The use of cheques in Ireland is in rapid decline as users switch to other, cheaper forms of payment. This shift to electronic and card payments is Government policy.
However, there is no recommendation or plan to stop use of cheques here, in the foreseeable future. This is important for farmers and rural dwellers who have been very reliant on cheques and are likely to be one of the last groups to stop using them.
The move away from cheques is being driven by charges. The typical cost per cheque written is now €1.30. That includes a Government charge of 50c. The cost of making an online or card payment is typically in the range of 10c to 25c.
In addition, the number of electronic payment options is increasing rapidly. The mobile phone looks set to replace the chequebook and the wallet for many people in the next few years.
If Ireland switched fully away from cheques and cash, there would be savings of up to €1bn, according to the Central Bank. Most of the savings would go to the Government and the banks. There would be direct savings for industry, consumers and farmers, too, in lower transaction fees.
Nonetheless, over the past year, some agribusinesses have found they were being charged more fees than expected for accepting card payments from farmer customers – more than for accepting a cheque.
As cheques become more expensive, use of bank cards is increasing quickly, in particular debit cards on current accounts. Once there is money in the account, the card can be used to make payments on the spot or online or it can be used for ATM withdrawals.
The many businesses that no longer accept cheques are happy to take payment by a debit card – it’s far less likely to bounce. The charge on the cardholder is relatively low, typically 10c to 20c per transaction depending on bank. It is as low as 1c for contactless transactions.
However, the business accepting your payment is also charged an interchange fee for processing of the payment. These vary widely depending on the brand of card and on which company processes the payment.
Recently, some banks began issuing business debit cards to farmer customers and cancelling the personal debit cards they had been using. What the farmers did not realise is that the interchange fees on business debit cards are typically charged as a percentage and are effectively higher. As a result, some vets, hardware shops and similar suppliers are not keen to accept payment by farmers’ debit cards.
Ennis Mart began accepting payment by debit card about 18 months ago. According to manager Martin McNamara, where a farmer paid using a personal debit card, the fee for the mart was between 17c and 30c per payment which was fine and lower than for a cheque.
“However, banks are now pushing out business debit cards to farmers and on these we are charged about 0.3% on the transaction value,” he says. “So if a farmer buys 14 cattle for €20,000 we are charged €60 and we must pay this out of the mart commission – which on €20,000 is only €120.40.”
That’s more expensive than accepting a cheque. Because of these high charges, the mart is not pushing for payment by debit card. “We’ll take payment by a personal debit card,” Martin McNamara says.
The various authorities are aware that high fees could discourage wider use of card and electronic payments. The EU has introduced a ceiling on interchange fees on debit and credit cards to come into effect on 9 December.
The ceiling is 0.2% on debit card and 0.3% on credit card transactions. In last month’s Budget 2016, Minister Michael Noonan announced a lower 0.1% cap on interchange fees for debit cards for this country, to come into effect on 9 December.
The IFA is likewise unhappy that banks are moving to impose percentage fees on processing of farmer transactions, knowing the cost will ultimately fall back on farmers.
It will meet the chief executives of the main banks over the coming weeks on finance issues and will be demanding that banks always impose a fixed fee for processing of debit card payments made by farmers to their suppliers.
“A reasonable fixed fee would be more appropriate than a variable fee and would encourage more farmers to move to electronic payment methods,” IFA farm business chairman Tom Doyle says.
Use of cheques peaked in Ireland in 2005 when 131m were used. Last year this dropped to 40.2m. Ireland’s policy on payments is laid out in the National Payments Plan, which was drawn up in 2013 under the leadership of the Central Bank.
It set a target that Ireland would double the number of electronic payments by 2015, leading to a reduction in cash and cheque usage to EU levels. By one measure anyway – the number of cheques used per person – that target has essentially been met.
But much of the big drop in use of cheques is accounted for by State bodies, which make and receive huge numbers of payments and which have almost entirely switched from cheques.
This includes the Department of Agriculture, Revenue and local authorities, for example. Business and consumers are also switching from cheques to electronic and other forms of payment but not as rapidly. No separate data is collected on use of cheques by farmers.
Card payments have increased and account for 59% of all transactions compared to 47% in 2010. The EU average is 46%. Credit transfers are used for about 23% of transactions. This has changed little over the past five years and is slightly below the EU average. Direct debits account for 12% of transactions, half of the EU average and falling. A survey carried out in 2012 for the National Payments Plan found that cheques were highly popular among farmers. Thirty per cent of adults had a chequebook in 2012 but among farmers it was almost 60%. Some 14% of those surveyed said they wrote a cheque every week but 25% of the farmers interviewed did so.
