The end of the accounting search
The end of the accounting search
Posted May 11, 2023 22:10 UTC (Thu) by anselm (subscriber, #2796)In reply to: The end of the accounting search by Wol
Parent article: The end of the accounting search
But the Eurocheque (or rather its rationale) disappeared with the Single European Currency. Surely national cheques carried on?
Here in Germany I haven't seen a cheque in 20 years. According to statistics, nowadays less than 0.1% of transactions between non-bank entities involve cheques.
The problem with cheques is that if Alice gives Bob a cheque, Bob has to trust that Alice has enough money in her bank account for the cheque not to bounce when Bob's bank asks Alice's bank to honour the cheque. Cheques can take considerable time to clear between banks and therefore even if Bob's bank has credited him with Alice's money quickly just to be nice, they might want it back if it turns out that Alice's bank says that Alice isn't good for it after all. The big advantage of Eurocheques was that they were each guaranteed up to a certain amount (400 DM in Germany, IIRC) and therefore represented a much safer way to be paid.
(This delayed-bounce effect is at the heart of the popular scam where someone overpays you for something with a cheque and then asks you to send the excess money back using Western Union or some other payment scheme that is hard to undo. If you do that, what will happen is that, later on, the cheque bounces and (a) you're out the money that your bank wants back, plus the money that you sent to the scammers, and (b) you may get a friendly visit from the money-laundering police.)
Posted May 12, 2023 10:37 UTC (Fri)
by farnz (subscriber, #17727)
[Link] (11 responses)
The thing that basically killed the cheque in the UK was a regulatory mandate that all payments into personal accounts were final (from the point of view of the recipient) 5 working days after the payment was posted to the account by the bank. The only exceptions to this are if a court orders the banks to reverse the payment; this is the process used in cases of fraud, for example, where a court can make such an order.
Effectively, this meant that banks had two choices, neither of them great for the bank:
Neither of these are great options for the banks, and so they've made huge efforts to get a third option going - one where nobody uses cheques because electronic payments are simply easier and faster. We're now trying to address the social problem this causes for people who have aged to the point of not being able to learn a new system (electronic payments via Internet banking) to replace the one they learnt as a young adult in the 1970s or earlier (cheques) - it'll be interesting to see if a solution to this problem is found other than the trivial one (of waiting for that group to die out).
Posted May 12, 2023 19:41 UTC (Fri)
by Wol (subscriber, #4433)
[Link] (10 responses)
Cheers,
Posted May 15, 2023 9:15 UTC (Mon)
by farnz (subscriber, #17727)
[Link] (9 responses)
Because of a whole bunch of things adding up:
Of these, the only one that could reasonably be reduced is the final one - where there's a delay notifying the payee's bank of the allegation of fraud, but that only gets you down to 150 days instead of 180. The 90 days to the next statement is unavoidable, since I cannot tell that a fraudulent cheque has been written against my account until I see a statement; the 30 days to notify the bank is a standard thing to allow for postal delays, holidays etc preventing me from checking the statement as soon as it's printed. 30 days for the payer's bank to verify the allegation of fraud is also normal - this gives time for the bank to get the appropriate backup tape from deep storage, verify signatures etc, and otherwise do their due diligence to confirm that an allegation of fraud has merit.
The critical difference is that with cheques, the whole process is asynchronous to the payer's bank - it gives you a chequebook, and some arbitrary time later, you write a cheque, exposing your bank to one set of fraud risk. An indeterminate time later, the payee pays the cheque into their bank (if this cheque is a forgery, this exposes the payer's bank to another set of fraud risk); and then a further delay happens before the payer's bank is notified of the payment. When the payer's bank is notified of the payment, it can take action to handle fraud - but this has happened after it's been exposed to the fraud risk, and is thus too late for any action to be taken to reduce risk. With bank transfers, the payer's bank is in the loop as the payer asks for the transfer to happen - the payer's bank can thus do whatever it wants to do to reduce the fraud risk to a level it deems acceptable.
Posted May 15, 2023 12:10 UTC (Mon)
by Wol (subscriber, #4433)
[Link] (8 responses)
Let's knock off another 60 days ... Pretty much EVERY current account I've had is monthly statements (with "no transaction? no statement!"). I think banks may have tried to move to quarterly statements 20 years ago, but for current accounts that doesn't seem to have stuck.
And given the propensity for banks to demand mobile numbers and spew texts, surely "cheque no N has been presented for payment, please contact us if you didn't write it" isn't hard?
At the end of the day, pretty much all of your timescales could be massively reduced, if the banks cared.
