In a report prepared by the National Irish Bank (NIB) and released today, Andrew Healy, CEO of the NIB, presents ideas for modernising payments in Ireland, with two key objectives for 2013:
- Reduce cheque-use by 95% by 2013
- Reduce cash usage to below the EU average by 2013
For a long time now, we’ve known that Ireland’s a mess when it comes to money. For example, going back to June 2003, Ireland’s Information Society Commission (ISC) – the independent advisory body to Government reporting directly to the Taoiseach (Prime Minister) – published their report “Developing a World Class Payments Environment”. The reports main thrust is that modernising the Irish Payments
Infrastructure could save the Irish economy €420m, or 0.3% of GNP.
Nothing much happened about that though.
Things may change however, as NIB puts pressure on those in office to make things happen. Here’s the report’s Executive Summary:
Ireland’s payments system – the means by which we pay for goods and services and transfer wealth – remains dominated by cash and cheques, which are very expensive, slow and environmentally damaging.
Ireland is the most intensive cash user in Europe. Cash withdrawals per person are almost twice the European average, which is driven mostly by the number of withdrawals, though the larger average size of withdrawal is also an important contributory factor. Irish people withdrew over €25 billion in cash from ATMs in 2009.
Ireland is the second most extensive user of cheques in the EU, after France, with Irish people writing 102 million cheques in 2009. In value terms, cheques in Ireland amounted to one-tenth of the value of all cheques written in Europe in 2008.
This reliance on paper based payments has a number of high costs for our society. Annual savings of around €1 billion could be made in switching from these paper-based systems to electronic systems. This is equivalent to around €680 per household. However there are many other non-financial costs to high cash and cheque usage:
- Late Payments: There is a very strong correlation between the extent of cheque usage in a country and the time it takes for firms to receive payment for invoices.
- Environmental Damage: Paying utility bills by cheque for a year has the same carbon footprint as paying a lifetime of utility bills by Direct Debit.
- Shadow Economy: There is a strong negative correlation between the prevalence of electronic payments in a country and the size of its shadow economy.
- Security: A high usage of cash payments imposes significant security risks. So-called “tiger kidnappings” are much more common in cash-intensive societies.
National Irish Bank believes Ireland should develop an ambitious programme of reform to change our payments habits.
The following recommendations, if enacted, would meet these targets:
Recommendation 1: Announce an `E-Day’ for October 2012
It is more efficient to have a transformation away from cheques in a relatively short space of time, through an ‘E-Day’ in October 2012. This leaves over two years to explain to consumers the changes that are going to take place, and what they have to do in response.
Recommendation 2: Establish a ‘Payments Transition Board’
A ‘Payments Transition Board’ should be established containing regulators, banks, consumer groups and businesses. This board should co-ordinate the communications programme in advance of the E-Day and identify measures to protect vulnerable individuals and groups.
Recommendation 3: Taxation should be switched away from debit cards
Currently, debit card users have to pay €5 for a combined debit / ATM card. This charge should be abolished to encourage people to take up debit cards. To replace the tax revenue foregone, the Government could increase the charge per cheque to cover the full social cost of cheques. Vulnerable people and groups should be exempted from this charge entirely.
Recommendation 4: State agencies should stop issuing or accepting cheques
The Government should adopt the principle of innovative procurement to its consumption of payment services. All arms of Government should stop issuing or accepting cheques by October 2012, though vulnerable individuals and groups should be exempted from this.
Recommendation 5: Try and influence people to reduce cash withdrawals
Banks and retailers should develop a detailed plan to encourage people to reduce their cash usage. Banks should explore the potential for products that can replace cash as a form of payment. A single ATM network should be created, with a public service obligation charter to ensure an adequate distribution of ATMs throughout the country.
Recommendation 6: Require all taxis to accept card payment by 2013
While card payment in taxis is common in many European countries, it is generally not available in Ireland. This forces people to carry cash and causes unnecessary danger for taxi-drivers who have to retain large cash holdings.
Recommendation 7: Abolish the Cheque Card Guarantee Scheme.
The cheque card guarantee scheme was established when cheques were the only alternative to cash for point-of-sale transactions, though few retailers still accept cheques. Ireland should abolish the Cheque Card Guarantee Scheme by E-Day.