A new system that allows UK banks and building societies to scan cheques and clear them digitally rather than using the paper cheque for clearing is expected to be introduced from October 2018. The Image Clearing System (ICS) for cheques will cut down the clearing times from up to six days to just one day.
The changes will facilitate more banks offering their customers the opportunity to pay in their cheques electronically using banking apps. There had been moves to try and phase out the use of cheques altogether, but research found that cheques are still widely used especially by older people and in certain sectors of the economy.
In November 2017, HM Treasury consulted on proposals to make provision for two measures to support the introduction of the ICS. These measures seek to ensure that the introduction of the ICS will have no detrimental impact on existing cheque users.
The first measure will allow for a copy of a paid cheque together with other relevant information to be provided to the payer upon his or her request, and that the copy can be used as evidence of payment.
The second measure will ensure that if a customer paying using a cheque incurs a loss in connection with the presentment of a cheque under the ICS (that did not result from gross negligence or fraudulent activity on their part), and has not received compensation,
the payee’s bank must compensate this customer for this loss. Whilst the current system achieves a similar result, the government was keen to ensure that the necessary legislation is in place to ensure this is the case for cheques cleared using the ICS.