Cheers,
Posted May 15, 2023 13:29 UTC (Mon)
by farnz (subscriber, #17727)
[Link] (7 responses)
Quarterly statements are commonly used by the disabled as a way to align statement arrivals with the time their carers have to help them reconcile their accounts. Insisting that you must take monthly statements if you want to use cheques is a way to disenfranchise this group, which doesn't seem like a good trade-off.
And if you have a mobile phone, why not use the bank's automated telephone or SMS banking service to make the payment instead? This is better from the bank's point of view, because it means that the bank can do as many checks as it wants up-front, before payment is presented the to payee's bank, rather than having to do its checks after the payee has apparently "received" the money.
This is why the banks don't care to reduce this timescale - fundamentally, they want the payer to get in touch with them and arrange payment, so that they can control their exposure to risk up-front. A cheque inherently involves the payee getting in touch to demand payment, and thus by the time the bank is handling a cheque, it's too late to do anything to reduce the risk; all the bank can do is move the risk around between the payer, the payer's bank, the payee and the payee's bank.
Posted May 15, 2023 13:59 UTC (Mon)
by Wol (subscriber, #4433)
[Link] (6 responses)
SMS banking service? What's that? As for automated telephone banking service, I really can't imagine the elderly / disabled people I look after being able to cope with it ...
And while things may have changed, what you describe does not sound like my experience of banking fraud checks. (Your description of bank incompetence seems pretty good, though.) You say the banks want time to do fraud checks? Then why can't the recipient's bank just forward a scan of the cheque and the paying in slip to the drawer's bank, which runs said fraud checks before it sends the money. Simples. Might catch a lot of scams, seeing as they'd be able to run "does the recipient's bank account look dodgy?" checks!
Cheers,
Posted May 15, 2023 14:12 UTC (Mon)
by farnz (subscriber, #17727)
[Link] (5 responses)
The difference between quarterly statements and monthly is entirely regulatory - you get 30 days after the statement date to challenge line items, in which the bank must prove that the line item is legitimate, after which the burden of proof shifts to you as the account holder to prove that it's not. If you increased that time to 90 days, then monthly statements would be just fine for these people (whose specific brain injuries stop them reading or writing; they're capable of getting people to read and write for them, but not doing it themselves).
And there's no need to align the statement with the payment quarter or whatever - you need a carer who comes in every 3 months and who's financially literate enough to help you reconcile your accounts and ensure that all line items are either legitimate, or have been challenged, in that 30 day period.
Remember, also, that in English law, you've made the payment by giving the payee the cheque; it's too late for the bank to run its checks at this point, since in law the payment has been made unless the cheque is proven to be fraudulent - but what the bank wants is to stop the payment unless it's proven to be legitimate within the bank's tolerance for risk. So, for your scheme to work in English law, the recipient's bank needs to forward a scan of the cheque and the paying-in slip before the cheque is written - I hope the problem with this is obvious.
Fundamentally, it all comes down to risk management - the bank is very happy to accept some level of fraud in order to permit normal transactions to go through; cheques prevent the bank from choosing what level of fraud it's happy to accept, since it cannot vary its checks based on the total amount at risk if it later turns out that fraud took place. The old cheque guarantee card was a way to limit the risk to the bank; the card said what the maximum transaction amount it guaranteed was, and if you exceeded that limit, the entire cheque was not guaranteed. So, when my card said £20, any transaction over £20 where I used a cheque for part or all of the amount was not guaranteed by the scheme; my last guarantee card said £500, which meant the bank was at risk for up to £500 each time I used a cheque covered by the scheme.
Posted May 15, 2023 17:01 UTC (Mon)
by Wol (subscriber, #4433)
[Link] (4 responses)
Has the law changed, then? That WAS the case with a cheque guarantee card. And how come my bank bounced my cheque because it failed fraud checks? Are you telling me my bank acted illegally?
Cheers,
Posted May 15, 2023 17:17 UTC (Mon)
by farnz (subscriber, #17727)
[Link] (3 responses)
In English law, and this has been true for a very long time (and is still true today), the fact that you've paid with a cheque is an acknowledgement that you owe money. Once I have a cheque from you, I do not need to get into whether or not you owed me money, just into whether or not the cheque bounced; if it bounced, you owe me the full value of the cheque, simply on the basis that the cheque bounced.
This means that if the cheque isn't a forgery, the payer's bank has no option but to honour it, even if it suspects fraud is involved, and then to deal with the resulting upset customer who wants the bank's help dealing with the fraud. With online payments, the bank can intervene earlier, and reduce its exposure to fraud by being very clear to its customer that the fraud checks are failing, and you need to take extra action to make the payment happen.
