For small businesses, it's also hard to see how you replace the value of being able to fedex a check to a new vendor. Online payment works in places where both companies are established and have a relationship, and less well elsewhere.
I know this is UK and not US, but is there something I'm missing about how business works in the UK?
How do you figure? Here in Belgium cheques have been phased out decennia ago, to the point that I have never had a cheque-book. To pay a vendor, new or old, I just transfer money onto their account. What's the benefit of the cheque?
The only cheques I see are the royalties I get from some US publishers that refuse to do bank transfers. They cost like $30 to cash, because after I receive them in the mail and bring them to my bank, the bank uses a secure courier to fly them back to the US, where their sister bank cashes them, and wires the money to Europe. Madness.
The UK enjoys free banking for people - free transfers, direct debits, automated payments, etc. Transfers show up in a couple of hours to most other bank accounts. Even businesses get most of that, including free banking for a year or 2.
Most 'bills' - water/gas/electric/cable/mortgages etc are all setup and automated electronic transfers - direct debits. (free of course)
Giving out your bank details to allow someone to pay you is fine and secure.
The need for cheques in the UK is incredibly small now.
Also, sure - people will probably still use cheques "for show". On things like charity TV programs we'll still see the big oversized cheques showing how much they raised. But it's just for show. The money is all sent electronically.
Possibly not for much longer, it was all possible because of overdraft fees etc that people are trying to weasel out of paying. In most of the rest of the world, you pay a monthly charge for even having an account and getting an overdraft is a much bigger deal.
http://www.guardian.co.uk/money/blog/2009/nov/24/bank-charge...
Thankfully they ruled that if you go over your agreed overdraft limit, the bank can charge you what they like.
Sanity prevailed.
I also do not buy the 'that's why bank accounts were free'. Consumer banking has always been free in the UK. Before consumer overdrafts/charges were common. I believe it's more than covered by the cost of business banking.
I think it's a much better system - consumer banking free, business banking paid for. The original freemium business model.
No, it hasn't. Charges for writing cheques, withdrawals, etc were common at one point. I remember the switch to free banking in the UK when I was a child - not having to pay anything to use your bank account normally without going overdrawn was a big deal at the time.
In most of mainland Europe everyone pays everyone through online banking. In Denmark people put their account details on their web sites and letterheads.
There is really reason why you couldn't do the same here even with first time vendors. Except that some banks make it really hard to do.
My old bank Wellsfargo had me sign up for something called I think DirectPay where you could do it easily. But my new bank CitiBank make it just as easy as in Europe from both my personal and business accounts to send money.
This love afair of checks that American business has is all about float and frankly I am incredibly annoyed that all my clients insist on paying me by check.
Do you have any links about this? I don't like to think we have clients unintentionally breaking the law.
Here's the guidelines (in Dutch): http://www.vbo-feb.be/files/ondernemingsnummer.pdf
So the website needs to contain the company registration number, the way it's incorporated and a bunch of other stuff, but not the bank account number afaics. Though the bank account number does need to be displayed on invoices.
Seriously though, wire transfers have become very efficient, simple and effective, and- i predict by 2018 - free. the FPS (faster payments service) can make transfers between accounts of different banks happen within 5 to 10 minutes or less. Whilst you and I know that it really only takes a few seconds to do a SELECT, UPDATE and an INSERT, the complexity of settling transactions takes longer, so having it all done within a few minutes is a boon.
The one disadvantage about the removal of cheques is that it'll be basically impossible to delay payment now... whereas you used to be able to say "The cheque's in the post", now you can't really pull that off.
My parent business is small and almost all their clients (Schools and institutions) pay by cheque. It's the easiest way for the schools to pay, if they have to do it online I doubt my parents will see the money for weeks :(