Retailers stopped accepting cheques several years ago as consumer preferences shifted from paper to plastic. Many feared that the final nail in the coffin for cheques came when the federal government announced plans to phase out cheques 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 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.’
Death of cheques may be premature
Cheque use has been declining at a rate of 5 percent a year for the past decade, according to the Canadian Bankers Association, but even so, Canadian financial institutions still processed nearly 1 billion cheques last year.
We need 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.
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That’s why cheques will be around for a while yet says Charaka Kithulegoda, Chief Information Officer at Tangerine. Kithulegoda believes it will be a gradual thing much like the demise of the payphone.
“Payphones didn’t just disappear overnight,” he says. “It took a decade or more, and you still see the odd one around today.”
Mobile cheque deposits
Last spring, a joint initiative of credit unions across the country, 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 remote 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 remote deposit capture was introduced, the online bank’s email money transfers outnumbered mobile cheque deposits three-to-one.
A year later, the number of mobile cheque deposits now 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.
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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 payment network of bank machines and debit terminals, launched email money transfers in 2002, it offered a new way to send money with just the recipient’s e-mail address or mobile number.
Teri Murphy, senior manager at Interac Association, says the service has grown by an average of 47 percent 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.
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Finally, you can write post-dated cheques to pay for recurring expenses like 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 account for 40 percent of all payments made in Canada (in terms of dollar value) and won’t disappear anytime soon.