Tuesday, February 2, 2010

An End to Checking in the UK Raises Concerns for Charities

In a major shift from traditional financial policy, the UK will end the use of checks as a valid payment method by October 31, 2018.  The Payments Council of the UK (an independent body that sets strategy for the UK payments system) provides a brief overview of this decision and links to more detailed reports on its website.  The end of checking in the UK will potentially have a negative impact on the UK’s voluntary sector for several reasons; convention, security and fund-raising practices.

According to RL Glassspool Charity Trust, a grant-making charity, more than half of the grants it transacted in 2009 were paid out by check.  RL Glasspool says that it is only one of many grant-making charities whose infrastructure is built on the assumption that checking will continue to exist.  The security concern is not unfamiliar in transitions to e-commerce.  Specifically, RL Glasspool is worried about weakening financial controls caused by the switch from requiring two signatures on a check to requiring the entry of two passwords into a computer system.  The consequences of changing the grant payment infrastructure sound grim according to RL Glasspool’s chief executive Frances Moore who told Third Sector that “no practical payment method exist[s]to replace checks.” The issue of fund-raising concerns donor practices.  Given the age demographics of their donor-base, many UK charities are concerned that an end to checking may be an end to a large amount of funding.  Third Sector reports that the Payments Council and the Institute of Fund-raising will meet this week to discuss concerns.Specifically, the Institute does not believe that there has been sufficient consultation on the move and wants to ensure that acceptable alternatives are in place well before banks stop using checks.

Responding to concerns about the phase out of checks without adequate alternatives, Sarah McCarthy-Fry, parliamentary secretary to the Treasury, stated that "the Government believes it is imperative that adequate alternatives be in place for all users of cheques, including small businesses, the elderly and the third sector, ahead of any potential closure of the check clearing system."

SS

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