Banks forced to cancel cheque ban proposals

PLANS to scrap the use of cheques from 2018 were dropped yesterday after the UK Payments Council admitted there was no better paper alternative.

The body, which is made up of the major banks, said cheques would continue for as long as people needed them and the target for possible closure of the cheque clearing system in 2018 had been cancelled.

The council announced in 2009 that cheques would no longer be used by October 2018, as long as viable alternatives had been developed.

Work started last year on an alternative paper-based system, but yesterday the council said it has now decided that this is no longer the best option and "retaining the cheque is a better approach".

The decision to scrap cheques was met with a wave of criticism from small businesses, charities and pensioner lobby groups, who accused the banks of ignoring the needs of millions of vulnerable people.

Michelle Mitchell, charity director at Age UK, said: "We are delighted that the Payments Council has listened to the many people who said how difficult the loss of cheques would be for them. This is a vital first step that will help many older people."

Last month, Richard North, the head of the Payments Council, told the Treasury select committee: "There is no question of there being a closure of the cheque clearing system without there being alternatives in place which are widely in use."

Mr North said one of the alternatives to cheques was likely to be mobile phone payments, under which people could transfer money to another person just by knowing their mobile number.

Cheque usage has declined by 70 per cent since 1990 and by 42 per cent in the past five years, according to the council.