The use of cheques in Ireland is in rapid decline as users switch to other, cheaper forms of payment. This shift to electronic and card payments is Government policy.
However, there is no recommendation or plan to stop use of cheques here, in the foreseeable future. This is important for farmers and rural dwellers who have been very reliant on cheques and are likely to be one of the last groups to stop using them.
The move away from cheques is being driven by charges. The typical cost per cheque written is now €1.30. That includes a Government charge of 50c. The cost of making an online or card payment is typically in the range of 10c to 25c.
In addition, the number of electronic payment options is increasing rapidly. The mobile phone looks set to replace the chequebook and the wallet for many people in the next few years.
If Ireland switched fully away from cheques and cash, there would be savings of up to €1bn, according to the Central Bank. Most of the savings would go to the Government and the banks. There would be direct savings for industry, consumers and farmers, too, in lower transaction fees.
Nonetheless, over the past year, some agribusinesses have found they were being charged more fees than expected for accepting card payments from farmer customers – more than for accepting a cheque.
As cheques become more expensive, use of bank cards is increasing quickly, in particular debit cards on current accounts. Once there is money in the account, the card can be used to make payments on the spot or online or it can be used for ATM withdrawals.
The many businesses that no longer accept cheques are happy to take payment by a debit card – it’s far less likely to bounce. The charge on the cardholder is relatively low, typically 10c to 20c per transaction depending on bank. It is as low as 1c for contactless transactions.
However, the business accepting your payment is also charged an interchange fee for processing of the payment. These vary widely depending on the brand of card and on which company processes the payment.
Recently, some banks began issuing business debit cards to farmer customers and cancelling the personal debit cards they had been using. What the farmers did not realise is that the interchange fees on business debit cards are typically charged as a percentage and are effectively higher. As a result, some vets, hardware shops and similar suppliers are not keen to accept payment by farmers’ debit cards.
Ennis Mart began accepting payment by debit card about 18 months ago. According to manager Martin McNamara, where a farmer paid using a personal debit card, the fee for the mart was between 17c and 30c per payment which was fine and lower than for a cheque.
“However, banks are now pushing out business debit cards to farmers and on these we are charged about 0.3% on the transaction value,” he says. “So if a farmer buys 14 cattle for €20,000 we are charged €60 and we must pay this out of the mart commission – which on €20,000 is only €120.40.”
That’s more expensive than accepting a cheque. Because of these high charges, the mart is not pushing for payment by debit card. “We’ll take payment by a personal debit card,” Martin McNamara says.
The various authorities are aware that high fees could discourage wider use of card and electronic payments. The EU has introduced a ceiling on interchange fees on debit and credit cards to come into effect on 9 December.
The ceiling is 0.2% on debit card and 0.3% on credit card transactions. In last month’s Budget 2016, Minister Michael Noonan announced a lower 0.1% cap on interchange fees for debit cards for this country, to come into effect on 9 December.
The IFA is likewise unhappy that banks are moving to impose percentage fees on processing of farmer transactions, knowing the cost will ultimately fall back on farmers.
It will meet the chief executives of the main banks over the coming weeks on finance issues and will be demanding that banks always impose a fixed fee for processing of debit card payments made by farmers to their suppliers.
“A reasonable fixed fee would be more appropriate than a variable fee and would encourage more farmers to move to electronic payment methods,” IFA farm business chairman Tom Doyle says.
Use of cheques peaked in Ireland in 2005 when 131m were used. Last year this dropped to 40.2m. Ireland’s policy on payments is laid out in the National Payments Plan, which was drawn up in 2013 under the leadership of the Central Bank.
It set a target that Ireland would double the number of electronic payments by 2015, leading to a reduction in cash and cheque usage to EU levels. By one measure anyway – the number of cheques used per person – that target has essentially been met.
But much of the big drop in use of cheques is accounted for by State bodies, which make and receive huge numbers of payments and which have almost entirely switched from cheques.
This includes the Department of Agriculture, Revenue and local authorities, for example. Business and consumers are also switching from cheques to electronic and other forms of payment but not as rapidly. No separate data is collected on use of cheques by farmers.
Card payments have increased and account for 59% of all transactions compared to 47% in 2010. The EU average is 46%. Credit transfers are used for about 23% of transactions. This has changed little over the past five years and is slightly below the EU average. Direct debits account for 12% of transactions, half of the EU average and falling. A survey carried out in 2012 for the National Payments Plan found that cheques were highly popular among farmers. Thirty per cent of adults had a chequebook in 2012 but among farmers it was almost 60%. Some 14% of those surveyed said they wrote a cheque every week but 25% of the farmers interviewed did so.
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