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Canadians should scrap paper cheques to modernize the country’s payment system, a new report suggests.

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A report by the C.D. Howe Institute suggests getting rid of paper cheques in a bid to modernize the country's payment system.

Author John Chant, professor emeritus of economics at Simon Fraser University, suggests businesses could save between $1.6-billion and $4.4-billion annually if they wrote 350 million fewer cheques and used cheaper alternatives.

The report estimates Canadians write about 800 million cheques per year with 46 per cent of them issued by businesses.

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In addition to the expense of the cheques themselves, the study says other costs include employee time authorizing and writing them, distribution and mailing as well as the effort to reconcile cheques with business accounts.

However, the move would require reorganizing the Canadian Payments Association clearing and settlement systems.

The report recommends a switch to a hub-and-spoke system with payer-push digital payments.

"Canada's payment systems need some timely maintenance," Chant said in a statement.

"Going completely digital would save the country billions."

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