Cheques disappearing, cash likely to follow

The writing is on the wall; cheques are going the way of video, fax and the payphone.

Banks have already signalled they will be phasing out the promissory note from 2020, based on low transaction numbers and their high cost relative to other payment methods.

First cab off the rank is Kiwibank, which says cheques represent less than 1% of all its transactions.

The bank will not be accepting them from the end of February and banking Inland Revenue — which received 430,000 cheques last year — is moving exclusively to electronic transfer from March.

So is the ACC.

IR deputy commissioner Sharon Thompson says cheque numbers have been in steady decline and now represent less than 5% of all payments.

"Cheques are part of a paper-based world and don’t mesh with the increasingly digital world we now operate in," she says.

Ms Thompson said the tax department had various other ways for people to pay their tax bills, via internet banking, direct debit or eftpos payments.

"We want to help as many as possible shift to those before the technology used to process cheques comes to the end of its working life next year."

Treasury company Bancorp says cash could also be on the chopping block.

"The use of cash is in decline while the per transaction cost of providing cash infrastructure is increasing," it says.

The company says while credit and debit cards are showing strong growth in the New Zealand and Australian markets, cybercurrency and mobile wallets are becoming more commonplace on the international stage.

The company says more than 50% of all daily payments are made via Alipay and WeChat Pay and an increasing number of businesses are not accepting other payment methods.

"In many developing countries, consumers have largely bypassed the use of credit cards and electronic banking. Mobile payments through non-bank providers dominate in many African and Asian countries due to the low transaction costs, user friendly checkout experience, availability of smartphones and lack of banking infrastructure," it says.

Bancorp says payments are typically for low value sums, such as for transportation and retail services.

Kiwis have also gravitated towards the "buy now pay later" or BNPL retail trend, which now accounts for more than a quarter of all retail purchases in New Zealand.

These schemes allow the cost of purchases to be spread over four or more equal payments and the shopper is able to take the items home immediately.

The retailer pays a fee to the provider (generally in the 3%-5% range of the purchase price plus a transaction fee), while the scheme funds the retailer upfront and collects the money from the shopper over the next six to eight weeks.

Research by Payments NZ suggests about 228,000 Kiwis are in a BNPL scheme, 70% of them young women.

Payments NZ chief executive Steve Wiggins says New Zealand is moving towards integrated or "invisible" payments.

"Real time payment capabilities are the new normal, characterised by instant and individualised interactions."

He says while payments are at the heart of much of the innovation in fintech and banking, there is also a concern about payments and data security.

"The challenge is to find the right balance between the user experience and the safety and security of payments and payments data in an open ecosystem."

brent.melville@odt.co.nz