The traditional cheque has enjoyed an illustrious history since its inception in the late 17th century. From the establishment of the first clearing house at the Five Bells in Lombard Street circa 1770, to the production of the first personalised cheque book in Scotland in 1811, and the introduction of MICR in the US in 1959, the humble cheque remained at the very forefront of payment innovation for hundreds of years.
Whilst volumes have steadily fallen during the 21st century, the cheque is far from dead, and in fact, just fifteen months ago, this resilient payment instrument perhaps underwent its most significant revamp to date, as the first phase of the highly anticipated Image Clearing System (ICS) came into effect. This saw a clearing infrastructure put in place to accept and switch data and scanned images, in lieu of the actual paper cheque. As a result, cheques are ‘truncated’ (digitised) at the point of deposit, and are no longer transported during the clearing process.
ICS went live on 30 October 2017 with, initially, very low volumes, however, the number of processed items has significantly and steadily grown over recent months.
Since its introduction, industry commentators have overwhelmingly agreed that ICS has dramatically enhanced the efficiency of the cheque as a payment tool. For instance, by agreement with their bank, account holders can now submit images of the cheque they intend to deposit via a desktop cheque scanner or a smartphone app, whilst all items deposited on a weekday will be cleared by no later than 11.59pm the following weekday – a huge improvement compared to the previous 2-4-6 model.
However, whilst many banks and their customers are currently enjoying the convenience of ICS and faster clearing, building societies and their customers are generally unable to reap the benefits of the new clearing model. They will be unable to do so until sponsor banks finalise the functionality within their agency portals to allow building societies to submit digitised items into the new infrastructure.
From a building society’s perspective, this is a customer service goal still waiting to hit the back of the net, and an issue that needs to be resolved as soon as possible. The introduction of ICS in the UK will raise the expectations of the everyday consumer, however, whilst those banking customers are realising the change by scanning and electronically depositing their cheques, building society customers are generally still required to make the trip to the local branch.
On the whole, building societies are not able to enjoy a level playing field in terms of the level of customer service they are able to provide in comparison with banks. This problem is increasingly important when you consider just how mobile-savvy many everyday consumers have become, and their preference for utilising smartphone apps to carry out any number of everyday tasks – such as paying a bill, accessing a statement, reading the news, or purchasing online.
Secondly, the wait (sometimes more than a week) to access deposited funds - which can impact how a consumer manages their own personal finances - would be particularly frustrating for an individual customer who understands that mobile cheque deposit and branch cheque imaging (meaning faster clearing) are readily available elsewhere.
In conclusion, the introduction of ICS has been incredibly important for cheque users in terms of overall convenience and efficiency. However, whilst many banking customers are freely benefiting from this modernisation, building societies largely remain in limbo. These organisations are dependent on their sponsor bank’s appetite to develop, and roll-out the necessary functionality within their agency portals, so they too can exploit ICS and pass on the benefits to their customers. The availability of bank agnostic mobile apps to capture (an image), and deposit a cheque remotely, is becoming a reality. Banks putting these issues higher up their agendas will allow their partners to also embrace the new clearing world.