Cheques come under the scrutiny of the Payment Systems Task Force

Issued by the Payment Systems Task Force, chaired by the Office of Fair Trading

211/05 7 November 2005

Cheques are the next area of banking in the UK to be examined by the Payment Systems Task Force, chaired by the Office of Fair Trading. The Task Force includes representative associations of banks, building societies, consumer and business groups, and, as observers, H M Treasury and the Bank of England (see note 2 for a full list). It has set up a Working Group to look at a number of issues relating to cheques, including:

customers' understanding of what 'cheque clearing' means - when money is taken from their account for cheques they write, when they can withdraw money against a cheque, when they can be sure that the cheque will not bounce and when they will start to receive interest on the cheque payment
whether there is significant demand from, and benefits for, consumers and businesses in speeding up cheque clearance times
the costs and benefits of any changes to the system of cheque clearing
the different practices of financial institutions and awareness of these practices
the access and governance arrangements of the cheque clearing schemes in Great Britain and Northern Ireland
other cheque issues, such as the importance consumers attach to the cheque guarantee scheme and the special presentation of cheques
the costs and benefits for consumers and businesses of using payment methods other than cheques.

A report will be published in summer 2006. During the course of its four year remit the Task Force will also examine the UK's ATM and Card Networks, as well as issues such as pricing, transparency and innovation in payment systems.

The new study follows a report looking at electronic payments between banks in May this year (see press release 94/05, issued by the OFT).

NOTES

1. The Payment Systems Task Force was established in 2004, to identify, consider and seek to resolve competition, efficiency and incentive issues relating to payment systems over four years, particularly looking at network effects of the existing payment mechanisms. The Task Force meets not less than four times a year, and reports on its work and findings annually. Working groups have been established to take forward work on various issues. The Task Force publishes a report at the conclusion of each working group.

2. The members of the Payment Systems Task Force: Office of Fair Trading (Chair), APACS (Association for Payment Clearing Services), BACS Payment Schemes Limited, British Bankers' Association, British Retail Consortium, British Chambers of Commerce, Building Societies Association, CHAPS, Cheque and Credit Clearing Company Limited, LINK, Visa, MasterCard, S2, Federation of Small Businesses, National Consumer Council, Which?, The Bank of England (sitting as observers), and HM Treasury (sitting as observers). Individual banks are members of the Task Force's working groups.

3. Competition concerns about United Kingdom payment schemes were raised in the Cruickshank report of 2000. It found economic characteristics of United Kingdom payment schemes that did not appear to deliver price transparency, good governance, non-discriminatory access, efficient wholesale pricing or innovation. The report suggested that a new framework for competition, including licensing and regulation, was necessary to deal with the problems identified.

4. In preparation for proposed legislative changes that were to provide the Office of Fair Trading with powers as a specialist regulator of payment schemes, the OFT examined and reviewed the payment systems market in 2003 in relation to open access, innovation and efficient and transparent charges. The OFT report 'UK payment systems' (May 2003) noted that the industry had undertaken a number of self-regulatory reforms in addressing some of the concerns raised by the Cruickshank report - for example, the system changes to BACS and governance changes to APACS. The OFT reported, however, that a number of competition concerns remained. The proposed legislation was suspended by H M Treasury in favour of the Task Force and the payment systems industry therefore currently remains essentially self-regulatory. Download UK payment systems (pdf 641 kb).

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