Ireland’s payments system remains dominated by cash and cheques which are very expensive, slow and harmful to the environment, according to a new report by National Irish Bank’s (NIB) chief economist, Dr Ronnie O’Toole.
According to the report, Ireland is the most intensive cash user in Europe. Irish people withdrew over €25bn in cash from ATMs in 2009. Ireland is the second most extensive user of cheques in the EU, after France, with 102 million cheques written here in 2009. Cheques in Ireland amounted to 10% of the value of all cheques written in Europe in 2008.
“The reliance on paper-based payments has a number of high costs for our society. Annual savings of around €1bn could be made by switching to electronic systems. This is equivalent to around €680 per household per year,” said O’Toole.
While the government has taken steps to reduce cheques since 2008, other countries have been taking more radical action. Notably, the UK Government has now committed to the abolition of cheques. National Irish Bank’s report makes the following recommendations for payment reform:
- Target a 95% reduction in cheque usage and reduce cash usage to below the European average by 2013.
- Announce an `E-Day’ for October 2012 to achieve this change by, and establish a ‘Payments Transition Board’ to oversee it. It is more efficient to have a transformation away from cheques in a relatively short space of time and this would leave over two years to explain to consumers the changes that are going to take place.
- Reducing Cash:
Taxation should be switched away from debit cards to encourage more people to use them.
A single ATM network should be established, which will allow for a rationalisation of ATMs. Banks should also change ATM functionality so as to discourage cash usage.
Retailers should investigate ways of reducing cash usage, such as card-only lanes and loyalty card bonuses for customers who pay by card. All taxis should be required to accept card payment.
- Reducing Cheques:
State agencies should stop issuing or accepting cheques by E-Day.
The government should increase the stamp duty on cheques to reflect their full social cost.
The Cheque Guarantee Scheme should be abolished. This was established when cheques were the only alternative to cash for point-of-sale (POS) transactions, though few retailers still accept cheques.
- Vulnerable people and groups, notably the elderly, should be exempted from these measures in so far as is possible.
The report also points out the many non-financial costs associated with high cash and cheque usage. “Ireland has a culture of late payments which is putting huge pressure on SMEs [small and medium-sized enterprises]. There’s a strong correlation between the extent of cheque usage in a country and the time it takes for firms to receive payment for invoices,” said O’Toole.
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