The checkbook will soon be history

Three years ago, Canada withdrew the penny from circulation and, as far as we know, Canada is doing just fine without it.

Is the checkbook next?

Maclean’s today suggests the era of writing checks is over.

John Chant, author of the study and economics professor emeritus at Simon Fraser University, points out cheques are expensive, cumbersome and time-consuming. The cost to business of preparing a single cheque can be as high as $25, once all the labour spent printing, authorizing, co-signing and mailing is considered.

The financial industry has to live with a complicated and costly national system of cheque reconciliation. Anyone with a cheque in hand has to trek down to the bank to cash it, and then wait several days to actually get their money. Plus there’s the risk a cheque will be returned not-sufficient-funds. “It’s an antiquated system,” Chant says. It’s hard to disagree.

Online banking and direct deposit have gradually chipped away at cheque usage—many younger Canadians have never even owned a chequebook—but they remain popular, with nearly 800 million changing hands each year.

Other countries, the Netherlands for example, have fully switched to electronic payment systems, while Kenya and Tanzania use cellphones to move their money around. Chant conservatively estimates Canadian businesses could save between $1.6 billion and $4.4 billion a year if they cut by half the number of cheques they write.

The benefit to the economy as a whole from eliminating cheques once and for all could be as high as one per cent of GDP. He advocates a system in which payers would send instructions directly to their bank, much like online bill payment, simplifying reconciliation, improving security and eliminating the possibility of dishonoured cheques. Quicker, cheaper, more secure: going chequeless has much to recommend it.

People will resist this reality, especially seniors and small businesses, it says. Britain has announced plans to phase out the check by 2018, some people weren’t happy about it, and the government relented.

But Maclean’s says the phase-out of the penny provides a roadmap for how to get rid of antiquated financial instruments.