Now, the bank is well aware that not all customers will pay attention to the failed fraud checks, but I've encountered them twice in the wild; once paying someone who went (legitimately) by multiple names, where confirmation of payee raised an issue because I'd used his stage name, and the account I had for him didn't have his stage name attached (easily fixed), and once paying for goods I had ordered online, where the bank warned me of its fraud suspicion and I cancelled the order instead - which turned out to be the right thing, because I later saw other people complaining that they'd bought the same item with same serial number from the seller as I was trying to buy, but months before I did, and it hadn't been delivered.
Had I wanted to, I could have overriden the bank's fraud checks in both cases, and told it that I did know what I was doing. I chose to follow the bank's advice, but I didn't have to. With a cheque, in the second case, however, I'd have been stuffed - he'd have the cheque, and would be able to claim that by sending him a cheque, I had agreed to pay him.
Posted May 15, 2023 22:24 UTC (Mon)
by Wol (subscriber, #4433)
[Link] (1 responses)
So how come my bank bounced my cheque, when it had no real reason to be suspicious?
Cheers,
Posted May 15, 2023 23:15 UTC (Mon)
by farnz (subscriber, #17727)
[Link]
Because bouncing the cheque is the only option the bank has to move risk around - by bouncing a cheque, all the risk is moved to the payee, who can either chase the payer for new payment (using the bounced cheque as evidence that you owe them money), or discover that the payer is no longer in reach of English law, and that they've lost their money.
In contrast, with a system where the payer engages in a dialogue with their bank to ask them to issue a payment, the bank can move risk around to the payer, not just to the payee, by asking the payer steadily more probing questions until the bank is convinced that the total risk to the bank is low enough.
And remember that there's not just fraud risk involved - there's also the risk of someone writing more cheques than they have money to cover, leaving the bank with a bad debt, and there's the risk of having to actually offer some form of customer service to a customer who's been upset by the experience. By having the payer engage in a dialogue with their bank, which ends with either payment made, or payer terminating the dialogue, the bank only ever has to handle the risk its own customer represents; with a cheque written by the payer, the payer's bank also has to handle the risk the payee represents if the cheque is bounced, and has additional risk from the payer being upset because they thought the payment had cleared out of their account, and now cannot afford to pay the money they owe.
Fundamentally, the bank's goal is to reduce fraud risk to a level where it will eat the cost of fraud, and to reduce the other risks to zero because the bank would prefer to not spend any money at all on customer service (as is reflected in the quality of CS you get from a UK bank nowadays). Cheques are not compatible with this, since when things go wrong, the payer's bank has to supply CS to both the payer and payee, and has to handle fraud by the payee, while the payee's bank has to supply CS to the payee, and has to handle fraud by the payer. Internet banking works well for this, since when things go wrong, the payee is not dealing with the banks at all, and all the risk is borne by the payer's bank, who has to provide CS to the payer, and who can reduce the fraud risk to whatever level it's happy to accept.
Posted May 20, 2023 13:34 UTC (Sat)
by ghane (guest, #1805)
[Link]
> In English law, and this has been true for a very long time (and is still true today), the fact that you've paid with a cheque is an acknowledgement that you owe money. Once I have a cheque from you, I do not need to get into whether or not you owed me money, just into whether or not the cheque bounced; if it bounced, you owe me the full value of the cheque, simply on the basis that the cheque bounced.
This is important.
Also important is the cheque issuance process. In small owner-operated firms, the cheque book is with the Accountant, who checks invoices, prepares the Payment Voucher, and then the cheque. This is presented to the Owner (the Sole Signatory), who glances at the Payment Voucher, mutters: "what? So much?", and signs. Despatch is left to the Accountant.
If the Internet Access is given to the Accountant, the Owner believes it will be misused. If the Internet Access is with the Owner, then he is too important and busy to type in stuff (the typical owner here has a $1000 iPhone but is proud that he does not have a PC, his secretary does).
On the other side, the Payee gets a piece of paper (and the cheque has space to write the Invoice number it is for), so it is easy to reconcile in your ledger. No need to wait for an end-of-month statement, to see who paid you.
tl;dr: People use QR Codes, mobile payments, credit cards, stored wallets, etc all day. But businesses still prefer cheques. Because their workflow is set up that way.
The end of the accounting search
The end of the accounting search
Wol
The end of the accounting search
The end of the accounting search
Wol
The end of the accounting search
The end of the accounting search
Wol
The end of the accounting search
The end of the accounting search
Wol
The end of the accounting search
The end of the accounting search
Wol
The end of the accounting search
The end of the accounting search