The Bankwatch

Tracking the consumer evolution of financial services

Canada makes the right decision on cheque presentment

This decision by the Canadian Payments Association to discontinue the Truncation and Electronic Cheque Presentment (TECP) is the smartest thing I have seen banks do for a while. 

CPA Board Decides Not to Proceed Further with Image-Based Clearing Initiative | Payments News

The decision was reached after thorough analysis of the findings of the industry-wide project review. During the review, it became clear that the enhancements to efficiency that had been originally anticipated would not be fully realized due to implementation delays and the ongoing evolution of the marketplace towards electronic payments. This review also highlighted the complexity of moving forward to industry-wide implementation, given the extensive interdependencies among participants’ project plans.

TECP was the classic “paving the cowpath” project.  The intent was to swap digital images of cheque’s between banks in place of the current methodology which sends the paper cheques back to the bank of account.  This was ridiculous from the beginning because the obvious solution is to eliminate cheques, which customers are doing by themselves in Canada. 

The few cheques that remain can be managed using the current process.  It made no sense to introduce a horrendously expensive project to automate a dramatically declining activity.

Written by Colin Henderson

October 25, 2008 at 04:18

Posted in Payments

3 Responses

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  1. Hmmm. This worries me a little. Not that cheques are being used less, but more from the service angle.

    We all agree that banks provide a service. We agree that involves giving customers what they want.

    So therefore, its not about what bankers want to provide. Even if its a pain in the ass doing it, like cheques (checks).

    That’s what worries me.

    So why do people still want cheques?

    Cheques are slow, clumsy things but the alternative involves cost to the user. If I provide a service to someone, they sometimes say “can I pay you via card?”

    To do that, I have to set up:

    (a) A merchant account at £20 a month

    (b) use a card service like PayPal, Protx or PDQ

    (c) pay a surcharge for using that service

    All costs born by the customer the bank or provider makes money from these services.

    And I have to raise my charges to cover these overheads.

    Maybe we should have a universal payment gateway. We make a payment then select which channel it goes down – credit card, charge card, or a new one “virtual cheque”. This is a cheque in terms of process, but doesn’t actually exist as paper. It just ticks the same process boxes.

    Not exactly putting tarmac on your cowpath, but low-flying over it.

    PS: It’s not a good idea to fence off a cowpath when people are still walking down it. They tend to break down the fence… and kick your ass for doing it.

    Neil Robinson

    October 28, 2008 at 09:00

  2. @Neil … good point in terms how we think of payments. Your point: makes us realise how our payments are driven by old infrastructures.

    “Maybe we should have a universal payment gateway. We make a payment then select which channel it goes down – credit card, charge card, or a new one “virtual cheque”. This is a cheque in terms of process, but doesn’t actually exist as paper. It just ticks the same process boxes.”

    Your point also made me recall: while I was at the bank the driving force for TECP was the cost reduction associated with interbank settlement virtually vs sending paper cheques every night. There is also the customer presentment angle online and at the ATM.

    Colin

    October 28, 2008 at 22:51

  3. You’re absolutely right Colin!

    I started my career at NCR fixing cheque processing equipment. It was a pain back in the 70’s and it must be even more of a pain now. Ironically as I recall, all the hardware was made in Waterloo, Canada!

    You are right about the age of the channels. I feel the banks could slash costs by simply moving from a physical model to a virtual one. The costs come in establishing and proving the processes, after all.

    If they did that, they could rationalise and streamline everything they do, slashing costs and speeding everything up along the way. The customers would love it (eventually!).

    Your point about using the ATM network for this is compelling, as would using on-line banking to do it.

    We could even have a new plastic card that simply asks “which channel?” when presented.

    We’re not a million miles away from that. My charge card asks me “Solo or Maestro?” when I present it at Tesco…

    Now you’ve got me thinking. You always manage to do that!

    Neil Robinson

    October 29, 2008 at 06:45


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