New changes announced will enable cheques to be cleared by the next working day.
The new technology will be in place before the end of the year, according to the Cheque and Credit Clearing Company.
When will it be introduced?
The new system will be phased in from October 2017, with all banks and building societies offering the faster service by the second half of 2018. At present, it can take up to six days for a cheque to clear.
It will allow banks to clear cheques by exchanging pictures of them. As it stands, cheques still have to be physically transported back to the bank that issued them before they are cleared.
“These changes will put cheques firmly in the 21st century, delivering real and important benefits for the many individuals, charities and businesses that regularly use cheques,” says James Radford, chief executive officer of the Cheque and Credit Clearing Company.
“Not only will cheques clear faster but banks and building societies may offer their customers the option of paying in an image of a cheque rather than the paper cheque itself.”
Can’t we use photographs already?
Some banks already allow customers to pay in cheques via pictures on their banking apps, but only if the cheque was issued by the same bank. Otherwise it is impossible as the bank needs to send the cheque back to the issuing bank.
More banks are likely to start allowing cheques to be paid in by photo though. However, the old ways of handling cheques will remain, with banks and building societies still accepting physical paper cheques.
There had been calls for cheques to be abolished by 2018 as advances in online and smartphone banking have caused a huge decline in the number of people using cheques.
However, 477 million cheques were written in the UK last year alone and the government has declined to get rid of them as many older people still rely on them.