will soon be able to pay a cheque into their current account by sending a smartphone image of it to their bank.

It could just be a matter of months before trekking down to your local bank to pay in a cheque will be ancient history.

Under new Government plans, bank customers will be able to use their smartphone to send a picture of the cheque to their bank – good news for grandchildren sent a cheque for Christmas, shareholders sent dividend payments by cheque, and freelancers or tradesmen paid by cheque.

New technology

The Government's Treasury department has confirmed plans to use smartphone pictures to pay cheques into bank accounts.

The plan is part of legislation that will speed up cheque payments. Banks accepting photos of cheques would be able to cut cheque processing times from six to two days.

This is because "cheque imaging" does not require a hard copy of the cheque to be present at every stage of the paying-in process. That means that time spent transferring it between different banks and central clearing depots is saved, as well as reducing the overall costs.

Barclays plans to pilot the necessary technology early this year, with a full launch pencilled in for later in 2014.

Those without smartphone needn't worry though – customers can use similar technology at cashpoints or branches or continue to pay in paper as they do now.

Over the pond

"Cheque imaging" is already used in the US. JP Morgan Chase introduced the service in 2010, followed by Citibank and Bank of America.

JP Morgan Chase customers use a Chase mobile app, to snap a picture of a cheque and deposit the amount.

But as it stands at the moment the law in the UK states that the bank has a legal right to demand to physically see a cheque, especially if it is from a different bank, before it decides to honour it.

Will cheques be phased out?

Just a few years ago it looked like cheques would be consigned to history. In December 2009, the banking industry announced that cheques were set to be phased out by October 2018.

However, after a campaign by pressure groups the Treasury intervened in 2011, and the abolition of cheques ground to a halt.

According to the Treasury, cheques remain a crucial payment method with nearly £840bn-worth processed last year. This accounts for 10% of all payments made by individuals.

A total of 23 million cheques were sent as gifts in 2012, with surveys showing they are still the most trusted method of sending money through the post. Meanwhile, businesses accounted for more than 370 million cheque transactions in the same year.

The smartphone revolution

News that we will be able to use smartphone technology to deposit cheques has generally been welcomed.

John Allan, chairman of the Federation of Small Businesses, said it would encourage small businesses to accept cheques: "Many of our members, and their customers, still rely on cheques so will be pleased with the investment and innovation to ensure their continued use," he said. "Speeding up cheque payments into business accounts is to be welcomed as many find the current process frustratingly slow."

The Payments Council – which oversees the different payment methods on offer in the UK – welcomed the news too.

Chief executive Adrian Kamellard said: "Whether it's cheques, cards, electronic payments or cash the Payments Council believes that any innovation in the way we pay should be led by customer demand. UK customers already enjoy contactless technology on their cards; internet and phone payments at the touch of a button; and next year thanks to a Payments Council project it will be possible to transfer money safely from a mobile phone using only a mobile phone number."

Citizens Advice thinks the new technology is a good thing too. Chief executive Gillian Guy, said:"Cheques are an important, and sometimes vital, method of payment for many CAB clients. It's good to see plans to bring cheques into the modern age with digital imaging and faster payments, alongside continued use the more traditional paper cheques. It's important these developments don't bring extra costs or barriers for consumers."